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Contracts - royalties vs upfront

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Traz
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I'm curious how many of you have created a standard contract that you use when you pitch a game. Or do you just accept whatever the publisher already has?

I have a standard contract I am finishing up that offers to accept 5% royalties or 4% up front. I'm still vacillating between how I should word the thing...

5% royalties based on actual sales
or
5% royalties based on print run
or
5% royalties based on projected sales

4% upfront based on print run
or
4% upfront based on projected sales

My preferred is 4% upfront.

Your suggestions are welcome.

Katherine
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IMO you need to reconsider

Invisiblejon gives valuable insight to Game pitching and I don't see any mention of contracts being part of that.

IMO you need to reconsider including a contract with your presentation ...

Jeremiah_Lee
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Premature?

Now, I'm pretty new to all this (I have one game in print, and I've sent a bunch of other proposals), but it seems premature to send a contract. I'm not sure what there is to gain by sending it with the submission, and it could end up scaring off potential publishers. They'll like the game, but not like the fact that you have something in mind for a contract before you've even seen their standard contract.

Have you had success with this before?

Traz
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define success

An honest question. So far, all games I have sold were for upfront money [as is the game I have 'sold' which is in development], and none involved a contract I submitted.

My question on the contract front was a suggestion by a couple of other designers who do it that way. They pointed me to a generic Game Contract which I found on the web [don't remember where now] on a site with advice by a very nice fellow they both recommended. The contract was a 'download it, adjust to taste, and good luck to you' sort of thing based on his years of experience. He didn't really deal with the 'upfront option' which has been my experience, so that's why I was asking the question.

I also had a recent pitch where I talked extensively with the publisher who seemed just fine with the option of 5% royalties or 4% upfront.

Just to clarify, I would NEVER send a contract [or even bring the subject up] unless and until a publisher had expressed interest that would allow such discussions to be appropriate - maybe I'm just Old School that way.

InvisibleJon
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How about using it as a counter-offer?

Having your own contract seems clever and professional, but raises a few concerns:

Every contract from a publisher is an opportunity to comparison-shop. Look at it, compare it to everything you've seen before, and ask yourself if you like it more or less than the other contracts. By offering your contract up front, you may undercut what they were going to offer you. In some rare instances, I've heard of small start-up publishers offering 7% of gross.

You may also miss out on seeing perks in their contract that you may want to incorporate in yours. Early on, I was not aware that some contracts offer N copies of the game when it is published. This adds negligible cost to the contract for the publisher, but significant value to the contract for me. Now that I know about it, I always request this when it is not present.

I strongly suspect that some publishers (Fantasy Flight, Upper Deck, Hasbro/WotC/Avalon Hill, Mattel, etc.) would not accept a contract from a designer. Of course, I trust your judgement in deciding when it is appropriate or inappropriate to present your contract.

Also, consider the "watertightness" of the contract that you were directed to on the internet. Is it sufficiently robust to protect you (and your would-be publisher)? Does it have loopholes? Have you vetted it with a lawyer?

If I had a contract that I liked, thought was fair, and was legally robust, I would use it as a counter-offer for situations where I was presented with a contract that was unacceptable to me that making a few small adjustments to the offered contract would not "fix" what I disagreed with. "I've reviewed your contract. I propose we use this one instead."

InvisibleJon
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Why pick one when you can have both? Run the numbers & decide.

Traz wrote:
I have a standard contract I am finishing up that offers to accept 5% royalties or 4% up front. I'm still vacillating between how I should word the thing...

5% royalties based on actual sales
or
5% royalties based on print run
or
5% royalties based on projected sales

4% upfront based on print run
or
4% upfront based on projected sales

My preferred is 4% upfront.

I think you should create two contracts: One with royalties and one with up front payments. The one you should use depends on what you think the game's likely performance will be.

I recommend creating a spreadsheet. Imagine that you have a spreadsheet that you can plug # of copies sold and sale price into. The spreadsheet returns what you'd get in the different contract scenarios. You can use this information to decide which contract you'd prefer to use.

