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What is the appropriate percentage to offer in residuals for an indie game seeking contract labor?

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Just what the title says, I'm looking for a good average amount typically offered and expected by people working on indie games.  I'm getting ready to start a project and need a good ballpark figure.  Any advice would be appreciated. 

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Unfortunately, the majority of indie game projects are either not completed or never make a profit, so unless your employees are friends or you have a proven track record most people will expect to be paid up front; either an hourly rate, or a negotiated amount based on development milestones.

In cases where royalties are offered -- usually amongst friends, as mentioned above -- an even split of profits seems fairly common.

If you're paying up front AND offering residuals I've often seen smaller amounts around 5-10%, depending on the number of team members. In such a case it is also common to cap the length of time or state a minimum profit level at which residuals will continue to be paid, to avoid awkward situations when a game earns 20c/month several years after release.


Note that depending where you and your potential employees are located there may actually be legal requirements for how people are paid.


Hope that helps! :)

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If someone is offering out percentage ownership as part of their project, it is a good sign they have no idea what they are doing. Depending on the details, it can also be a great way to perform a hostile takeover.  

 

A surprising number of beginners are willing to assign equity shares based on submissions made. That means the people who started the company may start with a lot of shares but they are diluted with every submission. In short order a prolific submitter could overtake the project founder in terms of submissions, making them the owner of the business.

 

Pay up front or make payment discretionary. Make absolutely certain you are following tax law; even if no money is transferred the ownership is considered something of value for tax purposes.

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Thanks for the comments.

 

I was thinking more along the lines of residuals for the specific project we are starting and setting it up like a Sag/AFTRA contract.  Shares of the company would remain intact.  Currently, residuals on television broadcasts of movies are 3.6%; video and DVD is 4.5% on the first million dollars of gross receipts and 5.4% thereafter.  Since it's not a one off broadcast, the DVD model seems like a better analogue.  It has a defined benefit up front until a benchmark is met and then is reduced after.  But those numbers seem a little high for a team, hence my original question.  I was thinking of setting it up something like this:  3.6% on the first $250k and 2% thereafter for a period of five years.  For example, a team of 15 people would take away 54% of the first $250k and 30% of everything else for the next five years.  If the game does $1 million in sales the first five years(I'm dreaming I know) then each individual would get $9k off the first $250k and then $20k off the rest and it would continue to trickle in.  Since I have no idea what some of the cuts the distributers like Steam and ID@Xbox or the like get percentage wise because they are behind NDA's I was looking for advice on what would make the most sense.  Since I have no budget up front, I need to make an idea like this work.  

 

And we started off as a mod team so we are familiar with doing work for no pay. :)

 

Any thoughts would be appreciated.

Edited by oddjob1138

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