Contracts - royalties vs upfront

Now, I'm pretty new to all this (I have one game in print, and I've sent a bunch of other proposals), but it seems premature to send a contract. I'm not sure what there is to gain by sending it with the submission, and it could end up scaring off potential publishers. They'll like the game, but not like the fact that you have something in mind for a contract before you've even seen their standard contract.

Have you had success with this before?

Having your own contract seems clever and professional, but raises a few concerns:

Every contract from a publisher is an opportunity to comparison-shop. Look at it, compare it to everything you've seen before, and ask yourself if you like it more or less than the other contracts. By offering your contract up front, you may undercut what they were going to offer you. In some rare instances, I've heard of small start-up publishers offering 7% of gross.

You may also miss out on seeing perks in their contract that you may want to incorporate in yours. Early on, I was not aware that some contracts offer N copies of the game when it is published. This adds negligible cost to the contract for the publisher, but significant value to the contract for me. Now that I know about it, I always request this when it is not present.

I strongly suspect that some publishers (Fantasy Flight, Upper Deck, Hasbro/WotC/Avalon Hill, Mattel, etc.) would not accept a contract from a designer. Of course, I trust your judgement in deciding when it is appropriate or inappropriate to present your contract.

Also, consider the "watertightness" of the contract that you were directed to on the internet. Is it sufficiently robust to protect you (and your would-be publisher)? Does it have loopholes? Have you vetted it with a lawyer?

If I had a contract that I liked, thought was fair, and was legally robust, I would use it as a counter-offer for situations where I was presented with a contract that was unacceptable to me that making a few small adjustments to the offered contract would not "fix" what I disagreed with. "I've reviewed your contract. I propose we use this one instead."

As a freelancer it is usually the publishers that are going to set the terms. Most have a standard way they like to do business and their contract reflects that. If you’re in a good position you might be able to negotiate some but they hold the cards, dice, boards, chips, etc…

Does this mean the rights never return to the designer as long as you meet a minimum sales level? And waht is an excessive time, how many years?

It is designed to protect both parties.

#1 - The designer wants their intellectual property back if the game is no longer in print.

#2 - I do not want to renegotiate a contract in the event the game sells like a Carcassonne, Settlers, Ticket to Ride, etc.

So as long as there are consistent print runs of a defined size (5,000 copies after the first run) then the intellectual property remains with Tasty Minstrel Games. If however it has been 3 years since the last print run, then the intellectual property of the game would revert to the designer.

Contracts are there because publishers don't know which designers are actually wackjobs and whoich are the good guys (and vice versa too!). Suppose you create a game, a publishers picks it up, and the game becomes a hit. The first run sells out quickly. Now, the publisher wants to do a second run, of course, but they have to ask you first (because it says so in the contract). Now, you suddenly changed your mind and you want a lot more money for a second print run. And if the publisher doesn't agree, you go to another publisher who is willing to pay you more (because the game has already proven itself). While you are negotiating a contract for a second print run, the momentum passes away and you miss potential sales. You can see why a publisher doesn't want to deal with stuff like this. Of course, you are a good guy, you wouldn't do that, but you cannot expect a publisher to believe you on your pretty blue eyes, that's what contracts are for, and I can see why a publisher doesn't want to deal with that hassle each time they decide to do another print run.

I agree with this rationale, however, if a game becomes a hit, it's reasonable for a designer to expect that his royalty would increase. I would think this could be built into the initial contract to prevent a need for renegotiation down the road, eg "with each print run the designer's royalty will increase by X%, up to a maximum royalty of Y%". Is this standard in the industry? It seems to me that it ought to be, and something that designers would press for, but I can imagine publishers wouldn't necessarily be eager to grant terms of this sort if they didn't have to.

I think the argument would be that as a game becomes more successful, the publisher's risk decreases substantially and the credit for the success of the game becomes more equal, and so the designer is entitled to a larger share of the profits than he would have been at the outset. Look at it this way; if you had an opportunity to license TtR right now, do you think Alan Moon would accept the same royalty that would be offered to a designer of a new and unproven game? Presumably he'd want much more than that. I wonder whether pro designers like Moon have an "SdJ" clause in their contracts of this sort.

I'm pretty sure I've seen a contract somewhere with clauses to this regard, in the form "designer gets 5% from the first 25,000 copies, then 6% afterward". I guess you could also have another clause stating "7% after 75,000 copies, 8% after 250,000 copies, 9% after 1,000,000, 10% once 3,000,000 copies are sold" or whatever. That would solve the renegotiation question if the game is a big hit.

I don't think 10% is unreasonable for a really big success, simply because by the time you've sold over a million copies your name, and the name of your game, will probably sell just like Dan Brown or Stephen King on the cover of a book sells a lot of copies, no matter how good the game is. It's a marketing thing, and since you're helping sell games with your name, not just your game itself, it seems fair to get an extra slice.

But we're talking quantities most games won't reach, ever. Which means most designers will never get a 10%. I don't think publishers will have much worries about the inclusion of such percentage-increase clauses, if they want automatic renewal in their contracts. If they are selling huge amounts, the large print runs will mean lower costs per copy, and that will probably mean that a game that had a production cost of 20% the retail price might drop to 15% of retail, and I bet most publishers will be happy to share that extra income with their successful designers.

I think SEO hits it on the head here, he just doesn't know that he did... Hypothetical #1

Tasty Minstrel Games publishes Terra Prime. Sales go crazy nuts and we sell 250,000 games. Now Seth has the ability as a designer/developer of a proven game to expect more from future contracts. Seth can come into a contract negotiation saying... Look at Terra Prime, if 1% of buyers of Terra Prime buy game X just because my name is on the box, then you mr. publisher will sell 2,500 copies of the game instantly.

That reduces risk of a future publisher, and they may be willing to pay extra for it.

As for the talk about royalties moving to zero, it would be bad for existing publishers. New publishers would have an easier time coming into market and competing, because they will pay for good designs.

Michael

I've mostly had experience with German publishers, but what Matthew said about advances on royalties is the norm here: 1,000 Euro for a board game, and at least 500 for a card game, to be subtracted from the initial royalty payments, should it be produced. If it is not produced within 2-3 years of signing the contract, all rights revert back to the designer, and he/she keeps the advance.

Usually the rights also automatically revert back to the designer if the game no longer appears in the publisher's catalogue, or if it drops below a certain number of units sold per quarter. Otherwise, I beleive that either the publisher or designer may cancel the contract after giving notice, but it's usually in the best interest of both to maintain the contract as long as the game is selling well.

I joined the SAZ (international Game Designer's Association--even Alan Moon is member) when I was negotiating my first contract, and they offered a lot of help (from other published game designers, voluntarily). In addition, members get a packet with a standard contract--both long and short form--and a contract checklist. I found those to be invaluable when looking at new contracts from other publishers.

Most publishers, however, already have their standard contract, and are not usually inclined to negotiations, so don't spend too much time on your own contracts to offer them.

If they offer something sub-standard, you can, of course, negotiate (and having an international standard checklist like that of the SAZ can help), but they may just go on to the next eager wannabe designer who doesn't care as much about these things. Beware especially of newer hobby start-up publishers!

On the other hand, wanting too much (again--it's good to refer to an international standard) is also not wise and may alienate publishers even as you're just trying to break into the industry.

In closing, I highly recommend you let the publisher make the first move by sending you their standard contract. It's OK for you to have your own ideas as to what is important, but much better to negotiate details than to be the initiator. I'm fairly certain most game designers operate that way with publishers.