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Subject: Game design contract questions - Kickstarter rss

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Mordecai Montague
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I've recently been in some conversations regarding game design royalties and the number of games "sold." The core of the question revolves around the concept of Kickstarter copies and whether or not they count as "copies sold."

Are there any designers or publishers out there with experience they would like to share on this?

Or, just as a matter of perception (even if you don't have experience), how would you interpret this line of a contract:

"The Publisher will pay the Designer a royalty of X% of the actual sale price of each copy of the Game sold by the Publisher."

Reading that line, would you believe that the copies sent to backers from the Kickstarter campaign are "sold" by the publisher and are included in said royalties?

Or, would you assume that the copies from the Kickstarter campaign are only to get the project rolling and cover the costs of printing and shipping the game so that it will be available for future sale.

Bonus question: How would you interpret "actual sale price"? Would that be the price of the game when it is sold to the customer (MSRP) or the price when it is sold to a distributor or retailer (wholesale)?



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Nick Hayes
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I wouldn't consider copies of the game given away to backers as sold. Those are incentives to the backers to help fund the publication of the game.

Now if your contract said, "number of copies printed" that would be a different matter.
 
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By all legal definitions anything via kickstarter is a sale. As the project creator you are obligated to provide the reward in return for the backer's payment - that is a sale.

The IRS views it as a sale, Customs agents view it as a sale, no reason why it shouldn't be view as a sale for determining royalties.

Edit - I should add that its not a sale until the rewards are delivered. That again is a legal definition - both the commitment to pay, and the delivery of goods is required to constitute a sale, one of the reasons that FEDEX used to stay open to midnight near every software company on the last day of a quarter (before everything went digital delivery) - those deals that were signed in the last hour still had to ship out (conversely you could delay shipping the disks till the enxt day if you didn't need the revenue in the quarter)
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Kim Brebach
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re the phrase "the actual sale price of each copy of the Game sold by the Publisher" - this would presumably cover a range of sale types;
1. if the publisher sells 500 copies to a distributor you will get x% of that price (typically 35 - 40% of MSRP) x 500
2. if the publisher sells 100 games via their publishers own online store you will get X% of that price x 100. (check that the publishers online store is actually run by the same company - not a shop front store also owned by the same people but in a different business in which case they may try to give you a lesser cut)
3. If the publisher sells 100 copies of the game at a convention you should get your X% of price x 100

Re Kickstarter arrangements - I presume in this case the publisher is running the campaign themselves, with some input from you. I would absolutely expect a cut of each sale but it is surely harder to calculate what the exact prices are for a number of reasons - and what that cut should be exactly. Eg is it always the cost of each backer level minus its postage costs? How much art / graphic design / pre publicity did you bring to the table to mitigate their typical costs etc etc. Kickstarter is a lot of work (often for both designer and publisher) but essentially the publisher is using it to:

a) crowdsource capital for production
b) mitigate risk of over production
c) gain some publicity for this game and themselves
d) expand their contact DB to promote later games and themselves
e) possibly build in some profit margin into the KS costs from which they will gain a larger proportion than via regular distribution.

All of that is still built from your design work so don't sell yourself short.

It's my view that designers who are actively partnering with publishers to help ensure a projects success, and who do bring more art / graphic design / publicity to the table than those in regular straight to publishing deals, deserve a significantly higher cut from the KS sale price and publisher sale price than 3 - 5%. The whole game is changing - margins are still tight, but risks are lowered in KS (if its managed well) and designers are more active in KS collab projects success than ever before and that should be reflected in $ rewards.

I'm partnering with a publisher and we are looking at co investing in the the KS prep costs and splitting some of the proceeds (details still being finalised).
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Hilko Drude
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Fully agree with Travis here. And the "actual price" is whatever the publisher was paid for a game, by whomever.
I haevn't signed anything with Kickstarter involved, but if a publisher meant anything else, it would better be very well-defined in the contract.
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John "Omega" Williams
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Kickstarter copies are effectively copies sold. Several companies now use KS as targeted sales. IE Knowing exactly how many orders for a product.

