Why Game Publishers Get 70% And Game Developers Only 30% of The Royalties?

Question:

Why publishers get 70% of royalties?

Answer:
It is easy question to ask why game publishers take 70% of the royalties from sold games – they even’t do anything for developing the game! But they do a massive job after the initial development…

But you must understand than if you complete a game… nobody will automatically come and buy it. There must be somebody to tell people to come and purchase the game. That somebody can be the publisher. The other fact to consider is that most publishers have already created a customer base of maybe tens of thousands of players. Players who have purchased other games by the publisher. It will take years to build large customer base.

Then there are some other things you must notice. Press releases for example are not coming out of nowhere. Somebody needs to write them. Advertising the game is not going to happen without effort. Submitting the software to hundreds of game sites will take time – and might actually cost money in some places. Somebody must also take care the customer service. Hundreds of weekly emails can’t be just left unanswered – somebody has to do that.

And then there are the website costs. Space and bandwidth is never free. Usually the publisher is paying that. Last but not least the eCommerce provider might take about 10% out of the profits – publisher might be paying that cut.

Some indie developers say they use 50% of their time for developing the game and 50% for marketing it. Publishing takes resources. If you cannot make your game sell… would you be happy taking 30% of something rather than 100% of nothing by presenting your game to potential publishers?

12 thoughts on “Why Game Publishers Get 70% And Game Developers Only 30% of The Royalties?

  1. Chavez

    Maybe now it is good time to name some publishers that are worthy to cooperate with?

    Can you tell your top10 ?

    Can a portal (like bigfish or realarcade) do the same or better job in promoting and selling you game like a publisher (for example popcap, garagegames, gametrust, trymedia,..etc..?)

    In the case he (portal) can spread your game better or equal to a publisher – and you can get f.e.30% of the full price 19USD from a portal – then i think it is better to go for the portals and not for publishers right?
    because publisher will get for example 50% from his portal partners – and then give developer 30% from his 50% – and developer ends up with 1 or 2 $ for a sold unit.

    right?

    what do you think?

    Reply
  2. Juuso - Game Producer Post author

    @Jay: Scott Miller’s blog is great reading, I recommend that too.

    And I must point out that publisher CAN pay the development costs. Developer does it in most cases, that’s true – but not always. That post is bit dated, but contains still useful information.

    1) Publisher advance
    It’s not a loan. Or – as you said: it’s a strange loan that you don’t need to pay back. Either way it cannot be said that *developer* is paying the development: publisher is – If the game won’t sell – you don’t have to pay the advance back (=publisher had to).

    2) Investors
    It’s possible to get investors (who can own for example 49% of your company – leaving the majority 51% to you). Investors can fund the development – and again this money is not necessarily needed to pay pack. Often it is, but not always.

    But, as you stated: most of the time it is the *developers* who pay the development costs.

    (It could be argued whether it’s *customers* or developers who pay the development, but I don’t want to get into that ;)

    Reply
  3. PeterM

    @Twist and Juuso,

    In regular (non-indie/casual) game development, the money that the publisher pays you to make the game is usually an advance. So if the game turns a profit, you don’t see any of it until you’ve paid back the money that the publisher loaned you.

    Which isn’t quite such a great deal.

    Reply
  4. Jake Birkett

    The portals DO make a profit of course. However, as the main blog says I’d rather have 30% of their sales than 100% of sales made from my own site, which would be very low unless I put in a lot of time and money making it a big, well known site.

    Reply
  5. threewayswitch

    I work for the 3rd-party assesment team of an internationally-renowned games publisher. We look at deal like this all the time, and it’s not so cut-and-dried as you might think. Sometimes a product will come in fully formed, simply needing a distribution deal and/or marketing agreement. This can come in the form of a royalty, one-off payment or share of totatl revenue. Similarly, a product might come to us in concept stage and the royalty/ returns are worked out by balancing subsidising the developement with needed royalty (ie the more money you sink in the outset, the better the royalty you require). Deals are made on the basis that developers are paid to make the best game they can, publishers sell it for the highest price to the widest audience they can, and as a result everyone’s happy. But that’s not to say that the publisher won’t try to make money off the back of the deal ;].

    Reply
  6. Ville

    And those percentages are of course open for debate. If the publisher comes to you, you’re in a better position to ask for more. If you’re in a position where you have to plead for them to take your game, you’re bound to get a bad deal.

    If someone has experiences from these negotiations, I’d love to hear them.

    Reply
  7. Juuso - Game Producer Post author

    This 70% was just one example. Some publishers might take “50% of net income” (which can be the same as “70% of gross income”).

    Is it fair? Well – it depends. I think you should try to look for win-win deals. Something where you will benefit, and so does the publisher.

    I also think that Non-casual don’t need publishers – maybe deals with retailers/distributors, but that’s it.

    Reply
  8. Ville

    My opinion is that the 70 percent does not come from their expenses, it would be ridiculous to say that they did spend that much time and money on just marketing/support. I believe the percentages come from the point of view that publishers often have an upper hand on developers. The developer may be small and never heard of, and the publisher an established business with experience in swindling you out of your share.

    There is one notable exception, namely casual games where the developer actually does spend very little time developing it, and the publishing can amount to a larger share of the costs.

    I strongly believe that non-casual indie games don’t need publishers. You can do it all in house, even gathering that user base.

    Reply
  9. Twist

    Don’t publishers (at least the larger ones) also foot the bill for a large part of the development costs in many cases?

    Reply
  10. Thomas White

    Is the 70% fair, though? What percentage goes to costs and what percentage is profit for the publisher?

    Reply

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