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Splitting up and paying royalties

Splitting up and paying royalties

Postby andie » Jan 12, 2005 @ 5:30pm

The time has come - your game is launched and the money is rolling in. Think it is a cakewalk from here? Think again.

Step back in time - before you started development, drawing the cute little characters or creating that special beat - and think "terms of agreement" regarding payment.

Factors to consider:

1. Who or what company is holding the contract?
2. Are they reputable?
3. References - Obtain business and character references. Check their history on working with other developers, etc.
4. What type of checks and balance system is set up?
5. Throw trust and friendship out the window - this is business. When money is involved everyone on the project must ensure rights are covered to be paid on all sales, every month, on time.

How to set up terms without alienating one another -

1. Be honest - this is business and if "feelings" get in the way upfront - WALK AWAY and find another team to show off your talents. These "feelings" will cause turmoil and create unnecessary stress and accusations.

2. Line out and agree on who gets what - Developer 20%, Animator 20%, etc. Keep in mind if you are in the USA and they are not - to outline you are paid in USA Funds.

3. Take it a step further - Agree on how each party is paid - wire transfer, bank check, etc.

*Note - you can write the contract where each distribution channel or "deal" is set up to pay each "partner" direct their share or percentage of royalties.

4. Agree on a payment date - "Due on or before the 10th of each month for the previous month sales." Or whatever date you choose. (Meaning it hits your account on or before that date)

5. Fees or interest percentage for late payments. Distribution channels pay on time, for the most part -there is NO reason for you NOT to be paid on time for all royalties owed each and every month. You should NEVER have to ASK for monies owed to you as agreed. Remember - this is a business.

6. Recourse - This is NOT sending out accusations that your partners are theives - IT IS A NORMAL and EXPECTED BUSINESS PRACTICE.

Set up a "Right to Audit Accounts Receivable Records" specific to the project(game) you are working on - Every contract should offer you the right to Audit the Books. If there is resistance here from the start - WALK AWAY.

Agree with all partners that each of you has the right to contact each distribution channel direct to request a sales report. This is the easiest way to go. The person or company holding the contract must give each channel written permission for you to receive information direct.

7. Stay informed - Simple Spreadsheet Report outlining sales and distribution channel unit sales and monies received per specific game should accompany your monthly royalty payment. YOU NEED THIS FOR TAXES.

The distribution channels all send a spreadsheet outlining sales specific to each game. These numbers can be transfered as appropriate.

If you find the "company" who is paying your royalties is resistant to provide this information - be matter of fact and ask them why they are not in compliance with full discolsure - there is NO legitimate reason for this type of resistance. NONE. "Not having the time" is poor business practices and is no excuse. If further resistance incurs - offer a solution, if this fails - demand an audit.

In a perfect world these items would not have to be addressed - but we don't live in a perfect world.

Build your team based on strong business ethics and do what you are suppose to do - by the book and don't waiver. You will come away with a more dedicated and focused team where trust will follow.

Reputation is key in this business - remember everyone knows everyone else. Food for thought.

Happy Gaming!

Andie Clarke
Senior Technical Recruiter
PM Contributing Editor At Large
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Posts: 163
Joined: Jan 7, 2004 @ 3:58am
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General development discussion including business/marketing topics. Platform-specific discussion should be placed in the appropriate forum below.


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