Those are covered under royalties. If a publisher tries the "it doesnt count as a sale so we dont have to pay you." gag then they are trying flat out to rob you, especially if the KS sales are the ONLY sales, and and youd better raise bloody hell if it ever happens.
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Brook Gentlestream
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MordecaiMontague wrote:
Are there any designers or publishers out there with experience they would like to share on this?

Or, just as a matter of perception (even if you don't have experience), how would you interpret this line of a contract:

Before going into details, I would like to point out that I am not a publisher, distributor, or professional expert of any kind within the field of game publishing. So bear in mind that my opinions are merely that, and based mostly on my observations and reactions from conversations within this community.

MordecaiMontague wrote:
"The Publisher will pay the Designer a royalty of X% of the actual sale price of each copy of the Game sold by the Publisher."

Reading that line, would you believe that the copies sent to backers from the Kickstarter campaign are "sold" by the publisher and are included in said royalties?


Absolutely. Knowing that they were entering into a kickstarter, however, I would have expected the publisher to make an arrangement with the designer prior to starting the campaign, epecifying his royalties per backer at each tier level and specifying when the amount will be paid. If he did not, I would surely expect this original contract to cover all copies of the game sold through kickstarter.



MordecaiMontague wrote:
Or, would you assume that the copies from the Kickstarter campaign are only to get the project rolling and cover the costs of printing and shipping the game so that it will be available for future sale.

Exchanging goods for cash is a sale, as Travis explained above.

MordecaiMontague wrote:
Bonus question: How would you interpret "actual sale price"? Would that be the price of the game when it is sold to the customer (MSRP) or the price when it is sold to a distributor or retailer (wholesale)?

The price is whatever money the publisher received in exchange for the game, which is usually a wholesale price since most sales are to a distributor. During a kickstarter, conventions, and online sales, this means your royalties should be higher unless otherwise specified in your contract.

---

If a Publisher knows he will be starting a kickstarter campaign, the responsible thing for him to do is create a contract or agreement that covers compensation throughout the kickstarter process. This will clear up any confusion about your compensation and give him the opportunity to negotiate coverage of his own costs. If you suspect your publisher will be starting a kickstarter, you may want to suggest a contract, agreement, or appendix to cover the kickstarter details.

In most cases, a reward tier will include not only the game but also certain bundled costs such as extras, stretch goals, shipping, etc. For this reason, it would not be unreasonable for the publisher to base your royalties on some lesser amount instead of the full tier amount, so long as your contract clearly outlines how much your royalties are at each tier level. Without that specification in your contract, this is a somewhat questionable practice as routine costs of doing business are not your responsibility in a standard contract.

Further, your agreement should include some note as to when you get paid. Do you get paid when the kickstarter ends, when the game is manufacturered, or after the game is shipped to backers? Without this specification in your contract, a publisher is well within his rights to pay you only after all of the kickstarter games have shipped. Which is fine, but its best to know that going in.

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Russ Williams
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Since it's evidently ambiguous and different people answer the question differently, I would rather not assume but would instead explicitly ask the contract author what is meant by the sentence in the contract and seek to get it written more explicitly clear if I were signing the contract.
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Jeremy Lennert
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Assuming this contract has not actually been signed yet, if you think it is at all unclear what it covers, I would recommend that you try to get the contract changed to make it more explicit. If both parties would've interpreted it the same way anyways, that shouldn't be difficult, and if they had different ideas of what it meant, then you should talk it over and agree on a course of action you both want to take, regardless of whether the original language would have been taken as ambiguous in a court of law.

(Note: I am not a lawyer.)
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Ramon Raya
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I've always seen kickstarter as a fund-raiser.

You're donating money. As an incentive to donate, we are offering this reward/gift to you.

Just like PBS fund drives which offer 5 CD sets of music. You donate, you get a free gift. There is no sale.
 
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Krzysztof
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Now that would be handy to not pay taxes... "Hey, he just donated me some money, so I gave him a gift, there was no sale nor profit, you cant tax me..."

Anyhow, in my country you pay taxes for donations and gifts alike, so not like it really matters...