My understanding is that smaller companies generally prefer to pay royalties while larger companies prefer to pay up front.

In Mike Stackpole's seminar at GTS 2009, he said that it is often difficult to get timely royalty payments from hobby game publishers. That may make up front payment more appealing.

Dralius
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As a freelancer it is usually

As a freelancer it is usually the publishers that are going to set the terms. Most have a standard way they like to do business and their contract reflects that. If you’re in a good position you might be able to negotiate some but they hold the cards, dice, boards, chips, etc…

MatthewF
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Advance on Royalties

An advance on royalties, like they do in book publishing, isn't uncommon at all. You might get 5% which, with the first print run works out to, say, $1500 ($10 gross * 3,000 printed, for this example), and you get a $1,000 advance on that. If all 3,000 games sell then you get another check for the rest (or, commonly, smaller quarterly or annual checks though the "in print" period). If they only sell 1,000 of your games, you still keep the full advance, despite the fact that in theory you'd owe $500 back.

Extremely common in book publishing, and pretty common in game publishing.

Traz
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choice for the publisher

I've always thought of the contract as giving the Publisher choices. He can do one or the other. Upfront is more out of his pocket in the short run, but much less over the long haul [plus he doesn't have to keep track of sales on my account - or account to me at all for that matter]. That's a trade-off I'm more than willing to make, because it creates a more 'clean' business relationship. I don't like the idea of putting the Publisher in the position of having to decide on whether to pay me or a supplier, as happens in the royalties situation. And sometimes you just don't get paid [or don't get paid timely], which creates a lot of tension I don't need.

Of course, I'm looking at it from my viewpoint and not theirs. I'm thinking it's more of a win-win for both of us. If they sell out the first run, they'll be back for another printing [and another check]. That means they're making money, which means I will too.

And yes, there is a clause in there that I get 'x' number of copies. :)

ReneWiersma
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I like royalties better than

I like royalties better than a fixed, one-time sum of money. If the game doesn't sell well, you probably make more money with a fixed, one-time sum of money. If the game sells as expected, it probably doesn't matter much which one you choose. However, if the game unexpectedly becomes a huge hit (think Ticket to Ride, Carcassonne) you will make so much more money off the royalties.

If I had to design games for a living, I'd probably negotiate some hybrid form of a fixed amount of money upfront and royalties, because security and predictability and a steady source of income become more important.

Traz
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not quitting my day job

There's the rub, Rene - I don't do this for a living. I do this for the occasional vacation with my sweetheart and because I have the itch. It's all for love no matter how I approach it. :)

My theory on the 'mega-hit' is this - my contract is designed to cover a printing of 'x' copies. I leave that line blank and whatever they put on it, I'm going to increase it. I want them to make money. Because when it is all said and done, if they do, when I come back with another design, they will be pre-disposed to look at my design with a favorable eye.

If the sales go through the roof, when we re-negotiate the second printing, I won't change the number they ask for on the print run. By that time they've got a very good idea of exactly how much to run, and I'll take their word for it for the same reasons as above. This time, it's all gravy money.

I want to be able to present myself as an easy guy to work with who puts together quality games that he cares very much about. Which, strangely, is exactly who I am. I've never been any good at portraying myself as something I'm not. I've always been the what-you-see-is-what-you-get kinda guy. If I ever have to put on an act, then I'll have to start remembering what character I acted for who and it'll all go downhill from there.

As to mega-sellers, I think I only have two. I believe my GODS ALONG THE NILE will be a Euro-Game Mega Hit, and I believe my ORBIS will eventually become the 4th Classic Game and be bundled with Chess, Checkers and Backgammon. If ORBIS hits like I think it will, then I'll pay off the mortgage and retirement [when the day job hits 20 years] will be sweet. If GODS hits like I think it will, Pam & I are taking the 2 week Alaska cruise!

MichaelM
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Being a Publisher....

