Hi all!

Can anybody out there give me lows, highs and averages for royalties from retail (boxed) distributers? I heard the average was 15% of the boxed product price, but that was a long time ago.


Felix

Like the real retail? you are talking 3-5%, only the big dogs with proven track records have the clout to score larger royalty deals.

If you come with an already finished game you can sometimes edge that number a little higher, but as an unknown your negotiating power is next to nothing.

I think it's deliberately complicated and confusing. You are talking a percentage of... what? Sell-in or sell-through? Are you talking about the percentage of the retail price, the distributer's wholesale cost, the publisher's net, or the publisher's gross?

Did you get an advance towards your royalties in the form of milestone payments?

Many publishers also have a tiered royalty system... so your royalty rate changes as the game sales increase. The idea is that if your game is a big hit, you'll make lots of money. The practical side of it is that if you do average or below average, you'll make somewhere between diddley and squat.

Well, the retail deal we are currently working toward gives us 8% of the £10 street price.

Sounds grim, I know, but im happy enough with it.
Looking forward to a nice new year!

80 feckin p????
And all it's going to do is hurt your online sales!
Dude, get your affiliate sales sorted out! And, er, make it a little easier for Dad to play :D (See, I too can hijack a thread and complain about the controls on someone's game!)

Cas :)

Haha, yeah! and why is mutant storm so hard? and how come I can't tell the difference between powerups and enemies? :P

See as magic princec drags thread back on topic again:

Hey, a little bird in another forum just told me that a publisher actually has to pay the retailer to put the game on the shelf - and not only that but they'll even have to agree to pay a penalty for every unit unsold as well!

Is this true?

The world is even more backward than I thought.

Cas :)

80p may suck, but thats how it goes in retail.
At the end of the day, if the advance is big enough, who cares?

ahahaha - no mention of that advance before :) I hope it justifies the time you've spent on it...

Cas :)

Originally posted by princec
Hey, a little bird in another forum just told me that a publisher actually has to pay the retailer to put the game on the shelf - and not only that but they'll even have to agree to pay a penalty for every unit unsold as well!

Is this true?

I believe the retailer is the one who has to pay the publisher for unsold copies so they can be destroyed or something... Basically all I remember is that it makes more financial sense for retailers to throw unsold items into a bargain bin and sell them at cost (or less) than to ship them back.

Shelfspace always costs money, in virtually any form of retail, not just games. Also publishers have a funny way of doing business, how it works is they recognize their revenue when they ship the game. So say they have a $50 game and they ship 100,000 copies. Boom they recognize $5,000,000 in revenue for that quarter. The odd thing about this is that they have to sign agreements with all their retailers agreeing to take back the games that don't sell.

In the next fiscal quarter they just deduct all the returns as expenses. This is why often you'll see publishers push games out the door before their finished at the end of the quarter so that they can make their quarterly profit targets, they don’t really care if it tanks, because next quarter they'll just ship someone else’s game before it's done to cover the returns. It's truly a horrid system.

Originally posted by Dan MacDonald
... So say they have a $50 game and they ship 100,000 copies. Boom they recognize $5,000,000 in revenue for that quarter.

Just a quick side note that if a game sells on the shelf (and Dan didn't specify) for $50, the publisher is probably selling in to the retailer at around $30 per copy. So, in the example above, they would see only $3,000,000 in revenue. Also note that if a developer is getting a 20% royalty, the 20% is coming from the $30, not the $50.

And yes, getting products on the shelf (and in the good spots, and facing forward vs sideways, and end-caps, etc. etc.) all costs a lot of money...sometimes in a form that could basically be described as bribes.

I personally enjoy digital distribution MUCH more than working with publishers and retailers. :)

-Scorpio

That's a good point; I left it out of the above equation for simplicity's sake. You have to remember also that the publisher is selling the game to the retailer for$30, it still has to cover the actual packaging and marketing of the product, which they deduct from the 30$, this typically leaves the publisher with a profit of about $6 a box, of which you get your 3-5% royalty, and only after the publisher has been re-reimbursed any advances it gave you. Sweet dreams :)

in my experience, most of what's stated in this thread is true. But every deal is different, and it is always possible to negotiate. I've heard of deals that are worse than those described in this thread, but also deals that are better.

For example, it is true that usually the marketing cost is deducted before the developer gets his royalty. But I know of several cases where marketing is a seperate budget, and the developer gets a fixed amount per sold unit, regardless of the publishers costs.

My point is that every deal is unique, and you often hear more about the good ones than the bad ones. The system is in many ways messed up, and a lot of people get really disappointed when they get their sales results. And even if your game DO make a profit, it can be a lot of trouble to get the publisher to actually acknowledge this and even more trouble getting them to pay you.

This is why retail sucks, and the real opportunity for guys like us is online sales ;)

usually you only get the advance, then the distributor says that the game doesn't sell...so you never see a dime again.

If you can't negociate a good advance, forget it, you'll make more money seeling it yourself online.
pat.

I do agree that devs with a reasonably large library of games can do very well online, but for us, with only 2 games, the opportunity to get the games out there to tens of thousands of people is too good to ignore.
I honestly dont believe we could sell this many copies online. And even if we could, I cant handle the struggle anymore. Im fed up with it... I just want to make games.

At least now, we have a good trusted publisher, giving us a very decent advance, so we can forget about the marketing side of things ( which I f**kin hate by the way ), and actually start thinking about a new game without worrying where we are gonna find the money to support us while we develop our ideas.

