Share this Page URL

Tier Two: Royalties > Recouping - Pg. 181

The Publishing Contract Note 181 TIP It is wise to have the publisher include a sample royalty statement as an appendix to the contract, and besure it includes the numberof units manufactured, thenumber sold, and the wholesale price. A sample royaltystatement is included at theend of this chapter. Recouping The publishing company will want to "recoup" some or all of the development fee from royalties payable on the game (or other products--see the discussion of cross-collateralization in this section) before it begins making royalty payments to you. Earn-out the point at which the publisher begins paying royalties. The three main schemes for recouping the development fee are 1. 2. 3. Recouping the fee from net sales at developer's royalty rate (most favorable to the publisher) Recouping the fee from total net sales (most favorable to you) Recouping the fee from net sales at developer's royalty rate minus X percent and paying developer X percent from unit one (a valid compromise, but a very uncommon arrangement) Here's an amusingly lowball example: Assume the royalty rate is 10 percent of net sales, the pub- lisher makes $10 in net sales per unit, and the development fee was $100,000. $1 (10 percent of $10) of every unit sold goes toward repaying the development fee; you will begin receiving royalties after sales of 100,000 units (barring other income from ancillary products). You won't like this setup since the publisher would break even and be long into the black before sharing any money with you. You will want the publisher to begin paying royalties after break-even, once net sales (see discussion below) exceed the development fee (in other words 10,000 units).