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Income distribution in independent team


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#1 savail   Members   -  Reputation: 330

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Posted 18 August 2012 - 11:18 AM

Hey,
I'm planning to gather a few people to my team and I would like to fairly distribute any income from the game. In the team will be probably:
1 sounds/music designer
2 or 1 spriter
and me as programmer.

Let's bet here:
sound/music designer is to create about 10 songs and about 120 sounds (like running, punching, and sounds for skill effects).
1 spriter is to create about 250 - 300 sprites
and me programmer - I've already spent 2 years creating the game alone. I've written whole engine. It's action 2d side scroller. I've created graphical user interface which is possible to modify via .txt files(using CEGUI), basic input(keyboard, mouse, sounds), and I'm going to code advanced network(using UDP). I've implemented also possibility that players can create their own mods/characters/skills via .txt files. I've created also map editor for modders to easily create stages. I will also have to create a website/forum for the game.

How should the income be divided to make it fair for everyone? I would be very grateful for any help!

Edited by savail, 18 August 2012 - 11:37 AM.


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#2 Tom Sloper   Moderators   -  Reputation: 9108

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Posted 18 August 2012 - 11:35 AM

How should the income be divided to make it fair for everyone?


What does your collaboration agreement say?
What's that, you don't have a collaboration agreement?
You negotiate the compensation with each individual, and you write it up on paper, with a lawyer's help.
http://underdevelopmentlaw.com/collaboration-agreements-and-online-development-teams/
Notice that word "negotiate."
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#3 Orymus3   Crossbones+   -  Reputation: 6943

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Posted 18 August 2012 - 11:42 AM

Also, who is taking the financial risk in your team?
I'm assuming you'll have some form of expenses to make at some point (publishing, hosting, etc)?

#4 savail   Members   -  Reputation: 330

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Posted 18 August 2012 - 11:54 AM

Thanks a lot for answers!
Tom Sloper,
Actually I'm currently looking for people to my team and I'm far from the stage in which I'll want to make an agreement. But people might be curious about how high income they could receive and so I'm not sure what to say not to turn out being an idiot or a fool?
Orymus4,
Financial risks would be taken by me I guess. However the game would have offline mode as well so if we couldn't afford server, the game would be offline. and only the income above server costs would be shared.

Could anybody think of some reasonable distribution? (in % of whole income above server costs)

Edited by savail, 18 August 2012 - 11:59 AM.


#5 Tom Sloper   Moderators   -  Reputation: 9108

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Posted 18 August 2012 - 12:00 PM

Could anybody think of some reasonable distribution? (in % of whole income above server costs)


Yes. Lots of people have talked about this, right here in the Business forum. Why don't you do some reading, see what people have suggested and tried and argued for and against.
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#6 Adam Spade   Members   -  Reputation: 161

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Posted 18 August 2012 - 07:47 PM

We clock hours and pay for work on the game. Amount of hours also goes towards a pool. The pay is based upon work so everybody is treated fairly.

Adam Spade

Composer, Sound Designer

http://www.adamspade.com

 

Executive Producer

Uncaged Games LLC
"Release your inner game."


#7 Orymus3   Crossbones+   -  Reputation: 6943

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Posted 19 August 2012 - 08:40 AM

Orymus4,

My number just got promoted :)

Financial risks would be taken by me I guess. However the game would have offline mode as well so if we couldn't afford server, the game would be offline. and only the income above server costs would be shared.

It might be a mistake to consider only server bandwidth as potential cause of money drain in a production environment.

Also, this may look like a small detail, but are you considering split profit or split income?
In a split income arrangement, the person who spent money is going to rake cash until spendings are evened out, which can't be said of split income (sales) where you may not get a priority on paying back your initial investments.

#8 savail   Members   -  Reputation: 330

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Posted 19 August 2012 - 10:25 AM

I don't foresee any huge cash spending other than the server costs (which I don't think will be high or maybe a free server would be enough for a start?). Therefore I think I'm closer to split profit arrangement, not to complicate it too much. At first I didn't see difference between those words: profit and income. Sorry, I'm not native ^^

#9 Madhed   Crossbones+   -  Reputation: 2649

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Posted 19 August 2012 - 11:25 AM

I think it depends on the type of contract that you are going to make.