A few months ago, I would have agreed that retail is not the way to go ... but bear in mind that not ALL retail deals suck. The guys we are dealing with are fantastic. We owe them an awfull lot for the support theve given us over the years. Im a very happy bunny right now!
:)

We owe them an awfull lot for the support theve given us over the years. Im a very happy bunny right now!
LOL!
well I'm glad to hear that there are still some honest publishers around ;)
I agree with you on some parts. I too am experiencing all the problems of dealing with customers, making promotion, etc (see my other thread about "annoying customer"!)
Anyway until I find a really good publisher, or until I have enough money to go full-indie, I'll continue doing both marketing-developing.

This is really a eternal question anyway... ok I got a good product, now what?
sell it online by myself, getting more money, but also more advertising/support work?
or use a publisher, which can do all those things by himself and leave me free, going to make a new game?

I'd have chosen the second solution, if I hadn't so MANY bad experiences in past. Maybe I'll reconsider that option in future... but not for now :)

Been talking to several publishers on behalf of a client and I thought I would share some of the numbers. The product in question is a mid-price/budget RTS game for PC (so not a small puzzle game).

The publisher is looking to do an initial release at £10 ($16 US).

RRP £9.99
Less VAT = £8.50
Less retail dist'n (55%-60%) = £3.40

So £3.40 is what the publisher receives.

Less COG (70p) = £2.70
Less warehousing + stock Cont'rl (20p) = £2.50
Less trade marketing & Returns admin. (10% approx 34p) = £2.16
So £2.16 left over
or approx. £1.08 each for the publisher/developer on a 50%/50% relationship (ie 20% of Net Receipts).

The above is a budget release so the developer is funding the development. Some publishers I have spoken to have some additional deductions so they pay around £0.80 per unit.

If you go down to super budget ($5.00) then the royalty is around £0.30 per units.

Both the above are figures from respectable budget publishers who pay an advance up front (or rather part up front, part on delivery of master and part 30-60 days after release).

Thank you for the info, everybody.

Out of curiosity, has anybody had success from a publisher without an advance?

Say the publisher paid a percentage from street price, and not from profit. Wouldn't that remove the risk of getting nothing? The hardest part then would be to get the publisher to pay you.


Felix

That is outstanding idata, Obscure. Thank you. That's also about the clearest breakdown I've seen.

Do you have any idea what the "average" (does such a beast exist?) sales numbers for a game of that price range might reach? I worked on one set of budget titles once... I think our initial run was something like 20,000 and we might have gone into re-orders. But I was a lowly programmer so nobody tells me anything :)

Felix,
Not sure I understand the first part of your question. For a developer getting paid= a good deal but getting paid in advance is an even better deal.

So yes provided they get paid eventually then they have a successful deal even without advances but getting paid an advance is obviously better. It shows that the publisher truely believes they can sell the game and are willing to put their money where their mouth is.

As for the royalties question, no. I have never heard of royalties calculated in that way simply because the publisher doesn't set or control the retail price. They set a recommended retail price but that is only used as a guide from which to calculate the retail distribution discount (55-60%). I have seen some deals done on the wholesale price but only on triple A titles where the developer has considerable power.

Coyote
Not really I am afraid. One budget publisher (£5.00 price point) I spoke to said that they would expect to guarantee about 25,000 units but would actually hope to sell double that over two/three years but one example is hardly an average. :(

Thanks Obscure.

From the posts in this thread, it seemed to me that if your publisher didn't give you an advance they weren't worth dealing with. Maybe I misunderstood.

The data in your previous posts is outstanding. Thanks!

And thanks to everybody who posted in this thread so far.


Felix

I wouldn't say "not worth dealing with" but it is true that a professional, financially stable company that actually thinks they can sell your game should be willing to put their hand in their pocket and offer an advance. Especially when we are talking about finished product where they can clearly judge the quality.

I know that even respectable publishers do "no advance, royalty only" deals but it usually means that they lack faith in the product. Of course it might mean the developer has high expectations and they opt for a zero advance and a higher royalty percentage. But normally it means the former.

Of course it might mean the developer has high expectations and they opt for a zero advance and a higher royalty percentage.
For me dealing with a publisher without an advance is unacceptable.
As you said, if he isn't a bad publisher should at least give you "some advance" + royalties.
Anyway, you have no control over those royalties. In which manner you can protect yourself?
I know no sure method to know exactly how many copies they sell...

Your contract should always include the right to audit the publisher (at your own expense) but can also include the requirement that they pay for the audit if it turns out that they have underpaid royalties by a certain amount (5% is probably fair).

The retail sales channel is massively over hyped. 95% of all games distributed through retail bleed money profusely. If you're not brimming with name recognition, you probably won't make any money on this. At 3-5% take, it's simply not worth it. Online distribution is where it's at. You don't need to worry about packaging, shipping, negotiating with the likes of Best Buy or Compusa, and physical returns.

Sssh!! don't talk too loud! ;)
I don't want all those big companies starting to sell online... :p

I know it... but I would love to be able fill up a CD with juicy media though... sigh

There are some good people in the retail sector. Careful not to be too blinkered in your views. It may be true that most retail deals are not worth considering, but that doesnt mean you should close the door completely.

If it wasnt for our current retail publisher, we would probably have never made another game.
We now have that option, and im really thankfull for it.

Three cheers for the retail sector? .... ok, maybe just one ..... a quiet one!! ;0)