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CaptainDeathbeard

profit-sharing with indie projects

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I know most indie projects have this setup. That everyone works on the game for free, and shares the profits up if it is published. As an idea its great, but I don't know how to do it, how to divide fairly and the legal side. Particularly when you account for the potential unreliability of unpaid remote team members. Or am I worrying about all this too early? I am totally confused by the whole issue, and have little business knowlege at all, so forgive me if I sound ignorant and woefully un-prepared to lead a team. 1 - how is it done, do you make a ltd company and offer shares? Or is there some kind of contract type? 2 - How can you fairly divide profits based on input? (I think this is called gain-sharing?). Obviously you can't just split it equally when one guy worked full time for years and another guy did 2 models. 3 - if you are doing shares then everyone will have an equal share from the start right? Which wouldn't work if one of them decided to then slack off. Or would you start with a fixed amount and just award more shares each month or so, so the relative value of shares are actually reduced as the game grows. This way is similar to earning money I suppose, but I made it up so I don't know if it works. 4 - Also I don't want to have to go "thanks for another model, its worth 40 shares" all the time, its pretty... well rude I suppose. I want people to be driven by the fun not thinking of money all the time, its the whole point of indie development. I would prefer to just divvy it all up near the end, but I think that would be likely to result in conflict. Are there are good resources you can point me to that will help with these questions? At the end of the day, I just want to make sure that if the game comes to publish, then everyone gets treated fairly. I believe I am sorted for legal ownership of team contributions, I used http://www.gamedevkit.com for a contributor agreement, but obviously if I get legal at this stage and make people sign that, I have to give them something in return at the same time. [Edited by - CaptainDeathbeard on June 30, 2008 12:11:32 PM]

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Before doing anything on this, you must get an assignment of the rights. It sounds like you know about that part already. Your lawyer can help you in this area, but most places don't require a physical transaction to take place. Contracts are often done "in exchange of goodwill and other intangible assets".

The exact details of sharing profits and/or revenue is one of the wonderful aspects of owning a business. One option is to have "project contribution points" given out by the game's rights-holder. You could do it as they are added, or at the end of the project, or whenever. If you are the rights holder, and the rights were assigned freely, the exact amount you compensate them is entirely up to you. Beware of words like "shares" with specific legal meanings, which should only be used after consulting with a lawyer.

Finally, remember that most games see about $0 in revenue. Take that into account when thinking about how much to promise to the contributors.

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Captain,

I have a similar situation. I asked my contributors to sign a DIY NDA and the company (which isn't yet formed) owns all of their work. They will receive shares in exchange. At this point not even the shares exist (legally speaking) so they are contributing on an assumption.

I don't inform my team members how much they gained for every separate contribution. We track man hours contributed and everyone knows how much their man hour is worth. In other words, if they are interested, the information is there, but it doesn't get in the way of their fun (I hope).

I think the scenario you described in point 3 is the most likely. However, you should probably have some sort of "share" or "contribution point" pool that you use. For example, you may have 1,000,000 such points at the beginning and distribute a part of them each month based on contribution. In this particular case, you're essentially promising that 10,000 shares/points will be worth at least 1% of the project/company and that they will be worth more if not all of the 1,000,000 points get distributed.

Let me know if I'm not making sense. d:

frob, can you be more specific about the usage of the word "shares"? Are you referring to things like pass-through profit/losses that have to be declared in taxes?

Also, I am wondering what you mean by "$0 in revenue". Do you mean that completed games that are released to the public see 0 sales (direct or otherwise)? Do you happen to know specific examples?


Alex

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Thanks for both your replies.

kipple - Shares are an actual ownership of part of the company itself, whereas royalties are just a percentage of profits earned on that one product. Hence why frob advised me to be careful of my wording.

And by "$0 in earnings", I think frob is referring to the fact that most indie games don't get finished or published. Except mine of course.



But I think it is important to sort all this out at the start, before people start vanishing from the team etc. and you forgot who contributed what. For myself, I plan to have a discussion with my team once it grows a bit more, and then sell my kidneys so I can visit a lawyer.


But still, I think ensuring complete fairness will be a challenge.

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Quote:
Original post by CaptainDeathbeard
And by "$0 in earnings", I think frob is referring to the fact that most indie games don't get finished or published. Except mine of course.

No, actually that isn't what he meant. He meant that most indie games that DO get finished and published see $0 in earnings.

This is especially true when first starting out because no one knows your game exists so no one downloads it, let alone buys it. It usually takes several years (in which a developer builds a portfolio of games for sale) before they see anything close to enough sales/revenue to live off/cover the cost of developing the games.

There are some interesting threads over on the indiegamer forum about sales (or lack thereof) of ..... indiegamer forum.

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It's likely that going through a big portal would get you more sales but you would earn a smaller % on each one so not much more money unless it is a huge hit.

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