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Canadian_Goose

Typical Developer/Publisher Deal?

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Posted (edited)

Hello, 

I am part of a team with an online PvP game. We get good buzz when we post our work and had a major publisher reach out to us and casually express interest in our work a while back. We finally have a stable build and are about to present to them our work thus far!

It is very exciting, but also nerve-wracking, because our game development experience is very limited. So with that in mind...

What the heck is a good publishing deal for an indie studio like us? There is frustratingly little information on this specific question, and what I find is all over the place. Here are examples of what I've read are "typical" deals:

  • The publisher handles all marketing expenses and takes a 70% cut of the revenue, leaving the studio with 30%. The studio keeps the IP and assets.
  • The publisher handles all marketing expenses and takes 100% of the earnings until the marketing budget is recouped. After this point, the publisher takes a 30% cut, and the developers get 70%.
  • The developer pays 25% of the cost of developing the game and the publisher splits the revenue with them.
  • The developer doesn't make much money after the sale of the game. Instead, they should negotiate as large of a budget as possible to the publisher and use as little of it as possible in developing the game.

These deals are all over the place! 

We have so many questions of our own:

  • How much of the budget should the developer expect the publisher to pay? (Is this a major reason to partner with a publisher, or is it really for their marketing spend/connections?)
  • Will the publisher expect us to quit our full time jobs to work on this? 
  • Should the devs be asking for any salary at all? Maybe just enough to keep a roof over our heads? 
  • What assets should we expect to keep - our source code, at the very least?
  • Should the publishers buy us out for the work we've done this far, or is that just "written off" as the cost of getting a vertical slice demo? 
  • How do we decide what's a reasonable marketing budget, development budget, and revenue split with the publisher?  Is there a good rule of thumb for how much money should be spent on budget vs. marketing? (I know the marketing expense is significantly higher than the production costs for Hollywood movies, for example)
  • We have funding for another year without a publisher. It is our own money. We would rather not use it, but should we consider using it as a negotiating chip to increase our revenue take, or is that weird?

It is scary looking at the digital distribution channels' takes (especially Steam) and licensing fees on top of the publisher's take. We do not want to lose our shirts... in fact, our game is fun and we want to make money! 

Thank you in advance!

Edited by Canadian_Goose

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9 hours ago, Canadian_Goose said:

Here are examples of what I've read are "typical" deals:

  • The publisher handles all marketing expenses and takes a 70% cut of the revenue, leaving the studio with 30%. The studio keeps the IP and assets.
  • The publisher handles all marketing expenses and takes 100% of the earnings until the marketing budget is recouped. After this point, the publisher takes a 30% cut, and the developers get 70%.
  • The developer pays 25% of the cost of developing the game and the publisher splits the revenue with them.
  • The developer doesn't make much money after the sale of the game. Instead, they should negotiate as large of a budget as possible to the publisher and use as little of it as possible in developing the game.

These deals are all over the place! 

30% is a high royalty for a new developer. The publisher normally pays for ALL of the dev cost and marketing cost. But in your case, you've already developed the game, so you have to forget about "normally." Forget that third bullet. And that fourth bullet is just weird, you should forget that one too. 

9 hours ago, Canadian_Goose said:

How much of the budget should the developer expect the publisher to pay? (Is this a major reason to partner with a publisher, or is it really for their marketing spend/connections?)

Since you have already developed the game, there will have to be a different arrangement. I suppose you'll want to calculate what you've spent so far, but that doesn't mean the publisher will calculate things the same way.

9 hours ago, Canadian_Goose said:

Will the publisher expect us to quit our full time jobs to work on this? 

Would you want to sign with a publisher who is only a part-time publisher? Forget I said that. It depends on how much more work there is to do on your game, If you've just made an MVP and there's still 80% of the project remaining to be done, then your team working on it in just your leisure hours is definitely going to be a problem for you in the negotiation.

9 hours ago, Canadian_Goose said:

What assets should we expect to keep - our source code, at the very least?

You get less money if you're just renting your game than if you're selling it outright. Ownership is negotiable. 

9 hours ago, Canadian_Goose said:

Should the publishers buy us out for the work we've done this far, or is that just "written off" as the cost of getting a vertical slice demo? 

Don't agree to something you don't think is fair. 

9 hours ago, Canadian_Goose said:

How do we decide what's a reasonable marketing budget, development budget, and revenue split with the publisher?  Is there a good rule of thumb for how much money should be spent on budget vs. marketing? (I know the marketing expense is significantly higher than the production costs for Hollywood movies, for example)

Nobody expects you to know what should be spent on marketing. But YOU get to say how much you spend on development. The revenue split (the royalty) you can expect is somewhere between 18 and 30 percent. But nobody's going to force you to sign a deal you don't like. Marketing cost is discussed in other threads in this forum - it's not unusual for game marketing cost to equal dev cost. 

9 hours ago, Canadian_Goose said:

We have funding for another year without a publisher. It is our own money. We would rather not use it, but should we consider using it as a negotiating chip to increase our revenue take, or is that weird?

It IS a negotiating chip. It's not weird.

9 hours ago, Canadian_Goose said:

our game is fun and we want to make money! 

Read a lot more of the threads in this forum. Read Gamasutra and Gamesindustry.biz. Talk to published devs. Start doing all that 2 years ago when you had the idea for this game. 

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On 3/13/2019 at 11:15 PM, Canadian_Goose said:

What the heck is a good publishing deal for an indie studio like us?

This is part of the reason you need a good lawyer who is familiar with the industry.

They can go over contracts carefully, they know what is standard and what is not.  They also know what unusual that you are offering, such as a near-complete game.  

A good lawyer will find details that we on the forum can't spot, since they know all the details of your business, and details of your projects, and details of the agreement.

Do not blindly sign the contract they offer.  Contracts that publishers offer are always written in terms favorable to them, although some offer a more fair deal than others.  It is your job to get a good lawyer who can negotiate the terms.  The more you are contributing the better the negotiation can become.

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