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Subject: What is an appropriate royalty percentage? rss

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Caleb Hand
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I've entered into talks with a publisher for a game I've designed. I'm curious though about what sort of royalties are typical. Is 5% of the net sales a good amount or is that ridiculous? I understand that they publisher will be doing all of the risk taking, investment, marketing, printing, etc., but I don't want to be naive. Does anyone have any comments on the appropriate percentage that game designers should receive?
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Tom Russell
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It varies. I've sold three games to three different publishers-- one for a bulk sum, and two for royalties-- and the money has been vastly different with each one.

The guys who made Belfort posted a very helpful overview here:
http://inspirationtopublication.wordpress.com/2011/08/10/ste...

Quote:
Percentage: This is what you will get paid for each game that is sold. Most publishers will pay you a percentage based on their selling price – not retail price! If the game retails for $25 then the retailer probably buys it from the distributor for $13 or so and the distributor probably buys it from the publisher for about $7. So your percentage is based on that $7 not the $25. What kind of percentage is fair? There are many variables here. If it’s with a big company that plans a big print run and will support it with advertising then your percentage could be small, like 3-5%. If it’s a tie-in to a big franchise like Harry Potter or Spiderman then it could be even less. If it’s a smaller publisher with a smaller print run then you could get anywhere from 7-15%.


EDIT: I should note though, apropos that last sentence, that smaller publishers, in my experience, have offered about the same (or less!) than the "big company that plans a big print run" percentage range. Everybody's different.
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Scott Nelson
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Unless your name is Moon or Kramer, Knizia expect 5% or less unless you bring more to the table on your end, like if you did your own art, own advertising, etc. It isn't going to get you to quit your day job publishing 1 game. Alan Moon did not quit his day job until Ticket to Ride became a big hit. Even some of his greatest achievments were not enough, even though they made German Game of the Year e.g. Elfenland.

On the other side, I am sure when you have a steady job designing games for a company like Fantasy Flight Games, it is your main job, and I'm not sure about percentages at that point; it might just be the hourly wage you are paid to work?

So, to answer the OP, that is the going rate, don't expect more, and don't expect much since yes, it comes from the wholesale price, not retail, and since most publishers go through about 2-3 different channels before it hits your FLGS, expect a very low cost to make the game, comparedly. $45 game retail is about $15 or less to make, and you would get 5% of the $15 = $ .75 per copy.
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Brent Cunningham
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Not all publishers work off of wholesale price. Some do work off of MSRP, some pay lump sums, some base it off net. I'd say if a publisher had their druthers, they'd do a percentage of wholesale...it's easier on the bookkeeping, I've been told.

Depending on the designer, and volume, I'd say expect 6-12% of wholesale, probably on the lower end if this is your first game getting published.

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Gladen Blackshield
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I have not entered into any publication talks in regards to a board game, but I have done some novels, some RPG games, some computer software, and two recording contracts...

Here's what I would want to know:
What exactly does their term 'net sale' mean? Is this per unit sold to retailer (retailer orders them), or are they consigning your game out for to the retailers and you only get paid per end-user purchase. By net do they mean 5% of their proftis off of retailer purchase price (which would be net, more or less), or do they intend to take out marketing and distribution costs as factors to the net off of gross, etc.

Are you talking about US publishing, or worldwide? Lots of organizations will 'partner' with another company overseas and have them handle the distribution overseas. This, in effect, cuts you out of the loop as your publication agreement might only cover domestic sales.

Is there any advance or kill money involved? I have one project that an RPG publisher wanted badly, very badly. They offered me 15.5% of gross sales (to retailers). I did some detective work and found out that they were trying to buy out the rights to my product so it would not be in competition to their project which would be coming out shortly as well. This meant that they were offering me a large percentage in futures for a product that they intended to moth-ball the second it was signed over. An advance on future royalties can sometimes be negotiated and a clause can be added stating that if the project does not go into distribution then the advance will serve as a 'kill fee' after so many months. Whether or not rights revert back to you should also be negotiated.

My primary thing I wanted to add is that if your porduct is good enough to get one bite, then it is probably good enough to get another if the contract is a bit shady. However, if you are a first-timer in your niche, then any contract that doesn't cheat you out of anything is a good stepping stone.

5% sounds good for a first timer, if it is a fair shake of all markets and it isn't a hollow promise. BUt make sure that you know all the ins and outs and I can tell you from experience in other fields that even good-seeming contracts can still screw you over if you don't keep yourself alert.
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Clark D. Rodeffer
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Royalty payments come from the publisher. They are not somehow collected from distributors or retailers and passed along, but are calculated on sales made by the publisher only. You need to realize that most publishers' sales are to distributors at about a 60% discount off MSRP, followed by a smaller chunk sold directly to retailers at about a 50% discount off MSRP, a small portion sold at MSRP directly to consumers, and some other relatively small portion written off (promotional copies, damages, environmental or safety testing, shrinkage, returns, unsold merchandise, etc.). With that in mind, the royalty figures I've heard range from 4% to 7% of actual sales made by the publisher, with a strong skew toward the lower end of that range.