I have to say that as a publisher, I want the contracts for all of my games to look very similar. That way I know what my legal responsibilities and protections are without pouring over each contract individually.

For example, one thing that I currently find absolutely non-negotiable is the length of the contract. I do not want to leave myself open to any renegotiation in the future. Of course, I understand that a designer wants their intellectual property to return to them if I fail to publish or if a game becomes out of print for an excessive amount of time. My contracts account for both of these needs.

Feel free to check out the website for my publishing company. We are releasing our first two games later this year, and are currently in the process of building our pipeline. Tasty Minstrel Games is the publishing company, and our first two games are Homesteaders and Terra Prime. Send me a private message about your "GODS ALONG THE NILE" game. If you have a sell sheet, I would prefer to see that. After Homesteaders and Terra Prime hit, we should have some decent euro game exposure, and I am actively looking to expand our euro game pipeline.

Thanks,

Michael

Dralius
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MichaelM wrote: For example,

MichaelM wrote:

For example, one thing that I currently find absolutely non-negotiable is the length of the contract. I do not want to leave myself open to any renegotiation in the future. Of course, I understand that a designer wants their intellectual property to return to them if I fail to publish or if a game becomes out of print for an excessive amount of time. My contracts account for both of these needs.

Does this mean the rights never return to the designer as long as you meet a minimum sales level? And waht is an excessive time, how many years?

ReneWiersma
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Dralius wrote:Does this mean

Dralius wrote:
Does this mean the rights never return to the designer as long as you meet a minimum sales level? And waht is an excessive time, how many years?

It is usual that the rights of the game revert back to the game designer X years after the last print run. I think that is what Michael means. A typical number of years is around 4 or 5.

MichaelM
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My contracts seek to be reasonable for both parties

It is designed to protect both parties.

#1 - The designer wants their intellectual property back if the game is no longer in print.

#2 - I do not want to renegotiate a contract in the event the game sells like a Carcassonne, Settlers, Ticket to Ride, etc.

So as long as there are consistent print runs of a defined size (5,000 copies after the first run) then the intellectual property remains with Tasty Minstrel Games. If however it has been 3 years since the last print run, then the intellectual property of the game would revert to the designer.

ReneWiersma wrote:
Dralius wrote:
Does this mean the rights never return to the designer as long as you meet a minimum sales level? And waht is an excessive time, how many years?

It is usual that the rights of the game revert back to the game designer X years after the last print run. I think that is what Michael means. A typical number of years is around 4 or 5.

Traz
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it always happens this way...

MichaelM wrote:
I do not want to renegotiate a contract in the event the game sells like a Carcassonne, Settlers, Ticket to Ride, etc.
Perhaps you misunderstood what I meant by 'renegotiate'.

What *I* mean by renegotiate is to simply redo the contract exactly as before - except this time you as the publisher fill in the number of copies you expect to print this next time. I would absolutely leave filling in that number up to a publisher every time. The first time, the second time, etc. As I said - I'm a game designer, not a businessman.

But I do understand the basics - if sales go nuts you're going to want to reprint. I WILL TOO! :) But I can't think of any circumstances why anybody would want to jump ship or gouge the goose if there are more eggs on the way? That might make sense to some cut-throat wackjob, but what publisher would ever want to work with the wackjob ever again? You could kiss your reputation goodbye.

On the other hand, if you are loyal to the publisher who is going to make you a mega-hit, what does that do for all the other designs you have in your pocket? Call me old fashioned, but I've always felt that integrity IS the best business plan! There are way too many options for publishing out there to be the egotistic problem child that nobody is going to want to work with. I'll stick to treating people the way I like to be treated.

Bottom line is - I want to offer a publisher a choice. Upfront at 4% or royalties at 5%. I figure that each publisher has a business model that they prefer and I would respect that - they are ones doing ME the favor, not the other way around. Every company out there is evaluating 200-1000 games per year and only publishing 2-12. While I want to keep a couple of MY options open, I also understand what a rare opportunity even being SERIOUSLY CONSIDERED is.

