From: HeroSoftware@cup.portal.com (Bits of Magic)
Newsgroups: rec.games.programmer,alt.msdos.programmer
Subject: Re: Game Publishing Questionaire (LONG)
Date: Wed, 27 Jan 93 11:21:08 PST
Organization: The Portal System (TM)

Standard Disclaimer:
I am not a lawyer.  These are opinions only and should not be taken as facts.
Your mileage may vary.  Don't sue me, I'm only trying to help.  I can think
of exceptions to just about every statement or opinion I've offered here.


>   1)  Currently the game is still in its earlier stages of development.  We
>       have not yet decided how we will distribute the game but let's assume
>       that we will publish it commercially.  What is the best way to get
>       our game into a market?  Should we find a distributor, sell the
>       rights to a company, what?

Generally speaking, in order to get into major retailers, you MUST sign a
deal with a distributor or publisher.  What's the difference, you ask?

A publisher will usually assume responsibility for writing, laying-out, and
printing manuals, designing packaging, printing of game materials, assembly
of game materials, warehousing of game materials and assembled product,
marketing and sales (a short phrase that encompasses a multitude of sins),
distribution of finished product, and at least some level of end-user
support.

A distributor will usually assume responsibility for limited warehousing of
assembled product and distribution of finished product.

Quite a difference, isn't it?  What it comes down to is that a publisher
is going to buy (or lease) the RIGHTS to produce and sell a game.  They will
generally assume all responsibilities for creating that game EXCEPT for
design, coding, and testing of the software itself.  They will generally
consult with authors as to the CONTENT of manuals and other game materials.
They will sometimes consult with authors as to the design of packaging and
other marketing materials.  They will occasionally (that's less often than
sometimes) consult with authors as to the design and content of of sales
materials.

A distributor, on the other hand, generally buys finished product from you
and resells it.  Perhaps the term reseller would be better than distributor.

The line between publisher and distributor/reseller is not sharp.  There's
fuzziness that can be sharpened up when you negotiate a contract, like
requiring a publisher to let you write the first two drafts of the manual,
or requiring you to design the package and get art for it.  Almost anything
is negotiable to a point.

Before you demand complete control over your work, remember:
   1) Assuming a decent contract, what's good for sales is good for both you
and the publisher or distributor.  If they don't think a package is going to
attract buyers, they'll probably want it changed.
   2) The cost of actually manufacturing product can be very high.  The risk
of monetary loss is correspondingly high to the party that has to do the
manufacturing.

>   2)  Assuming that we have decided work out a contract with a distributor
>       to sell our game.  What sort of contract should we negotiate?
>       Should we ask for royalties, a flat sum, a combination of both, or
>       what?

If you are serious about doing this, the first thing you will do once you've
talked to a publisher or distributor and decided between yourselves that
you want to talk seriously about a contract, is to GET A LAWYER!  Unless you
are a lawyer.  A lawyer will do several things for you:
   1) A lawyer will take your money.  Anywhere from $100 - $500 per HOUR.
   2) A lawyer will make the publisher or distributor take you very much
more seriously.
   3) A lawyer will keep you from making simple, easily made mistakes that
can cost you a great deal of money.
   4) A lawyer will generally shorten the negotiation cycle enormously, and
the contract that comes out the other end will be much more to your
advantage.

To effectively use a lawyer, you must understand the role of lawyer in the
process.  A lawyer doesn't MAKE deals.  A lawyer makes CONTRACTS.  You will
be responsible for most of the negotiating (although you may use your
lawyer as a go-between).  Once you and the publisher/distributor have
agreed on general terms, your lawyer and their lawyer will settle the
details of a contract.  Your lawyer will inform you of the many things in
the publisher's/distributor's "standard" contract that are not to your
benefit, and you will between you decide which ones to insist on having
changed.  Sometimes these things are in contracts for no good reason, or
a small modification to the language will make them very much better.  That's
what a lawyer is for...

Deals.  Deals vary widely.  What target machine?  What type of game?  You
said computer RPG, but nothing about the target machine.  Distribution or
publishing deal?  Are you interested in up-front money or long-term cash
flow?

