What Is a ‘Royalty’?

Question:

Okay, here is my question. What is a royalty. I read about it on sites but I don’t get what it means. Can you explain it to me?

Answer:
Yes I can.

Shortly put: Royalty is a percentage of a game’s sales paid to the developer as specified in the developer/publisher agreement. For example, you could get 30% royalties from all sales. If the game sells $1000 and if your royalty portion is 30%, you would get $300. If the game sells another $1000, you would again get $300 more. If the game sells nothing ($0) then your share would be $0 ($0 * 30% = $0).

Thanks to the person asking this, it’s good to remember to define terms when using them. I try to do that. On the other hand, I have a good hint for anyone asking about a meaning of some term. First you should try to use google for finding definitions. Just go to google.com and type define:yourword. In this case, you could go to google and type ‘define:royalty’ and you’ll hit a big list of definitions.

3 thoughts on “What Is a ‘Royalty’?

  1. Juuso - Game Producer Post author

    Good point there. I intentionally left that away from the post (because it would bring gross sales, net profit and other issues with it…) I’ll make another post later. Meanwhile – that’s a good point. Net & Gross are different. Net is after expenses, gross before expenses (roughly speaking)

    Reply
  2. Tim Fisher

    Ah, you’ve fallen into the trap that many others fall into. Check your contracts, more than likely it will say that you will get 30% of Net Revenue, or fees; Net is not the retail price!

    Make sure you are happy with the definition of Net, is it reasonable? exactly how much do you get 30% of? Every publisher should know their cost of sales so that can give you a fairly accurate idea of what Net is as a percentage of Gross.

    Reply

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