MichaelM - GODS ALONG THE NILE was sent by request to Z-MAN GAMES about ten days ago, but if that doesn't pan out, I'll certainly send it along to you! Thanks for asking!

ReneWiersma
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Traz wrote:But I do

Traz wrote:
But I do understand the basics - if sales go nuts you're going to want to reprint. I WILL TOO! :) But I can't think of any circumstances why anybody would want to jump ship or gouge the goose if there are more eggs on the way? That might make sense to some cut-throat wackjob, but what publisher would ever want to work with the wackjob ever again? You could kiss your reputation goodbye.

Contracts are there because publishers don't know which designers are actually wackjobs and whoich are the good guys (and vice versa too!). Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this. Of course, you are a good guy, you wouldn't do that, but you cannot expect a publisher to believe you on your pretty blue eyes, that's what contracts are for, and I can see why a publisher doesn't want to deal with that hassle each time they decide to do another print run.

MichaelM
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What if you can not be located?

Additionally, something could happen where the publisher was not able to get in contact with you. Or for some reason it takes a month to get the new renegotiated signed. Then you have production time, and shipping time. How many lost sales does that amount to? A good contract should be designed to protect all parties. Publishers have the most to gain from a proper contract, because they are investing their money and risking loss of that money to print your game. If you hold the strings or insist on holding the strings...

ReneWiersma wrote:
Traz wrote:
But I do understand the basics - if sales go nuts you're going to want to reprint. I WILL TOO! :) But I can't think of any circumstances why anybody would want to jump ship or gouge the goose if there are more eggs on the way? That might make sense to some cut-throat wackjob, but what publisher would ever want to work with the wackjob ever again? You could kiss your reputation goodbye.

Contracts are there because publishers don't know which designers are actually wackjobs and whoich are the good guys (and vice versa too!). Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this. Of course, you are a good guy, you wouldn't do that, but you cannot expect a publisher to believe you on your pretty blue eyes, that's what contracts are for, and I can see why a publisher doesn't want to deal with that hassle each time they decide to do another print run.

jwarrend
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ReneWiersma wrote: Suppose

ReneWiersma wrote:
Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this.

I agree with this rationale, however, if a game becomes a hit, it's reasonable for a designer to expect that his royalty would increase. I would think this could be built into the initial contract to prevent a need for renegotiation down the road, eg "with each print run the designer's royalty will increase by X%, up to a maximum royalty of Y%". Is this standard in the industry? It seems to me that it ought to be, and something that designers would press for, but I can imagine publishers wouldn't necessarily be eager to grant terms of this sort if they didn't have to.

sedjtroll
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jwarrend wrote:ReneWiersma

jwarrend wrote:
ReneWiersma wrote:
Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this.

I agree with this rationale, however, if a game becomes a hit, it's reasonable for a designer to expect that his royalty would increase. I would think this could be built into the initial contract to prevent a need for renegotiation down the road, eg "with each print run the designer's royalty will increase by X%, up to a maximum royalty of Y%". Is this standard in the industry? It seems to me that it ought to be, and something that designers would press for, but I can imagine publishers wouldn't necessarily be eager to grant terms of this sort if they didn't have to.


Well... per unit royalties may not go up, but overall royalties do because with a new print run there will be more units sold. They're not selling for any more money each though. I'm not sure it's standard for a designer's cut to increase in that way (upon future print runs).

jwarrend
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Quote:They're not selling for

Quote:
They're not selling for any more money each though.

I think the argument would be that as a game becomes more successful, the publisher's risk decreases substantially and the credit for the success of the game becomes more equal, and so the designer is entitled to a larger share of the profits than he would have been at the outset. Look at it this way; if you had an opportunity to license TtR right now, do you think Alan Moon would accept the same royalty that would be offered to a designer of a new and unproven game? Presumably he'd want much more than that. I wonder whether pro designers like Moon have an "SdJ" clause in their contracts of this sort.

