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Royalty Rates > Royalty Rates - Pg. 183

The Publishing Contract Given the hit-driven nature of the game business, be prepared for yourpublisher to actually try to reduce the royalty rate as sales go up, with thereasoning that 1) the developer is in- curring no additional cost and is making a fair return even at a lower royalty rate, and 2) hits are what keeppublishers in business so they need to capture as much revenue as possible from the hits in order to finance the games that fail.Your response tothis should be 1) that a developer's business model relies on extra revenuefrom hits to cover the games that never earn-out, and 2) the publisher'sshare of net sales is already significant enough to cover its risk. 183 royalty rate begins, you will want to share in any success of the title, and most publishers are happy to grant royalty escalations based on units sold. The points of negotiation will be the thresholds for escalated royalties and the amount of the escalation. Rates will also vary by medium and category. Example: Consoles 8-20% 1-300/500k 10-22% 3/500-750/1mm 12-24% 750/1mm - 1mm/1.5mm 14-26% 1.5mm and up PC Some developers argue that they should receive a higher royalty for PC games because the publisher does not have to pay any license fees to the console manufacturer. Handheld 5-8%