Are you going to found a company with those people?
Are you planing on making them employees?
Are you outsourcing the work to them as freelancers?

#10 Tom Sloper   Moderators   -  Reputation: 9108

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Posted 19 August 2012 - 12:37 PM

I think I'm closer to split profit arrangement, not to complicate it too much.


Then you need to keep a detailed accounting of expenses. You have to be able to show, on paper, with backing evidence, why certain moneys are withheld in the calculation of profits.
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#11 TMKCodes   Members   -  Reputation: 271

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Posted 19 August 2012 - 01:02 PM

I would track everyone's working hours. Pay them every month if I have the cash. If I do not have the cash to pay the team every month I would create agreement with them to pay after the game does some actual profit.

The agreement would go something like this.

Team member gets paid percentage of the net income of the game until something like 600,000 and the percentage is equal to the team members working hours percentage of the whole teams working hours.

So if I had 5 team members who worked together for 9,600 hours. One guy worked 1,200 hours. This guy would get 12.5% of the net income cash until something like 600,000 dollars. Which is actually 75,000 for the guy. Now another guy worked 2,240 hours so 23.3% of 600,000 is 139,800 dollars for him.

This to me seems quite equal to me. Though you can always go the way of the royalties and pay something for each asset of the game to those who created them, but with royalties you have to pay them as long as you keep selling the game and new update additions to your game would not bring any more money to your company.

#12 Orymus3   Crossbones+   -  Reputation: 6943

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Posted 19 August 2012 - 02:37 PM

The problem here is you can never quite backdate exactly how many hours were made before.
Plus, would you count the engine dev time as working on the game if the guy was working on an engine in his spare time and "it so happened" that it was used?
I see a problem where I make an engine, bille 1000 hours about it on this project, then make another project, and bill my 1000 hours again even though I've done them once.

#13 SimonForsman   Crossbones+   -  Reputation: 5953

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Posted 19 August 2012 - 02:45 PM

I would track everyone's working hours. Pay them every month if I have the cash. If I do not have the cash to pay the team every month I would create agreement with them to pay after the game does some actual profit.

The agreement would go something like this.

Team member gets paid percentage of the net income of the game until something like 600,000 and the percentage is equal to the team members working hours percentage of the whole teams working hours.

So if I had 5 team members who worked together for 9,600 hours. One guy worked 1,200 hours. This guy would get 12.5% of the net income cash until something like 600,000 dollars. Which is actually 75,000 for the guy. Now another guy worked 2,240 hours so 23.3% of 600,000 is 139,800 dollars for him.

This to me seems quite equal to me. Though you can always go the way of the royalties and pay something for each asset of the game to those who created them, but with royalties you have to pay them as long as you keep selling the game and new update additions to your game would not bring any more money to your company.


I wouldn't put a cap on it if they don't get paid up front, anyone working for free is taking a significant financial risk and should get a share based on the risk they've taken, reducing the size of that share if things go well is extremely unfair since you're not increasing it if things go poorly.

If anyone brings in existing assets to the team you can discuss that on a case by case basis, if you get exclusive ownership of the assets you should pay for the time spent making them, for non exclusive licenses you pay far less.

Most successful indie teams pay everyone a salary though, it is very rare for the revenue/profit share hobbyists to get anywhere.

Edited by SimonForsman, 19 August 2012 - 02:53 PM.

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#14 savail   Members   -  Reputation: 330

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Posted 19 August 2012 - 04:25 PM

hmm you guys are talking about serious buisness :D but in my team there will be probably people even under 18. And Nor I or them will think about earning a living from this project. It's not so super commercial project but if whole profit from game was about 100$/month, that would be nice. And maybe we wouldn't even like to play with all those formal agreements etc. Is that possible to let them just have a track of game profits so that they would be sure I'm not cheating? Maybe grant them access to profit statistics from the advertisement provider for example? We will more likely search for something like this I guess

#15 bschmidt1962   Crossbones+   -  Reputation: 1781

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Posted 20 August 2012 - 02:06 PM

It's not so super commercial project but if whole profit from game was about 100$/month, that would be nice. And maybe we wouldn't even like to play with all those formal agreements etc. Is that possible to let them just have a track of game profits so that they would be sure I'm not cheating? Maybe grant them access to profit statistics from the advertisement provider for example? We will more likely search for something like this I guess


A couple points..
This is your idea and you are driving it. That means you get the lion's share of 'profits' (regardless of how large or how small). That is also reflected in how many hours you've spent creating the engine, etc.
The easiest/cleanest thing to do is to pay people flat fee, period. They give you stuff--you pay them money and you're done with it.

