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royalties & co-branding

11 replies [Last post]
Thu, 02/02/2006 - 22:22
Lee
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Joined: 12/31/1969

I attended a Toy Fair on the weekend and received 3 offers, I am not sure what I should do.

1. I received a royalty offer on my game which would be co-branded under another name, can anyone tell me more about how this works?
Do I lose all rights to my game? Can I receive a royalty on any game manufactured with my game concept? This is a very large company and my game would be sold in large mass markets, but my royalty would be very small, say 3%

2. I had also received another offer for a 50/50 joint venture (half risk/half reward) deal in which I would pay half and the other company would pay half. This is a very small company and my game would be sold only in the small specialty markets, I would receive half profits.

3. As well as a manufacturing/distribution deal in which this would cost me a great deal of money. I would be a no namer, but have the potential to make a large profit or lose my shirt so to speak.
I am not sure which route to go, can anyone find any reason why I should choose one option over another?

Thanks
Lee

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Thu, 02/02/2006 - 23:15
#1
Emphyrio
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royalties & co-branding

Game publishing seems to be a risky business. I think the 3% royalty is a good bet, even if you don't retain any rights. After all, if it sells 50,000 copies at $20 apiece, you'd make $30,000. I suspect you'd be lucky to make anything like that with either of the other two options -- though you never know.

Plus, the royalty offer doesn't require any investment on your part (besides what you've already put into it), so even if it tanks, at least you haven't lost anything -- unlike the other two options.

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Thu, 02/02/2006 - 23:49
#2
Lee
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royalties & co-branding

$30,000 would be based on retail pricing. Do companies generally pay royalties based on the retail price or the wholesale price. Or does this depend on the contract deal?

Lee

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Fri, 02/03/2006 - 03:26
#3
zaiga
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royalties & co-branding

Lee wrote:
$30,000 would be based on retail pricing. Do companies generally pay royalties based on the retail price or the wholesale price. Or does this depend on the contract deal?

Depends on the contract, but usually wholesale price, which is typically around half of retail (40% or 60%, I always forget). Make suer you understand what the contract says in this regard.

One tip: never sell the rights completely! Make sure the contract says that the rights to the game revert back to you after X years. Also make sure that the rights to the game rever back to you after date Y, if the game hasn't been published by that time. X and Y are always negotiable, as well as the % of royalties.

Personally, I would go for option 1, but this is because I have the rule that I don't invest my own money into publishing games. I'm a designer, not a businessman.

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Fri, 02/03/2006 - 09:36
#4
Dralius
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royalties & co-branding

Look at it like this if in option 1 the company is making a big run of 50,000 copies with a SRP $30 and your getting 3% of what they sell it for to the distributor at 40 to 50 %. The math comes out something like this.( ($30 x 50,000)x .4)x .03) = $18,000. That’s not a bad deal if you get the rights back and you’re not risking anything, you can licence it out to someone else down the road. Take the number of hours you spent on this game and devide it into what they offer you. Does the hourly rate look good?

Your second and 3 option is probably high risk with a low possibility of high profit. Why would you do this if the risk is so high and the profit not so great. Since you are a partner or sole owner you have control over the theme, art just about every other aspect as well. There is still that 1 in 1000 that chance that you have designed the next big thing and that’s were it would pay off in the long run. An additional downside is the more time you spend doing sales; marketing etc is less time you have to design games.

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Fri, 02/03/2006 - 11:36
#5
Lee
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royalties & co-branding

So far option 1 sounds like my best bet, but he wants to co-brand the game and make my game concept into a Dora brand game (did I mention that it is a kids game?) Would I then be able to claim royalties on other games made with my game concept that he should manufacture (eg. sponge bob & blues clues?
Also, We are still in the early stages of working something out & details are still being negotiated, should I ask all details about royalties, rights etc. now or should I wait until all game adjustments are done by him and then settle contract details when the time comes.
I also have a few other games on hand with the same unique game concept. Would it be wise to mention this now and make a deal to provide him with all my other games if royalty payments are made from the sale of any games using my game concept (kind of like a partnership so to speak) or should I wait until this deal has gone through and see how sales go first?

Lee

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Fri, 02/03/2006 - 12:18
#6
Dralius
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royalties & co-branding

In most cases when they license it they essentially own your game for a period of time in return for a % of the take. They may put what art they like on it; change the theme, the rules or what ever they like although it depends on the individual contract. The key is reading the contract and be certain what it says, if the language is not absolutely clear to you get a lawyer to look at it.

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Fri, 02/03/2006 - 12:25
#7
Lee
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royalties & co-branding

Should I have a lawyer regardless or would dealings be less stressful & alot smoother if an agreement could be reached without one?

Lee

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Fri, 02/03/2006 - 14:30
#8
Dralius
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royalties & co-branding

I am not suggesting you get a lawyer to negotiate the contract for you just to review and explain it to you so that you know what to expect if you don’t understand the legal jargon . You may not be able to negotiate the terms at all; the company may have a standard form of contract that they expect you to accept or decline.

BTW Congratulations!

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Fri, 02/03/2006 - 15:12
#9
Lee
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royalties & co-branding

Thanks you guys, dreams really can come true, just never give up on them!
I was in touch with this company a short while ago and he is already in the process of arranging this so that he can have them ready for mass market this season. Wow, talk about fast the toy show was only 4 days ago, what an exciting surprise. I am in the process of sending my game rules and photos of my game design, which he has requested in order to make this happen in time.

Thanks again for all of your help and advice!

Lee

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Fri, 02/03/2006 - 21:26
#10
Sen
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Joined: 12/20/2010
royalties & co-branding

Excellent news! Keep us updated!

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Tue, 03/07/2006 - 11:33
#11
Jose
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Joined: 12/31/1969
royalties & co-branding

Always talk to a lawyer. Seriously.
You'll spend a little money, but you'll make sure you don't run into any surprises later on....

All the questions you're asking here would also make good questions for your lawyer.

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