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Brahose

Making Money From your game. Royalty style!

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Me and my friend are working out a deal with a company in canada to design a game for them. They have never published an electronic game before, so it will be a high risk investment. Because of the high risk, they are offering royalties instead of a fixed price. I have never worked with royalties before, and need to know what a decent percentage would be. If anybody has any ideas or past experiences, please help! Keep in mind that we are doing all of the design, building, graphics, and packaging ourselves. They are simply publishing it. thanks! Brian Reinhart Brian[@]Pointblanc.net www1.pointblanc.net

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I heard that ~30% was a good deal to start with. However, like the risk is very high since both parties are new in the business, maybe 10% is more appropriate.

Sébastien Nadon
http://www.foredoomed-mansion.com

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You haven''t offered a single piece of relevant information. Are you just designing a game, or are you also developing the game? Are they funding the development or are you funding the development? Will the publisher be publishing the game in a physical format and putting it on store shelves or will it be by order/download only? Will the publisher engage in any relevant marketing/advertising to push your project? To what extent if so? Is the publisher providing a QA team to work with your project?

If most of those questions show you doing most the work and the game not being on store shelves, I''d expect a minimum of 50% and aim more around 80%. If all of those are geared towards the publisher and you''re only designing the game, you''d be lucky to score a fraction of a 1% royalty.

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My team will be designing and developing the game through all stages, including private and public QA and beta stages. The company we are "designing" for will be in charge of marketing, packaging, and distributing our final output. We will be funding our end of the development fully. Because it is high risk, they do not want to loose any money. WHich in my opinion we should get a higher royalty for having to fork up the costs for ourselves.

P.S. Thank you for all of your help so far. I am beginning to get a feel for how I should approach the price!

Brian Reinhart
Brian[@]Pointblanc.net
www1.pointblanc.net

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Well if they are not going to put any money up front then I''d say ask for a higher percent; like 10 to 20% depending on what it is you are making and how much effort it will take.

Another option would be to ask them for a ''small'' amount of money up front with a lower percent. That way you can at least offset the cost of any dev tools or hardware you may end up needing.

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quote:
Original post by Brahose
My team will be designing and developing the game through all stages, including private and public QA and beta stages. The company we are "designing" for will be in charge of marketing, packaging, and distributing our final output. We will be funding our end of the development fully. Because it is high risk, they do not want to loose any money. WHich in my opinion we should get a higher royalty for having to fork up the costs for ourselves.


Will the game be on store shelves or by order/download only? If it is by order/download only I would demand 70% royalties and allow for packaging/medium costs to be deducted from gross. If it will end up on store shelves I would aim for 40% royalties but expect 15-30%.

It would help if you could enumerate the costs you are enduring out of pocket. List all programmers at a reasonable hourly rate, software at typical purchase rate, artists at a reasonable contract rate, etc.. That will end up being a huge chunk of money. The fact that most people are presumably working on the project for free is not that relevant - you are sacrificing all potential earnings, thus losing money indirectly.

Get an idea of how they plan on advertising and shipping the product. What sort of shelf space do they plan on getting for your game? A box-front view of a game on shelf costs significantly more than a side panel view does -- as such, box-front shelf space would entail the publisher earning a greater share of the pie.

Have you considered negotiating in a less conventional manner? Since bother parties are relatively new have you considered offering something along the lines of direct profit sharing? Take the gross, subtract all of the expenses you have accrued, subtract all advertising/shipping/shelf/etc expenses the publisher has accrued and then determine a split on resultant profits. You could decide on a number based on the investment the publisher is putting into the project - if he plans on massive shipments/advertising/shelf space then perhaps 80% of the profits go to him. Ideally 60% for you would be a very nice number, but realistically 40% would probably be a miracle if the game will be on shelves.

Don't sell yourself short, most people do. Your first offer should be viewed as the beginning of the bargaining. If you offer start the bargaining at less than 15% they're going to assume you're desperate for anything and possibly doubt your team's ability to product a marketable game.

[edited by - haro on June 2, 2004 10:15:32 PM]

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I agree with Haro that you should go for a revenue sharing deal. As this is a new publisher they don't have a proven track record and that, combined with the fact they aren't risking development money puts you in a better position.

It is also important to know exactly what investment they will be making. You don't want to do all the work only to find that they don't spend any money on marketing.

Dan Marchant
Obscure Productions (www.obscure.co.uk)
Game Development & Design consultant

[edited by - obscure on June 3, 2004 4:32:03 AM]

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quote:
Original post by Brahose
Keep in mind that we are doing all of the design, building, graphics, and packaging ourselves. They are simply publishing it.



I have to ask, what *actually* are they doing?

The big cost to a publisher is generally the development - they take a risk on the development costs of the game and pay for it's development. Usually deals like this are handled in such a way that the game must sell a certain number of units before the devs start getting a royalty.

If they are paying for the pressing of CD's, packaging, storage, marketing and distribution of the game, that's another risk. This is a scalable risk though - a jewel case is cheaper than a nice big fancy box with printed manuals, a dirty slot behind the cabbages at the local grocery store is cheaper than a large obvious shelf at the front of Electronics Boutique or Wal*mart. Spam emails are cheaper than spectacular TV adverts. You really need to have an idea of how they are planning to handle this before you can get an idea of the risk they're taking, and thus whether the deal they're offering you is worthwhile.

There's also the issue of tech support - who handles this? Usually tech support is provided by the publisher, and the cost of handling this for the lifetime of the game should be factored into the deal. However, since this is their first game, they won't have an existing tech support staff, so you may have to handle this yourselves too.

Anyway, I think since both parties are inexperienced with the process, I think any kind of fixed deal stands a good chance of screwing one of other of the parties over. I'd agree with haro and go for some kind of revenue sharing scheme.

EDIT: Oh, and I think this should probably be in the Business of Game Development forum.

[edited by - Sandman on June 3, 2004 5:10:37 AM]

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