Traz
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ReneWiersma wrote:Contracts

ReneWiersma wrote:
Contracts are there because publishers don't know which designers are actually wackjobs and which are the good guys (and vice versa too!).
Good point... I hadn't thought about that.
ReneWiersma wrote:
Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run.
I see how this would be a problem, however, my contract precludes this - extra printings are allowed. All the publisher needs to do is let me know how much the print run will be this time and whether he wants to pay via Option A (Upfront 4%) or Option B (5% Royalties). Again - this seems to me an integrity issue and is covered by the contract. I'm never hard to find - hiding is the issue! :) In the unlikely event a Big Guy wants to buy me out from under The Little Guy Who Gave Me My Big Break, he's going to have to negotiate with The Little Guy... I'll still be there at the end looking for my 4%/5% after they decide how it goes. Again - once you 'sell out' from under somebody - who's ever going to trust you? This type of double-dealing only makes sense to me if you plan to become a heartless bastard known as such in the industry - to which your rewards will be obvious. I prefer fair dealing done in the open. That's how I got where I am, and I'll keep my reputation intact, thank you.
ReneWiersma wrote:
While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this.
I can see why he wouldn't want to renegotiate - neither would I. That's why I would expect there to be simple, immediate options for reprints. Why in the world wouldn't I WANT there to be immediate options like that? If a game goes nuts, I certainly want the publisher to be able to take it to the Mega-Nuts ASAP.
ReneWiersma wrote:
Of course, you are a good guy, you wouldn't do that, but you cannot expect a publisher to believe you on your pretty blue eyes, that's what contracts are for, and I can see why a publisher doesn't want to deal with that hassle each time they decide to do another print run.
I agree. Hopefully, all will be fixed up front.

Please understand that I am not expecting any publisher to bow down and sign or lose out. I have my contract because I've dealt with two publishers who didn't have one ready. Also, after modifying the standard contract to meet my personal needs, it gives me something to pass along to the publisher to look over so he has a better idea of where I'm coming from. I don't need him to bend over, but I don't think it's asking too much for him to look it over - is it?

Traz
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jwarrend wrote:If a game

jwarrend wrote:
If a game becomes a hit, it's reasonable for a designer to expect that his royalty would increase.
Really? I wouldn't expect that. Based on my 4% / 5% model, I get an increase based on the number of units printed/price charged/etc. Whatever I made in the first small priniting, will be increased proportionally in the next, larger printing - so I automatically get a bigger check.. right? If anything, I might expect a 'bonus' of some sort, but that would be all.

jwarrend
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Quote:Really? I wouldn't

Quote:
Really? I wouldn't expect that.

My point was mostly that you wouldn't be unreasonable to expect it.

Traz
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fair enough

jwarrend wrote:
My point was mostly that you wouldn't be unreasonable to expect it.
I can see someone doing that - perhaps asking for 5% / 6% if sales go wild. I was just reacting to the idea (not that you posed it) that someone might go nuts demanding 10% or more. That would be suicide. I prefer to stick to my original formula - to me that tells the publisher that I am a known quantity that can be relied on. That message also goes out loud and clear to all the other publishers who missed out on the great game, but who might be (much more) interested in my next offering.

If the publisher wants to show excessive appreciation, he can book me a two week cruise to Alaska with my sweetheart - I'll be the happiest camper ever (and we can do signings on the cruise so he can write it off as advertising)! Some folks like to say I'm easily bought - I prefer to think of myself as comfortable with who I am and what I want out of life. :)

jwarrend
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Quote:I can see someone doing

Quote:
I can see someone doing that - perhaps asking for 5% / 6% if sales go wild. I was just reacting to the idea (not that you posed it) that someone might go nuts demanding 10% or more.

I agree, 10% seems unreasonable; an increase of a percent or two seems reasonable, and as you say, it would only be if the game sells a lot. I agree with you that there are many classy ways a publisher could show appreciation for a game that becomes a proven seller. But we're talking about the terms up front, before anyone knows whether it will be a big seller or not; if the contract is to extend in perpetuity and there are no agreed-upon terms up front for the eventuality of a big success, there's some risk.

