25% Is a Rip-Off?

Yesterday’s gamestreamer review started a pile of comments, including this one:

Scale is not an issue, if you sell 5 copies or 5000, you’re still getting ripped off, no matter how much money you make.

Could be true. (But not necessarily… consider the following)

I partially agree that 25% can be a rip-off, but I disagree that scale doesn’t necessarily affect this. I might be wrong, but I personally try also look the $$$ (not just % figures). It’s of course quite good to know what kind of percentage rate you get 10%, 25%, 50% or 190%, but I’m more interested in the actual dollar amount.

For example, if I think that 25% (gross sales %) of 5000 sold copies (for example with $10 price tag) is a rip-off then this means that I’m leaving $12 500 (25% of $50 000) on the table. If I think that getting $12 500 is potentially a good deal (meaning: I’m pondering how much more I could sell through my own site, and how much work it would mean) then I can make a decision on whether to accept such deal – even though the % figure might seem low (although nowadays distributors don’t give too big numbers for developers).

The reason why scale is important that numbers add up quickly. If I would get 50% of 500 sold copies (with $10 price tag) then that would be a $2500 deal (50% of $5000). Again I could ponder whether this is worth the effort. If I would get 50% of 2500 sold copies ($12 500) then of course this deal would be a better than 25% of 5000 sold copies.

But here the scale is important (I think of it bit like giving volume discounts), and can end up generating big dollar amounts, even when the % number is low.

In my opinion, it’s difficult to say at this point which deal would be the best in a long run (since I don’t know how much the for example some 30% deal might affect to my potential other sales). For this reason, I could decide that I first sell the game through my own site for like 3-6 months (which unfortunately can be something that some portals dislike), and after that start looking to find different distribution channels. The channels I choose don’t depend on the solely %, but the potential $$$ they might get.

Does this mean that I think people should use for example the GameStreamer system (or any publisher option). Nope – I think that people should make up their own minds about things and consider if the deals are good for them. At this point is very difficult for me to say if for example the specific GS 25% (or potential 35% which Nathan hinted) is a good or a bad deal since I have no personal experience from it – but since there’s developers selling games it might be worth considering. If GS, BFG, Steam or other distributors sound bad, them skip them. If you think there’s any good channels to use – pick them.

Thoughts?

What do you think is a fair percentage? (And how much it matters to you?)

Note about the GameStreamer discussion: Nathan from GS informed that “they are carefully reviewing some of the feedback and also are considering upping the revenue share from 25% to 35%”.

13 thoughts on “25% Is a Rip-Off?

  1. Leroy Frederick

    Yeah, 25% is waaaay too low at the moment.

    The only way I would be interested in this is if I can have my game distributed through the system in a fashion that I can have links and methods to get customers to my website / mailing list etc, therefore taking low short-term revenue but getting higher value from potential future / lifetime customers.

    Other then that at best it’s a short term-only potential revenue increase avenue but not one to build a business upon.

    Reply
  2. Chris

    (Casual portals are 25-30%, core portals give much less, as I know.)

    You mean much *more*, surely? (See my comment on Juuso’s previous blog post.)

    Reply
  3. mrkwang

    25% for the game maker / publisher, right?

    If portal does affiliate & must pay them some money, affiliate might get 25-30%. So they could pay 25 – 30% to the game maker. (Casual portals are 25-30%, core portals give much less, as I know.)

    25 (game maker) : 50 (portal) : 25 (affiliate)
    or
    25 (game maker) : 5 (traffic fee) : 40 (portal) : 25 (affiliate) : 5% (2nd. affiliate)

    But if portal doesn’t do any affiliate, don’t have to pay some share to others, just final sales are all made by that portal…

    25 (game maker) : 75 (portal)
    or
    25 (game maker) : 5 (traffic fee) : 70 (portal)

    That’s insane, as I think.

    Reply
  4. Jake Birkett

    Of course appstore gives 70% so is the leader. Someone once tried to make a develop run portal that gave 100% but it failed. Why? Lack of money spent on marketing I guess, which is what the portals do…

    Reply
  5. Jake Birkett

    The worst portal deal I got was 25% which is a shame as the portal actually shifted TONS of copies. The best deal was 40% from a couple of portals. Others ranged in-between. Anyway, it’s all about volume. 40% of 10 sales is nothing, but of 50,000 (even if they are at $6.95), then yeah, it’s pretty good.

    Reply
  6. Sargon

    If 25-35% is what gamestreamer can offer in respect to how much they need to survive as a business, I can understand that.
    But if other big(ger) portals offer something like 50-70%, then either gamestreamer is in the wrong business, or either they are too greedy.
    But all this is just talks.
    If gamestreamer can show data that they outperform portals like steam and others, relative to the deal they offer, then there is something to consider.

    Reply
  7. James

    Scale can be important but in the context of Gamestreamer it isn’t relevant. Gamestreamer hasn’t launched so any projections are pure speculation (and probably inflated due to marketing hype). A service starting out will take years to build any type of traction so I agree that they should be offering more competitive rates until their service is proven. Until then, I’d give them a miss and wait and see.

