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engineeredvision

General question about developer returns

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I know that this question has probably been addressed many times in one form or another, but I haven't been able to find any information that really satisfied me so I'm going to ask anyway. Does any one know what percentage a developer can expect to make off of the sale price of a retail game if they have received the majority of the funding via a publisher contract? Take for example a game that costs 50 US dollars. The retailer is obviously going to take a percentage of this sale price leaving X number of dollars for the publisher. The publisher then takes its percentage, which I have been told is anywhere from 65-75% of the profits, and this is typically after the publisher has already taken 100% of the first sales in order to recoup the development costs. So after all is said and done, for a typical game that has a fairly standard publishing deal what percentage of sales per unit sold can be expected for the developer? I'm guessing somewhere around 10-15 US dollars for a 50 dollar game, but I could be way off. Does anyone know where this type of information can be obtained? Thanks guys for having the patience to answer a question that I know has been addressed several times. - Matt

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Obscure    175
Your $10-15 is way out. Developers get between 0-25% of net sales depending on how good you are at negotiating and what sort of track record you have. Super developers like id would obviously get even more but I am quoting general figures for normal developers. The definition of net sales also varies depending on how good you are at negotiating.

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Guest Anonymous Poster   
Guest Anonymous Poster
As Dan mentions you are way off, for a $50 game expect something starting at $2 for a 10% royalty rate, many publishers will offer a slidign scale of rate linked to sales, and some of those will be hockey stick shape. Its all very heavily to the advantage of the publisher if you are a new team.

Now I remember in the dim distant past a meeting with you Dan at Phillips with a Mr Brown and a Mr Lynn Evans just before he jumped ship to Virgin :)

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pink_daisy    200
a "typical" developer can expect to receive roughly 10% of the retail box price in a traditional developer->publisher->retailer distribution model. Some established independent developers (such as ID software) can command higher percentages, but 10% is the norm.

~PD

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Obscure    175
Quote:
Original post by Anonymous Poster
Now I remember in the dim distant past a meeting with you Dan at Phillips with a Mr Brown and a Mr Lynn Evans just before he jumped ship to Virgin :)
Your memory must be slightly off because I never met JLE until after he actually jumped ship and joined Virgin. Several other VIE producers visited Philips so it must have been one of them and we met after he jumped.

Back on topic the $2 figure is in the right ball park. Publishers get about 40-55% of the retail price which is their wholesale price. They then deduct various costs (exactly which depends on how good you are at negotiating) including console manufacturers license fees (if its a console game), cost of goods, marketing and distribution. These can easily knock $10 off leaving the publisher with $25, of which the developer gets their %.

However that isn't the final story because games don't stay at full price for very long. Publishers very quickly drop the wholesale price to allow the retailer to discount the game and this drop in wholesale will impact the developers royalty.

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Thanks guys,

Only $2-5 to the developer for a $50 unit? If this is the case it seems that less than 10% of developers would ever be able to stay afloat.

Next question: If an existing company that already had trained artists and programmers were to self fund the development of a game so that a publisher was only required for marketing and distribution purposes would the percentage of return significantly increase or will the publisher still take the larger percentage?

Thanks again.
-Matt

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frob    44972
Quote:
Original post by engineeredvision
Only $2-5 to the developer for a $50 unit? If this is the case it seems that less than 10% of developers would ever be able to stay afloat.

You apperently haven't looked too closely at the actual pay-per-hour rate most salaried developers get, and the razor-thin profit margins of most game companies.
Quote:
Next question: If an existing company that already had trained artists and programmers were to self fund the development of a game so that a publisher was only required for marketing and distribution purposes would the percentage of return significantly increase or will the publisher still take the larger percentage?

I read this question as: "If they don't give me money up front, can I get more money at the end?" The answer is obvioulsy 'Yes'.

If they fund development, they are basing the contracts on the risks that your game will actually get completed. They factor this in to the negotiated per-unit royalty formula. I like the hockey-stick description given earlier. Until you hit the bend in the hockey-stick, your royalties are getting reduced mostly to fund the games that never make it to market, or do poorly. That bend is moved based on your project's risk and your negotiating skills.

Bringing them a completed game and negotiating a publishing deal gets you a much more attractive royalty rate since they don't have to take the risks of you actually completing the project, and because they don't have to incur significant costs for the 18-or-so months before they see returns. Again, the actual rates will depend on your product and your negotiating skills.

frob.

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mecha    181
Quote:
Original post by engineeredvision
If an existing company that already had trained artists and programmers were to self fund the development of a game so that a publisher was only required for marketing and distribution purposes would the percentage of return significantly increase or will the publisher still take the larger percentage?


The royalty would be higher. How much higher would depend on the publisher. Publishers of "indie" games, for example, pay a royalty of 40-60% since there usually aren't any manufactoring costs (i.e., games through download), and they do not fund development of a game.

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Obscure    175
Quote:
Original post by engineeredvision
Thanks guys,

Only $2-5 to the developer for a $50 unit? If this is the case it seems that less than 10% of developers would ever be able to stay afloat.
Now you understand why so many developers bitch about the fundamental flaws in the business. The current deals make it virtually impossible for them to recoup advances so they seldom make any additional royalties. - at $2 per unit if the publisher advance was $3 million then the game has to sell 1.5 million units before the developer sees another dime.

Quote:
Next question: If an existing company that already had trained artists and programmers were to self fund the development of a game so that a publisher was only required for marketing and distribution purposes would the percentage of return significantly increase or will the publisher still take the larger percentage?
In theory yes, in practice it depends on how much the publisher wants/needs the game and (as above) how good you are at negotiating. I am working with a new start up developer that is partially funding the project and that has given me leverage to get a better %. However as a start-up they are still getting less than an established team would.

To be honest for a new start up there are actually more important issues than royalty %. The biggest killer of new teams is cashflow and making sure you have a big enough advance to get the game done is more important. Few new teams create a world-beating smash game at their first attempt so worrying about back end royalty % is a waste of time. Issues such as advance, IP ownership and getting your name on the box/manual/ads are actually more important to a new company.

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