Kickstarter is a way to sell a product in a preorder fashion.
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David J. Mortimer
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lordrahvin wrote:


MordecaiMontague wrote:
Bonus question: How would you interpret "actual sale price"? Would that be the price of the game when it is sold to the customer (MSRP) or the price when it is sold to a distributor or retailer (wholesale)?

The price is whatever money the publisher received in exchange for the game, which is usually a wholesale price since most sales are to a distributor. During a kickstarter, conventions, and online sales, this means your royalties should be higher unless otherwise specified in your contract.


Agreed with some exceptions. Don't expect to get royalties paid on sales taxes/VAT if applicable in the kickstarter price. Also I would expect shipping/freight costs to be deducted from the kickstarter price. You may find this brings the net sale down to similar for wholesale on international fulfillments.

I suggest you just query with your publisher and ask for clarification. They are there to work with you.
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Nat Levan
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As usual, it varies from publisher to publisher. You should really be asking them. If they're trying to keep it secret, that should be a red flag.

Some publishers put Kickstarter sales in with the "direct to customer, retail" category, which might be MSRP, even if it includes additional shipping cost. Some don't consider it a "sold" copy, and your royalties don't start until after the initial kickstarter run is sold.

Actual sale price, I would interpret as MSRP if the publisher sells directly from the website, but if it is through a store that got it from a reseller, then it's going to be wholesale.

Again, talk to the publisher directly. Negotiation shouldn't be a hidden information game. They're asking you for a professional business relationship, and these questions would not be considered "rude" in this context.

That's my two cents
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Mordecai Montague
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Thanks everyone for the input.

To help clarify a few things, here are a few more details in this hypothetical situation.

Assume that the Kickstarter campaign has already happened and was successful. There were additional items included in some stretch goals beyond the original game. These were not mentioned in the contract and are not in dispute.

That said, the vast majority of sales (assuming the KS rewards are considered sales - I use this term for consistency, not to sway the argument) of this particular game have come from the KS campaign. Assume that about 1/3 of the print run was delivered to backers of the Kickstarter campaign. From there, assume 5% of the total print run was sold through other means and the designer received a royalty check based solely on that portion of the games that were sold.

Assume that the publisher believes that the copies sold/"given out as rewards" through the KS campaign were not meant to be part of the contract and that doing so would have been considered a "Kickstarter bonus" which was not mentioned in the contract.

At this point, asking the publisher what was meant by the contract is a moot point because they have already explained what they believe it to mean, however their perception is different from the designer's.

Assume that this is all after the fact and that there is a disagreement between the publisher and designer. Based on the wording in the contract and the accepted standards of board game Kickstarter campaigns - how would a *reasonable person* interpret the contract and what should be done to rectify the situation?



 
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Steve Zagieboylo
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Presumably the Designer already got the money from the backers via Kickstarter, right? So now that the game is complete and he is fulfilling those Kickstarter backers through the Publisher. I assume that he is the one covering the Publisher costs for those games, because the Publisher otherwise isn't getting any (more) money for those. Is that correct?

I'm not sure how any other publishers work, but for my game on DriveThruCards, any copies that I order, whether I have them sent to me or to someone else, cost only the publishing cost. (I realize that they do make some profit on that, but not much.) I wouldn't expect any additional royalties on those. (Admittedly, this is because that's how the DriveThruCards royalty is set up -- they deduct the publishing cost and pay me a percentage of any amount over that. I can set the price to anything I want above the publishing cost.)

 
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MordecaiMontague wrote:
I've recently been in some conversations regarding game design royalties and the number of games "sold." The core of the question revolves around the concept of Kickstarter copies and whether or not they count as "copies sold."

Are there any designers or publishers out there with experience they would like to share on this?

Or, just as a matter of perception (even if you don't have experience), how would you interpret this line of a contract:

"The Publisher will pay the Designer a royalty of X% of the actual sale price of each copy of the Game sold by the Publisher."

Reading that line, would you believe that the copies sent to backers from the Kickstarter campaign are "sold" by the publisher and are included in said royalties?