    Reply
  8. Paul Eres

    the worst deal i’ve ever had proposed to me was by merscom, who offered me 15%, after someone else takes 45% from both me and merscom. meaning i’d get roughly eight cents to the dollar. what do these publishers take developers for? do they really think anyone would do that?

    Reply
  9. tycoon games

    The most important thing is getting repeated customers and everyone knows that. Also, my theory is that there’s a finite number of customer or product XYZ. So you you “burn” all your potential customers quickly getting 25% only you will, in the end, earn much less for that product lifetime.
    (or in other words, you COULD make 50k in 2 months and stop, or you COULD make 250k in 3 years, retaining customers that would help you sell future games as well).

    Reply
  10. Koen Witters

    I was surprised to see myself quoted here ;) Thank god I deleted the last sentence of that post before submitting (it involved words such as “pants” and “bending” :D).

    In the past I was never very good at negotiations, but I read a lot on the subject and since then practiced a lot. I think it’s one of the most important skills anyone can have, you need it everywhere. Here are the things I know, and the things that will get you into the right mindset when doing deals:
    * There is no such thing as a standard contract or deal
    * You should make a win-win deal, so both parties have the same amount of gain. Win-win or no deal.
    * They probably need you more than you need them. If you think you need them more, you’re already losing.
    * You don’t get what you deserve. You get what you negotiate.

    For this situation:
    * If scale is that important for getting enough revenue, make sure you get an advance royalties payment as guarantee.
    * One of the basic negotiation tactics is to let the other party think you’re offering a ‘standard contract’. GameStreamer seems to apply this perfectly with their subscription agreement text (offering 25%).
    * Unfortunately game developers are very bad in negotiations and making deals, which ruins it for the rest of us :(.

    If GameStreamer just puts your game into their online shop, and you get 25% of 5000 sold copies, you might get $$$ out of that which seems like a lot. But it’s not you that’s making the great deal. That deal is in their advantage.

    In the other post they already stated to increase the revenue share to 35%, so remember, they are offering a percentage as low as they can get away with… who wouldn’t?

    Reply
  11. Chris

    “I figured 40% of gross as a minimum fair standard.” – note that’s due to the affiliate-like nature of the system. In setups with fewer middlemen, set your sights higher. Remember you can get above 90% for direct selling. What value are you getting for the percentage points you’re giving up?

    Reply
  12. Chris

    @Sargon: No, I’d say it’s worse than standard. Even worse than casual portals I think, unless they’ve taken yet another dive for the worse since I last looked. See below.

    @Juuso’s comment: “although nowadays distributors don’t give too big numbers for developers”. I disagree! Check out some example distributors who do give decent %s to developers:

    Stardock’s Impulse offers 70% of gross (salePrice*units), which is about as good as you’ll ever get.

    Steam offers a revenue share on gross minus sales tax, i.e. (salePrice-salesTax)*units; I can’t quote the revenue share percentage due to the NDA, but suffice to say it’s roughly comparable to Impulse. In theory it could differ per-developer I suppose, but in practice I think it’s pretty much the same for everyone. Except the big publishers, maybe.

    I can’t say much about Direct2Drive, but it’s >50%. I forget whether that’s net or gross. It’s a fine deal in any case.

    There are more examples, but I’ll stop there as I think I’ve made my point!

    @topic: Well, I’ve already provided my opinion about fair rev shares at great length, so I won’t repeat that part here. :-) To summarise: 25% of net is way too low. Before I heard about the possible 35% of net, I figured 40% of gross as a minimum fair standard.

    Maybe 25% minus expenses might fly for physical distribution; but in the internet era we’re not confined by the tyranny of transportation, nor by the middlemen who effect it; so there’s much less justification for digital distribution. For a pure digital distributor to claim 75%+expenses simply because they made a website with a fancy backend, set up some payment processing, and did a bit of marketing is ludicrous. Note that GameStreamer isn’t quite that bad, since they have to give some of that 75% to the outlets.

    So why do we get made these low pitches? Why do casual portals get away with their stupidly low payouts? Simple: WE LET THEM! We developers need to learn to stand up for ourselves more. If we grow some collective spines and all learn to negotiate higher percentages – always being willing to say no, no matter how tempting the absolute dollar amount is – then we’ll be granted higher percentages by our Lords and Masters in the distribution and publishing world, and our final payouts might actually start representing the amount of effort we put into our games! Shock, horror.

    Ultimately, direct selling is the only truly sustainable business model. Cut out the middleman! Sadly it’s hard to get going on direct selling, but it can be done, to an extent where you can turn down bad deals without worrying about where your next meal is coming from. That’s what everyone here should be aiming for over the long term.

    Apologies for the length! This stuff really gets me going. :-)

    Reply
  13. Sargon

    Is this the standard with game portals? to give 25% of net revenue?
    Is it also like that with steam? Or does each one get his own deal?
    But the way, maybe World of Goo got a better deal than the common game developer?
    Or does everyone get the same deal?

    Reply

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