Quote:
Some folks like to say I'm easily bought - I prefer to think of myself as comfortable with who I am and what I want out of life. :)

I definitely understand and relate to this. For me, the attractive aspect of getting a game published would be getting to see the "finished" version of a game. And I'm sure there are many of us who feel that we'd license our games to a publisher for free if we had the chance. I once heard Alan Moon react to that idea; his position was basically that doing this would devalue your game and would be a very unfavorable direction for the industry to go in, as publishers would think they could get away with hosing designers because the designers were indifferent to whether they were being hosed. Happily, I think that most if not all companies do value the work of designers and are willing to pay a fair rate for it, so I doubt there's much likelihood of that eventuality coming to pass.

seo
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jwarrend wrote:Quote:I can

jwarrend wrote:
Quote:
I can see someone doing that - perhaps asking for 5% / 6% if sales go wild. I was just reacting to the idea (not that you posed it) that someone might go nuts demanding 10% or more.

I agree, 10% seems unreasonable; an increase of a percent or two seems reasonable, and as you say, it would only be if the game sells a lot. I agree with you that there are many classy ways a publisher could show appreciation for a game that becomes a proven seller. But we're talking about the terms up front, before anyone knows whether it will be a big seller or not; if the contract is to extend in perpetuity and there are no agreed-upon terms up front for the eventuality of a big success, there's some risk.

I'm pretty sure I've seen a contract somewhere with clauses to this regard, in the form "designer gets 5% from the first 25,000 copies, then 6% afterward". I guess you could also have another clause stating "7% after 75,000 copies, 8% after 250,000 copies, 9% after 1,000,000, 10% once 3,000,000 copies are sold" or whatever. That would solve the renegotiation question if the game is a big hit.

I don't think 10% is unreasonable for a really big success, simply because by the time you've sold over a million copies your name, and the name of your game, will probably sell just like Dan Brown or Stephen King on the cover of a book sells a lot of copies, no matter how good the game is. It's a marketing thing, and since you're helping sell games with your name, not just your game itself, it seems fair to get an extra slice.

But we're talking quantities most games won't reach, ever. Which means most designers will never get a 10%. I don't think publishers will have much worries about the inclusion of such percentage-increase clauses, if they want automatic renewal in their contracts. If they are selling huge amounts, the large print runs will mean lower costs per copy, and that will probably mean that a game that had a production cost of 20% the retail price might drop to 15% of retail, and I bet most publishers will be happy to share that extra income with their successful designers.

MichaelM
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Front end risk?!?

Would I want to license Ticket to Ride right now? Probably. Could Alan Moon get a higher percentage for it now? Certainly.

However, if a publisher has their financial incentive for success diminished, then they are less likely to take the initial risk with their hard-earned / saved money. Additionally, their spouses may start to object. I know that I would not sign a contract like that, unless the bump up was at something ridiculous like 300,000 copies sold. At that point, it does however seem like superfluous contract language.

jwarrend wrote:
ReneWiersma wrote:
Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this.

I agree with this rationale, however, if a game becomes a hit, it's reasonable for a designer to expect that his royalty would increase. I would think this could be built into the initial contract to prevent a need for renegotiation down the road, eg "with each print run the designer's royalty will increase by X%, up to a maximum royalty of Y%". Is this standard in the industry? It seems to me that it ought to be, and something that designers would press for, but I can imagine publishers wouldn't necessarily be eager to grant terms of this sort if they didn't have to.

MichaelM
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Better rates on new contracts

I think SEO hits it on the head here, he just doesn't know that he did... Hypothetical #1

Tasty Minstrel Games publishes Terra Prime. Sales go crazy nuts and we sell 250,000 games. Now Seth has the ability as a designer/developer of a proven game to expect more from future contracts. Seth can come into a contract negotiation saying... Look at Terra Prime, if 1% of buyers of Terra Prime buy game X just because my name is on the box, then you mr. publisher will sell 2,500 copies of the game instantly.

