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Publishing by selling shares

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larienna
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One of my friend has a list of artists willing to do art for game in exchange of a royalty fee. That kept me thinking since a part of the game's funding is for artist and it can sometimes get quite expensive. The only mandatory expenses left I could see which are mandatory to get before selling anything are the print/production fee and probably the distribution fees. Else everything else could be royalty based: Designer, Artist, Manager, etc.

Considering that kick starter is illegal in Canada, I was thinking of a method that I am not sure if it is entirely legal. The idea would be to sell shares of the game to cover the production + distributor cost. If a game cost 5000$ to produce/distribute 1000 copies for a year, then maybe 10 shares of 500$ or 20 shares of 250$ could be sold. This will form the initial capital. Shares can be bought by anybody, including people working on the project like the designer, artist, etc.

Each time a game is sold, the royalties are paid the to designer, artist , manager, some money is aside to reconstruct the initial capital if all the games get sold and some royalties will be paid to the share holder. For example, maybe a 500$ pays 0.25c per game sold for a total of 250$ if all games sell through.

If the games works well, once all the copies are sold, the re-assembled capital can be re-invested again to make another print run. Else, if the investors want to stop, they take back their capital. So for example, if 1000 copies were sold and people stop afterward, then the investor get back their 500$ share and their interest of 250$ (25 cents x 1000 games)

Now there are some issues that I am missing.

- I am not sure if that kind of funding is legal. Because it's not a company shared by people, but rather each project is funded separately.
- Their might be taxes or fees that the company should pay forcing to set money aside. I am not sure if it could be possible to use a non-profit company and all royalties paid to the various partner would be instead taxed on the people's income. Because the "company" is just there to bind people together and publish under the same name, it's not making any profit for herself.
- If the game does not sell, you give what's left of the capital back to everybody, but what do you do with the games. You need to store them somewhere. You could share copies of the game between the share holders, force them to pay the royalties to the authors, and allow them to sell their copies at any price they want to get their money back. I am not really sure.

Does that business plan looks coherent and possible or I am missing a lot of issues or completely day dreaming?

Orangebeard
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Joined: 10/13/2011
Shares

Hi Larienna,

On the surface, this is basically the same thing as Kickstarter (i.e. you give me money and I give you something in return), however the "share" model has the added complexity of paying royalties on an ongoing basis to a larger number of people.

All tax and legal questions aside, the overhead of keeping track of 10-20 people to pay out royalties may not be worth the trouble.

However, on the topic of what else could be "sold" to raise money, maybe including the purchasers likeness in the artwork or their name in the credits could raise some cash.

larienna
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Joined: 07/28/2008
By selling shares, I mean to

By selling shares, I mean to people who know the designers and played the game. I was not expecting to sell real shares on a stock market. It's just that it would have looked like a stock market.

The idea is simply sharing the initial funding to get some money in return. There is no value of shares, or the ability to buy/sell shares.

Izraphael
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In my country (Italy), to do that you'll probably need a VAT number, and a contract.
You issue invoices for the money you get and then, according to the contract, you give back money to your sponsors when you sell copies. I don't see nothing "illegal" here, you take funds to build a project, and you give back the "loan" with royalties. The important thing, I think, is to consider taxes :)

Orangebeard
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Joined: 10/13/2011
Shares

I suppose the use of "shares" is more elegant than simply totalling everyone's contribution and using a straight % to determine their share of the profits. Shares would also guarantee a minimum investment amount.

pelle
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Joined: 08/11/2008
This is what I always want in

This is what I always want in kickstarter projects. I don't want some silly bonuses, I want part of the profit if the project is successful. But I think there are all sorts of laws and regulations that makes this tricky. Worst case, the proper way to do this is to create a registered company for that specific game, and sell shares in that.

I heard there is some kickstarter-competitor that does something similar though. No idea how legal it is in different countries to use it.

questccg
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Joined: 04/16/2011
Go with Kickstarter

larienna wrote:
The idea is simply sharing the initial funding to get some money in return.

Why do this type of *sharing* when Kickstarter projects allow people to attain their investment goals WITHOUT sharing in the profit???

Find someone to partner with who lives in the USA and start a modest kickstarter project. Like $5,000 for artwork (as an example). If you partner with someone, that will automatically imply you having to establish some sort of profit sharing in regards to your product/project...

You will no doubt need to establish some form of profit sharing with such a partner.

larienna
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Joined: 07/28/2008
Quote:This is what I always

Quote:
This is what I always want in kickstarter projects. I don't want some silly bonuses, I want part of the profit if the project is successful. But I think there are all sorts of laws and regulations that makes this tricky.

Apparently, the fact that they give "silly bonus" is the reason why crowd funding is possible.

On my point of view, those "silly bonus" should instead increase the quality of the game instead of giving freebees. For example, beign able to replace wooden pieces with sculpted miniature if the project reach over X$.

I made a similar thread on BGG with different answers

http://www.boardgamegeek.com/thread/894865/publishing-by-selling-shares/new

Apparently a project by share would actually mean starting a company for simply 1 game.

There is also an abiguity about if crowd sourcing is legal in canada. Some say it's only a kick starter restriction but other crowd sourcing site could do it.

Orangebeard
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Joined: 10/13/2011
Quote:On my point of view,

Quote:
On my point of view, those "silly bonus" should instead increase the quality of the game instead of giving freebees. For example, beign able to replace wooden pieces with sculpted miniature if the project reach over X$.

Agreed - Especially if the project is way overfunded. If money was not an issue, I imagine most designers would want to put their names on high quality products.

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