Straight Distribution/Reselling Deal
You do everything until you have shrink-wrapped boxes in your hands with
your game, manuals, etc. in them.  You sell them to a distributor for
$14, they sell them to retailers for $20, retailers list them at $50
and sell to end-users at $40.  Your profit is in however little you
can make the shrink-wrapped boxes for.  Your costs include marketing,
sales, and end-user support -- all of which you can ignore, but ignoring
them will lower you sales.  You assume inventory risk (by which I mean
you must PAY for the boxes before someone else pays you for them, and
you will be required by contract (almost certainly) to accept returns
and not get paid for those).

Various Publishing Deals
You create software.  They do just about everything else.

1) A straight royalty deal (no advances -- no money to sign or fund
development) might get you 20% or more for an IBM game, 10% for a
cartidge game.  But if they have no up-front investment, they have
little incentive to push your game into the market quickly or hard.
The vast majority of their risk is in their inventory, which they 
can control easily, so they can go slowly.

2) An advances against royalties deal (you get money to sign and/or
develop the product, but that money comes out of your future
royalties, if any).  These vary all over the map, but royalty
rates for IBM products run 12-15%, for cartridge products maybe
5-7%.  Advances for an IBM product can run as high as $250,000,
for a cartridge product as high as $350,000.  Generally high
advances go with lower royalties and vice-versa.  Sometimes you
can get varying royalty rates (X% until advances are paid off,
Y% after that -- or X% for the first 50K copies, Y% for the next
100K copies, Z% after that).  Sometimes some of the money paid
for signing or development is NOT advances but straight cash.
Sometimes the advances are returnable if the product is not
published or doesn't sell well.  Or they can be applied to
any other products you do for the same company.

3) A straight cash deal.  These are rare except for conversions,
but I imagine they still exist.  I would think you'd want all
development costs funded plus some additional amount that could
be negotiated.  I would think an easier way to do this would be
to go to work for the publisher.


Random Contract/Negotiation Thoughts
Whatever you do, MAKE SURE a lawyer looks at your contract before
you sign it.  Do not believe ANYONE who tells you "we have a
standard contract and it's not negotiable".  If they are serious,
you almost certainly don't want to work with them.  Don't do
extensive work for someone without at least a letter of intent
(if you're just doing your own stuff on your own product, it's
ok, but don't implement their "suggestions").  Don't sweat a
First Option clause, but be very concerned about a Right of
First Refusal.  Everything is Negotiable to a point, but
everyone concerned here has to make a profit or everybody
loses over the long run.

>   3)  Now lets assume that we have negotiated a contract that will benefit
>       both companies the most (ours and the distributor).  How much money
>       can we hope for?  How long will it take for the cash to really
>       start flowing (assuming the product is successful)?  How long will
>       the cash continue to flow?

All of this is variable according to your deal.  In a reselling deal
you will start getting paid on a regular basis (monthly or quarterly,
probably) as soon as they get paid (which is often net 90), so you
may be lagging as much as 6 months behind sales.  In a royalty deal,
first you have to pay off your advances (if any), which may take
a year or more, then you have a similar lag which may be a couple of
months longer because of the accounting practices of publishers
(mostly involving returns).  On the other hand, if you have a good
contract with a nice place, you may be getting money in hand 45
days after sale.

The life cycle of products varies a lot.  Today most retailers
dislike leaving product on the shelf if it doesn't sell fast, so
if you're not hitting big in the first couple of months it could
be all she wrote.  On the other hand, some products sell slowly
but consistently for several years.  It's something of a crapshoot.

RPGs tend to peak quickly and drop off quickly as the game is
solved by the dedicated gamers.  You often then release a sequel
which does the same thing.  Puzzle games (like Fool's Errand or
Tetris) tend to have slower, longer sales curves that never
peak as high.  Simulators seem to sell well while they are close
to the technological cutting edge, but often disappear quickly
when new technology comes out.  Your mileage may vary.


Oh yeah.  Check out the Computer Game Developers' Conference, a
yearly meeting of developers and publishers in the field of
computer entertainment.  This year it's in April, and it's always
somewhere in the San Francisco Bay Area.  I'll post info in the
next couple of days.  Please don't email me requests for info or
post them here unless I haven't posted by 3 February 1993.  Thank
You.
****************************************************************************
* Evan Robinson                * "I never get sick of zombies.  I just get *
* herosoftware@cup.portal.com  *   sick of producers."                     *
*                              *                        George Romero      *
****************************************************************************