Or, would you assume that the copies from the Kickstarter campaign are only to get the project rolling and cover the costs of printing and shipping the game so that it will be available for future sale.

Bonus question: How would you interpret "actual sale price"? Would that be the price of the game when it is sold to the customer (MSRP) or the price when it is sold to a distributor or retailer (wholesale)?


As others have mentioned, I would suggest that all of your questions concerning the perception and interpretation by the general public are irrelevant. Contracts should be written such that both parties know exactly what the contract says, and for that to be incredibly explicit so there can be no debate whether terms have been upheld.

If there are questions in your mind concerning what the contract language means, you should not under any circumstances sign the contract before you have both clarified the intended meaning of the sentences with your contractual partner and changed the wording so as to make more explicit the intentions to be upheld.
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Mordecai Montague
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Zag24 wrote:
Presumably the Designer already got the money from the backers via Kickstarter, right?


No, that is the disagreement at hand. Assume that the publisher (not the designer) handled the KS campaign and has already collected the funds and shipped out the KS rewards a while back. Since then, some other copies were sold via other venues and those are the only sales be calculated in the royalty check for the designer.
 
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Mordecai Montague
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NateStraight wrote:

If there are questions in your mind concerning what the contract language means, you should not under any circumstances sign the contract before you have both clarified the intended meaning of the sentences with your contractual partner and changed the wording so as to make more explicit the intentions to be upheld.


Thanks for the input. However, the option to discuss and clarify the wording has long passed and the disagreement remains.

Assume that the designer has had previous experience with other publishers and including the KS sales as part of the "copies sold" was a given in those previous situations. Also assume that the publisher ran previous KS campaigns for other games, but those were of his own designs and thus he did not need to bother with royalties. This campaign in question is his first one dealing with a designer and royalties.

The designer never imagined that this would ever be questioned and never thought that a reasonable person would make the assumptions that the publisher is making. On the other hand, the publisher believes that a reasonable person would believe that all of the funds from from the KS campaign would be used for the print run and shipping and to get the project started. However, the designer would certainly not have signed the contract if he/she believe that the KS sales (the bulk of the copies sold) would simply be ignored as far as the royalties go.

Assume that the designer is willing to accept that this may be a standard practice (to ignore KS sales as far as royalties go) if it is indeed the way things normally work, but would like to know what others have experience and what others would expect in a similar situation.
 
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Ben Draper
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You got boned.

Whether or not Kickstarter "sales" are sales by legal definition, they function almost identically in their net effect on total game sales and profit. If a publisher is refusing to pay royalties on these "sales", that publisher is being a royal douche.
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Hilko Drude
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MordecaiMontague wrote:
NateStraight wrote:

If there are questions in your mind concerning what the contract language means, you should not under any circumstances sign the contract before you have both clarified the intended meaning of the sentences with your contractual partner and changed the wording so as to make more explicit the intentions to be upheld.


Thanks for the input. However, the option to discuss and clarify the wording has long passed and the disagreement remains.

Assume that the designer has had previous experience with other publishers and including the KS sales as part of the "copies sold" was a given in those previous situations. Also assume that the publisher ran previous KS campaigns for other games, but those were of his own designs and thus he did not need to bother with royalties. This campaign in question is his first one dealing with a designer and royalties.

The designer never imagined that this would ever be questioned and never thought that a reasonable person would make the assumptions that the publisher is making. On the other hand, the publisher believes that a reasonable person would believe that all of the funds from from the KS campaign would be used for the print run and shipping and to get the project started. However, the designer would certainly not have signed the contract if he/she believe that the KS sales (the bulk of the copies sold) would simply be ignored as far as the royalties go.

Assume that the designer is willing to accept that this may be a standard practice (to ignore KS sales as far as royalties go) if it is indeed the way things normally work, but would like to know what others have experience and what others would expect in a similar situation.


So what about the publisher? Is s/he willing to accept paying the royalties if that is the standard practice (which it looks like it is)?
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Mordecai Montague
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HilkMAN wrote:


So what about the publisher? Is s/he willing to accept paying the royalties if that is the standard practice (which it looks like it is)?