The reason for sharing 'profits' is either
a) you are a generous soul
b) you want to reduce your out of pocket expense.

By having someone create work for a 'share of the profits' (sometimes known as 'back end'), you are asking them to take on more risk-- There's virtually no risk in doing a job for a flat fee; there's lots of risk in sharing in the profits. So if you are asking them to take on more risk, there should be more reward for them.

ballpark I'd say keeping 80% of the profits for yourself, should decide to go down that route, isn't unreasonable.

And maybe we wouldn't even like to play with all those formal agreements etc


You're playing with fire there. I get that a lawyer is expensive. And no fun. And it seems like a waste..


The problem is that this stuff gets complicated fast-- what exactly are "profits"? is that before or after things like web fees, marketing. Exactly who owns what? How is it that we can check to see if you're cheating us or not?
Odds are that won't be a problem, but say your game takes off? Or is bought by someone? Or you do it for another platform?

At the very least, have one clear, concise email summarizing exactly who gets paid what. Write this as a separate email AFTER you've come to agreement. Do not make it part of an email chain (the danger there is that you are thinking something 5 emails down still applies, but the artist doesn't, etc.).

Is that possible to let them just have a track of game profits so that they would be sure I'm not cheating? Maybe grant them access to profit statistics from the advertisement provider for example?

This is usually taken care of in a clause in the contract that gives the others the right to audit you.

Bottom line-- like it not, when you create a game and put it out for the world to see (and buy), you have created a business. And if you have used other people to help create that game, then you have entered into business relationships with those people. And when you do that, a contract is everybody's best friend.

Brian

Brian Schmidt

Executive Director, GameSoundCon:

GameSoundCon 2014:October 7-8, Los Angeles, CA

 

Founder, EarGames

Founder, Brian Schmidt Studios, LLC

Music Composition & Sound Design

Audio Technology Consultant


#16 savail   Members   -  Reputation: 330

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Posted 20 August 2012 - 03:41 PM

Brian,
thanks for reply. Actually I'm not completely sure about the idea of sharing profits too becouse it could become a bit disruptive if I had to share the profits from this game for whole game's lifetime :P. It would be better to pay teammates some flat fee only once as you said but it could be quite high in such case. If a spriter did 500 sprites each in about 2 hours how much worth would that be?I don't think I would be able to pay him a flat fee for such amount of sprites immediately. I thought about such agreement maybe - teammates are getting some % of profits until their earnings reach the flat fee estimated for their work. After that I would be free from sharing profits with such person and reserve all rights to my game. What do you think about it? Would that be a good idea or that wouldn't work?

#17 bschmidt1962   Crossbones+   -  Reputation: 1781

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Posted 20 August 2012 - 08:12 PM

I thought about such agreement maybe - teammates are getting some % of profits until their earnings reach the flat fee estimated for their work.


That's reasonable, except that in order to compensate the others for their increased risk (what if your game never makes a profit or drops off after only a few dozen downloads--in that case they get zilch!), you should increase the limit amount..

For example, if a sound person said they'd do the game for $1000, flat fee, It would be reasonable to see if they'd do it for $2000, payable as profits come in.
(btw 1000 was only an example. 10 minutes of music and 120 sound effects is quite a lot of work)

Of course, if you want to put on your ruthless businessman hat, you could just offer them their $1000 payable as you suggest (royalties up to a 1k cap) and see if they take it anyway. Or give them a choice of royalties up to 1k, or flat guaranteed fee of $500 etc. The art of negotiating takes more than a forum post :)

Note: in my book, I've found that being 'fair and reasonable' over the course of a career can pay off better in the long run than being ruthless, but that's just me..

Of course, this all needs to be spelled out very clearly in a written doc, whatever you decide upon..

Let us know how it goes!

Brian

Brian Schmidt

Executive Director, GameSoundCon:

GameSoundCon 2014:October 7-8, Los Angeles, CA

 

Founder, EarGames

Founder, Brian Schmidt Studios, LLC

Music Composition & Sound Design

Audio Technology Consultant





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