Here are some things to consider when you’re negotiating a contract with a publisher. This post will focus on the money side of the contract.
Advance: Some bigger publishers might give you advance at the time of signing. This could be a few hundred dollars or a few thousand dollars. If it’s an advance this means that it comes out of your royalties until it’s been fully recouped. So if you get a $2000 advance then you will forego the first $2000 of your royalties. Sometimes it might not be an advance but an actual signing bonus which doesn’t come out of your royalties. Obviously you should be clear in the contract which it is before you sign! One of the reasons why a publisher would give you an advance is because it motivates you to help in the marketing of your game since you won’t make any more money until the advance has been paid off.
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%. If it’s your first game published then expect it to be on the lower side since they are taking the risk with an unknown designer.
There’s more than just a flat percentage to negotiate though. You could negotiate a rate that increases over time. You could suggest that on the first 1000 games you’ll take a 7% rate, then the next 2000 games it goes up to 8%, and so on until a cap is reached. Publishers like this idea because if the game is a flop then they’ve paid out less to the designer, and designers like this because if the game is a hit then they take some short term pains to get some longer term gains. We tried this with one of our games and the publisher liked the idea. We recommended the sliding scale that we thought was fair (OK, we’re not dumb – negotiating tactic #1 – always ask for more than you would settle for!), and the publisher came back with a revised scale that worked for us.
Copies of the game: This is the easiest thing to negotiate. It’s a lot easier to ask for more copies of the game than a higher percentage. But there’s more to this than just how many copies you get when it’s published.
You should have a clause in the contract that states that you can buy the game directly from the publisher at any time at distributor cost. The publisher still makes a profit, but you get to buy the game at $7 instead of buying it at a store for $25. Even though you’ll be getting your own copies, they run out fast and if you’re planning on doing a bit of your own marketing (which you definitely should and a future post will be dedicated to it), then you’re going to want access to more copies of your game for cheap.
Also you’ll want to put in your contract that you’d like at least 1 new copy from each successive print run. As the game gets reprinted, sometimes there are art or rule revisions and you’ll be thankful to have the most up to date copy in your collection.
If you agree upon an advance, be careful to read the wording in the clause – do you have to pay back the difference if the game does not make that much in royalties, ever? Do you have to pay it back if the company does not go to market with the game or if the company folds prior to the game being released? It pays (literally) to be sure of these things up front! For a well-established publisher, an advance against royalties should not be a major issue at a low dollar amount (depending on various things such as estimated print run and percentages). But for a start up company, paying out anything up front, even though it may be “worked off” over time, may make or break the deal. If, like Jay says, you can convince them that the advance is an investment in you being an active marketer, that may swing things in your favour. In my mind, the advance is what lets Jay and I work on new games while the other ones are being developed and produced. An advance gives designers recognition up front and some breathing room while they’re waiting for the game to be completed. It’s standard fare in other creative fields such as music and literature, so why not game design? Signing bonuses are really only for the true “superstars” of our field so don’t expect to see those on your first time around!
Regarding percentages, it is a good idea to not get too caught up in the percentage itself, but to consider the print run of the game and the market penetration of the publisher. Do the math. A small print run by a boutique publisher of 1000 games at 15% a game nets you $450.00 if the publisher’s selling price is $3.00 and it sells out COMPLETELY. Compare that to 3% royalties on a Hasbro-level print run of 50,000 copies with a publisher’s selling price of $2.00. That game could see sales of only 10,000 copies (1/5 of the print run) and you’d be making $600. So you’re not a millionaire yet, but, in short, increased increased revenue potential exists with higher print runs, despite lower percentages and lower selling prices. While percentages are important, you may want to take a look at other things like the company’s marketing plan, their mass market distribution (e.g. local hobby stores vs. Toys R Us and Target) and what their normal print run and sales are like on similar games. Knowing that you’re with a successful company may help you be more at peace with a seemingly low percentage royalty fee. As you get more games out there and build a strong reputation as a successful designer, you will be able to command higher royalty fees. And as you get more savvy with this end of the process, you’ll get to know who you can negotiate with and what the “Industry Standards” are.
One thing that Jay and I are considering doing when it comes to copies of our games is purchasing a whack up front and selling them online. The reason why is because we’re Canadians and our fans, friends, and family who are Canadian get royally shafted when it comes to ordering single units from the US. Also, we usually know a lot more about the US distribution sooner while our fellow Canucks are chomping at the bit for the games. So, we’d love to be able to meet their needs sooner than later. So this is another reason for us wanting to put a clause in the contract allowing us to purchase at cost. We may never do it, but we’d like the option to be there in writing should we want to.