So, for example, suppose a publisher has a contract at 5% royalties on a $20 game. Suppose in the previous quarter, they sold 90 copies to distributors (90 * $20 * 0.4 = $720), 5 copies to retailers (5 * $20 * 0.5 = $50), 5 copies to consumers (5 * $20 * 1.0 = $100), and wrote off 10 copies ($0) for total sales of $870. The gross royalties for that quarter would be $870 * 0.05 = $43.50, just about enough for one meal out with the family.
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Brook Gentlestream
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CDRodeffer wrote:
So, for example, suppose a publisher has a contract at 5% royalties on a $20 game. Suppose in the previous quarter, they sold 90 copies to distributors (90 * $20 * 0.4 = $720), 5 copies to retailers (5 * $20 * 0.5 = $50), 5 copies to consumers (5 * $20 * 1.0 = $100), and wrote off 10 copies ($0) for total sales of $870. The gross royalties for that quarter would be $870 * 0.05 = $43.50, just about enough for one meal out with the family.


Is 90 distributor-sales per quarter a practical starting point? Most publishers are trying to sell a print run of 2000 copies or more. I realize that they aren't always successful in selling the whole print run, but I think they could do better than 400 in the first year. Don't the bulk of most board game sales come in the first year?

I don't have any experience or knowledge in this area, but unless someone with such knowledge tells me otherwise, its hard for me to imagine that a publisher would even make a game at all if they weren't confident about selling at least 1000 copies in the first year. That would come out to at least 250 games per quarter.

Also, if you're trying to make a practical example here, wouldn't a $40 retail price have made more sense than a $20. I don't know of that many games that cost less than $30 unless they are purposefully targeted toward a particular price point. I think assuming a $40 retail price, for example purposes, would have made more sense.

Even at $40 retail price (selling to distributors for $16 and earning you $0.80 in royalties) and 1000 copies in a year, that's still only about $200 per quarter. And I expect that number drops significantly after the first year.
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Alex Weldon
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Yeah, if your publisher is making 90 sales per quarter, find a better publisher.

Most smaller publishers will do a run of either 2500 or 5000 to start with, sell a big chunk of that in the first year and gradually try to get rid of their remaining stock after that. If the first run doesn't sell out very quickly, there probably won't be a second. Distributors and retailers always want the next new thing, so unless it's a big hit, a design will have a pretty short lifespan.

4-6% of the wholesale is pretty normal. I get substantially more, but it's because I do all my own art.

Most games only ever make a couple thousand bucks for their designer. It's not an easy way to make a living... the publishers themselves are not exactly raking it in (except the big ones) and there are tons of people desperate just to see their games in print, so unless you've got something really special, you don't have a lot of bargaining leverage.
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John "Omega" Williams
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5% is about average for royalties. Lower if you are new and/or is is a smaller company. and even the larger companies aren't likely to hand out much past 5% until you prove you are a golden goose.

As stated above though. Keep in mind that royalties don't pay out as much as you might imagine sometimes, or can he a form of sucker play. Rare that last. But it doesn't hurt to research.
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Markus Hagenauer jr.
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5% of the wholesale is the standard rate of most publishers (at leat in Europe).

Its lower if it´s a game with a licence theme or verry costly material, and it might be higher if you are famous or just verry lucky.

But don´t just look at the percentage.
Also check the other paragraphes of the contract, for example billing period, validity period, disclaimer of liability (for example Asmodee have verry strange ideas about this), further exploitation rights, merchendising promises, your name on the box, etc.
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Aaron Smith
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Hi there,
First-time game designer here. My publisher want to pay me a royalty value of $1 per game ($25 retail), but only pay me 4% of that (4 cents) per derivative game sold, which includes conversions (e.g. making a higher-end production value or software version), sequels, and localizations (translations) to the product. This seems very unfair to me. Can anyone suggest how much royalty I should get in this case?
Thanks!!
 
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John "Omega" Williams
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alterego200 wrote:
Hi there,
First-time game designer here. My publisher want to pay me a royalty value of $1 per game ($25 retail), but only pay me 4% of that (4 cents) per derivative game sold, which includes conversions (e.g. making a higher-end production value or software version), sequels, and localizations (translations) to the product. This seems very unfair to me. Can anyone suggest how much royalty I should get in this case?
Thanks!!


What publisher is pulling that?

Standard for a new designer is 3-5%, leaning to 3, but its been pushing slowly to 5.