That reduces risk of a future publisher, and they may be willing to pay extra for it.

As for the talk about royalties moving to zero, it would be bad for existing publishers. New publishers would have an easier time coming into market and competing, because they will pay for good designs.

Michael

seo wrote:
jwarrend wrote:
Quote:
I can see someone doing that - perhaps asking for 5% / 6% if sales go wild. I was just reacting to the idea (not that you posed it) that someone might go nuts demanding 10% or more.

I agree, 10% seems unreasonable; an increase of a percent or two seems reasonable, and as you say, it would only be if the game sells a lot. I agree with you that there are many classy ways a publisher could show appreciation for a game that becomes a proven seller. But we're talking about the terms up front, before anyone knows whether it will be a big seller or not; if the contract is to extend in perpetuity and there are no agreed-upon terms up front for the eventuality of a big success, there's some risk.

I'm pretty sure I've seen a contract somewhere with clauses to this regard, in the form "designer gets 5% from the first 25,000 copies, then 6% afterward". I guess you could also have another clause stating "7% after 75,000 copies, 8% after 250,000 copies, 9% after 1,000,000, 10% once 3,000,000 copies are sold" or whatever. That would solve the renegotiation question if the game is a big hit.

I don't think 10% is unreasonable for a really big success, simply because by the time you've sold over a million copies your name, and the name of your game, will probably sell just like Dan Brown or Stephen King on the cover of a book sells a lot of copies, no matter how good the game is. It's a marketing thing, and since you're helping sell games with your name, not just your game itself, it seems fair to get an extra slice.

But we're talking quantities most games won't reach, ever. Which means most designers will never get a 10%. I don't think publishers will have much worries about the inclusion of such percentage-increase clauses, if they want automatic renewal in their contracts. If they are selling huge amounts, the large print runs will mean lower costs per copy, and that will probably mean that a game that had a production cost of 20% the retail price might drop to 15% of retail, and I bet most publishers will be happy to share that extra income with their successful designers.

seo
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MichaelM wrote:Tasty Minstrel

MichaelM wrote:
Tasty Minstrel Games publishes Terra Prime. Sales go crazy nuts and we sell 250,000 games.

Then I will be able to sell my signed first edition copy for like $1000. ;)

jeffinberlin
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Negotiating

I've mostly had experience with German publishers, but what Matthew said about advances on royalties is the norm here: 1,000 Euro for a board game, and at least 500 for a card game, to be subtracted from the initial royalty payments, should it be produced. If it is not produced within 2-3 years of signing the contract, all rights revert back to the designer, and he/she keeps the advance.

Usually the rights also automatically revert back to the designer if the game no longer appears in the publisher's catalogue, or if it drops below a certain number of units sold per quarter. Otherwise, I beleive that either the publisher or designer may cancel the contract after giving notice, but it's usually in the best interest of both to maintain the contract as long as the game is selling well.

I joined the SAZ (international Game Designer's Association--even Alan Moon is member) when I was negotiating my first contract, and they offered a lot of help (from other published game designers, voluntarily). In addition, members get a packet with a standard contract--both long and short form--and a contract checklist. I found those to be invaluable when looking at new contracts from other publishers.

Most publishers, however, already have their standard contract, and are not usually inclined to negotiations, so don't spend too much time on your own contracts to offer them.

If they offer something sub-standard, you can, of course, negotiate (and having an international standard checklist like that of the SAZ can help), but they may just go on to the next eager wannabe designer who doesn't care as much about these things. Beware especially of newer hobby start-up publishers!

On the other hand, wanting too much (again--it's good to refer to an international standard) is also not wise and may alienate publishers even as you're just trying to break into the industry.

In closing, I highly recommend you let the publisher make the first move by sending you their standard contract. It's OK for you to have your own ideas as to what is important, but much better to negotiate details than to be the initiator. I'm fairly certain most game designers operate that way with publishers.

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