Assume that the publisher is standing by his perceptions and these questions will have no bearing on the outcome of the situation. The publisher has no interest in budging on the payment and even if they were willing to, the money is already gone.

Assume that these questions are merely a sanity check for the designer to learn from the situation. If the designer is in the wrong he/she is willing to admit this and even apologize to the publisher for misunderstanding what was expected. The designer's first reaction is "are you kidding me?" and "did I really just get ripped off like that?" However, the designer is taking a step back to consider the entire situation. He/she wonders if there may have been something lost in communication and that the publisher truly believed that both parties were on the same page when the contract was signed.
 
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Pavel Brabec
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Lawyer up. Was the objective of the KS campaign to fund the print run? And for the donation equal or close to MSRP of the game would be copy of the game received? Then sure, designer should receive a royalty, that is not a charity, that is disguising commercial venture as one.
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Kim Brebach
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MordecaiMontague wrote:
HilkMAN wrote:


So what about the publisher? Is s/he willing to accept paying the royalties if that is the standard practice (which it looks like it is)?


Assume that the publisher is standing by his perceptions and these questions will have no bearing on the outcome of the situation. The publisher has no interest in budging on the payment and even if they were willing to, the money is already gone.

Assume that these questions are merely a sanity check for the designer to learn from the situation. If the designer is in the wrong he/she is willing to admit this and even apologize to the publisher for misunderstanding what was expected. The designer's first reaction is "are you kidding me?" and "did I really just get ripped off like that?" However, the designer is taking a step back to consider the entire situation. He/she wonders if there may have been something lost in communication and that the publisher truly believed that both parties were on the same page when the contract was signed.


It is wise for you to step back after your initial justifiable shock and take a good look at the situation and gauge opinions.

But after comments above it should now be abundantly clear to you that this is the very definition of a swindle.

You made the game, it was kickstarted presumably with some profit margin of which you absolutely deserve a share. I cannot believe it would not legally be interpreted this way on the basis of your contract terms.

As I argued above, designers should get a higher share of KS profit / sales as the risk to the publisher is significantly reduced.

But I think you have taught everyone a valuable lesson in how explicit contracts involving KS and all possible sales channels should be. And for that I thank you.

The number of designer / publisher collaborations is increasing and for the sake of ongoing fair relations between designers and publishers collaborating via KS I think you should pursue this so it is less likely to happen again.

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Jason Kotzur-Yang
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Just wow. Looking back, it might seem like an assumption that a designer was going to get paid for their hard work, but I think it's one that many others would make. It is definitely known that board game sales on KS are somewhat of a pre-order system, and indeed are the vast majority of sales for many games. The hobby game industry is generally such a friendly place that it's easy to forget some people are less friendly and considerate than they should be.

To the designer in question:
I think you've handled this really well and tactfully. Sometimes these things can turn into mud slinging on the forums very quickly. It'll make us all a little wiser but's it hard to be an object lesson. I know that I would never work with or back a game from a publisher who would treat his/her designer like this. I congratulate you on taking the high road, but I'd kind of like to know who this publisher is. (If Mordecai was the designer, it would be wise for him to make sure he's linked to the game as a designer in the database)
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Jeremy Lennert
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I'm not an expert on Kickstarter, but my understanding is that backing a project functions more like a preorder than a donation: the party running the campaign is obligated to give you your backer rewards (or, IIRC, refund your money), so I'm not sure what reasonable definition of "sale" could exclude that. If you have a transaction that functions exactly like a sale, merely calling it something else should not change whether it counts as a sale for legal purposes. (Though my contracts have special terms for games given away for free "or at cost", which could conceivably apply if the backer rewards were exceedingly generous.)

Of course, backer rewards frequently include the game plus other stuff, which makes "X% of the actual sale price" difficult to resolve in a fair and objective fashion, unless the contract somehow specifies how much of that money was for the game and how much of it was for the other stuff. (My contracts also have special rules for bundles.)

Again, I am not a lawyer and none of this should be construed as expert legal advice.
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