1% of 25$ is 25c$ Assuming they sold 1000 copies thats a mere 250$. The publisher is pocketing 49% of the 25$.

Again. What publisher was trying to do this? We need to know so others know to avoid a company like that.

The only reason I'd see this as viable is if you as the designer demanded some absurdly high quality or high part count game be made. In which case you are soaking the excessive cost of production. Say a minis game with ALOT of minis.

NOTE!!! I TOTALLY misread 1$ to be 1%. sorry!
 
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Jake Staines
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alterego200 wrote:

includes conversions (e.g. making a higher-end production value or software version), sequels, and localizations (translations) to the product


I'm in no way familiar with the games industry, but a contract which gives you a wildly different royalty rate for a slightly different edition of the same boardgame ("higher-end production value" or whatever) smells of trying to screw you out of your royalties, to me.

Are you sure it's not "$1 per 1st edition game @ $25" and "4% of the price of the game for any future versions/conversions/ports to other platforms"? $1 is conveniently 4% of $25, after all! (Is $25 the wholesale price or the RRP of the game?)
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John "Omega" Williams
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Bichatse wrote:
I'm in no way familiar with the games industry, but a contract which gives you a wildly different royalty rate for a slightly different edition of the same boardgame ("higher-end production value" or whatever) smells of trying to screw you out of your royalties, to me.

Are you sure it's not "$1 per 1st edition game @ $25" and "4% of the price of the game for any future versions/conversions/ports to other platforms"? $1 is conveniently 4% of $25, after all! (Is $25 the wholesale price or the RRP of the game?)


Even at that interpretation its a sucker scam waiting to happen. "Here, take one third to one fifth of what we could be paying you. But we will pay you four times that when we make these sequels." And if no sequels ever come? This is akin to selling to a company for a fat 10% royalty... and they never publish.

Publishers on the whole are not like that at all. But in this case it sure sounds suspicious.

NOTE!!! I totally misread the first post. Ignore the above.
 
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Brook Gentlestream
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Bichatse wrote:
Are you sure it's not "$1 per 1st edition game @ $25" and "4% of the price of the game for any future versions/conversions/ports to other platforms"? $1 is conveniently 4% of $25, after all! (Is $25 the wholesale price or the RRP of the game?)


This interpretation would sound fair to me.

From what I understand, 4% of the publisher's sale price (which is likely to be wholesale at about half the MSRP) would be fairly standard.

If their converted into other medium or new editions or whatever, 4% of the sale price for those items would likewise be pretty fair, not 4% of your 4%. That being said, however, I think you should fight (at least a little, if you can) to keep any re-printing or conversion rights, and merely sell them the exclusive first-printing rights to make X copies of the game.

But if it works the way Bichatse has suggested and you merely misunderstood, it's a fair deal in terms of compensation -- it just puts the choice of re-printing, conversions, etc in your publisher's hands instead of your own.



Disclaimer: The above is based on heresay and research, not on personal experience. I have never directly negotiated a publisher deal, and this advice comes mostly from my interpretation of publishers' and other users' comments here on BGG.
 
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Jeremy Lennert
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Omega, it's hard to tell, but it seems like you may have misread Aaron's post--he said the royalty was one dollar per game, not one percent. On a game that retails for $25, that's 4% of retail (and therefore 10% of wholesale, if wholesale is 40% of retail). So that's equal to or higher than what you've been saying designers should expect.


This sounds a lot like the standard publishing contract from Victory Point Games, which typically pays royalties of $1 per copy for a game and four cents per copy if they publish a derivative work designed by someone else (if you create your own derivative work and want them to publish it, you sign a new contract).

I believe that derivative works clause is designed to cover cases like their "States of Siege" series where other designers borrowed the core mechanics of an earlier VPG game when developing a new game. Keeping in mind that game mechanics generally can't be protected by IP law, I think the unusual thing there is that you get anything at all for this--Yggdrasil could easily pass for a "States of Siege" game and I doubt they're paying anything for the resemblance; similarly, I doubt Donald X. is receiving any royalties for Thunderstone or Puzzle Strike.

Of course, it's worth worrying about unlikely uses of contracts as well as likely ones, and your contract always might be totally different despite this superficial resemblance...
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John "Omega" Williams
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Indeed I did misread it as 1%.

That makes more sense. Thanks.
 
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Pavel Kupriyanov
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While this generally is a rather disappointing information (I'd have expected royalties to be at least 2 bucks per game on the average), I wonder how well are the top sellers are expected to sell? I mean, deep games which are probably only welcome by geeks here and there like Through The Ages for example. It has 10k ratings on BGG, so I'd expect it sold at least 10k copies but generally there's only a fraction of people who rate games. For Apple Appstore it would be about 20-50 (differs on the game) to 1. But because board games are more frequently played by people who don't own the game themselves, this number is probably lower. I wonder if it's 10 to 1 or less.
If it's 10 to 1 that still nets you 75-100k income, which is not that bad. Its a mere fraction of what you can expect to make off a top-10 Appstore game, but it still is something.

Sadly though, outsourcing art for the game yourself doesn't seem to be a viable business strategy, if you only expect to get $1-3k on the average game. Maybe that's the reason so many top games have rather mediocre artwork?
 
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Brook Gentlestream
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jaguard wrote:

Sadly though, outsourcing art for the game yourself doesn't seem to be a viable business strategy, if you only expect to get $1-3k on the average game. Maybe that's the reason so many top games have rather mediocre artwork?

The designer doesn't pay for artwork, the publisher does. The publisher typically makes 2-3 times as much as the designer (after expenses, including art and marketing), but the trade-off is that he's the one wagering his money on the project's success or failure.

So the question becomes, would a publisher invest $10,000 or so in hopes of making about $11,000 - $19,000 down the road?

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jaguard wrote:
...Through The Ages for example. It has 10k ratings on BGG, so I'd expect it sold at least 10k copies


I rate games I don't own, but have played.

Although the game page does show 11112 owners.

BOb
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J C Lawrence
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jaguard wrote:
It has 10k ratings on BGG, so I'd expect it sold at least 10k copies but generally there's only a fraction of people who rate games.


I doubt TtA has printed or sold more than 6K copies. A typical first print run for a eurogame from a known and successful designer and by one of the better known publisher is 2K-3K copes. Smaller designers/shops will frequently have initial print runs of well under 2K copies. Print runs measured in hundreds are not rare.
 
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Pavel Kupriyanov
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clearclaw wrote:

I doubt TtA has printed or sold more than 6K copies.


And yet as was stated by pilotbob above, 11000 people here at bgg do seem to own this game. And that's only for this (even though a biggest) site and only for those people who actually bothered to edit their info for whatever reason, so the actual picture can't be less than several times more than that.

Quote:

A typical first print run for a eurogame from a known and successful designer and by one of the better known publisher is 2K-3K copes. Smaller designers/shops will frequently have initial print runs of well under 2K copies. Print runs measured in hundreds are not rare.


I understand that initial test prints might go as 2-3k, but I really fail to see how such extremely popular game as TTA or Agricola can have less than 100k copies sold.
The market for board games is huge, there's probably like dozens of thousands of shops over the world, not to mention smallish sections in every local kids store. There's like 10 of those not far from my house and every single one has at least few variants of Monopoly.
If that game sells 10s of million copies every now and then, how come there's only several thousand copies of some popular game sold in their entire lifetime?
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Pavel Kupriyanov
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lordrahvin wrote:

The designer doesn't pay for artwork, the publisher does. The publisher


Which is my reasoning of why some games have rather poor artwork. If you only expect to sell 1-2k copies, why bother and why spend a lot on a good designer?

Quote:

So the question becomes, would a publisher invest $10,000 or so in hopes of making about $11,000 - $19,000 down the road?

So the actual question is - how much better a deal can I expect if I design a game together with a friend who can draw? In this case obviously the publisher doesn't lose anything except some mythical money he spent on "marketing", but then he wouldn't want to have a game where he's going to give a good portion of revenue away, and obviously he wouldn't want to reprint such game, when he can instead take another new game and pay the designer only 4% of the price.
 
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roger miller
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Not all purchasers who buy a game even know about BGG, much less register as an owner. Take the number of owners and multiply by at least 3 to get some idea of sales.

What is confusing the issue is that a few games out of a hundred go on to huge sales and all the rest sell under 5k. So count on modest money for your game and hope to get lucky.
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Jeremy Lennert
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jaguard wrote:
So the actual question is - how much better a deal can I expect if I design a game together with a friend who can draw? In this case obviously the publisher doesn't lose anything except some mythical money he spent on "marketing"
surprise

I think you're overlooking a few things.

Games are usually manufactured in bulk (there are some print-on-demand shops, but they're more expensive per unit). The publisher generally pays the up-front costs of manufacturing and shipping that bulk order, and the costs of storing them until they sell. That's a significant up-front cost that might never be recouped if the game bombs.

They generally sell the game to wholesalers, retailers, and/or customers, which involves a system for processing payments, boxing up the orders and shipping them. That's a nontrivial amount of work. (And there's probably a nontrivial amount of marketing going on even if it's not obvious to you--stores don't automatically stock every game that's "published".)

I don't think it's uncommon for publishers to do some or all of the layout, editing, proofreading, and playtesting of a new game, either. There's a quite a bit of work that separates a finished prototype from a finished product--more than you'd guess if you haven't gone through the process.



If you want to make ALL the money from your game, you can self-publish. That's not crazy--some designers do that. But it involves a lot more than design + artwork.
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