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Exclusive rights - whats a normal price?

13 replies [Last post]
Fri, 01/03/2014 - 10:12
MrTacoBueno
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Hi everyone,

A small introduction here before i state my question.

My name is William van Schagen and i self-published my game BancoBanco in August 2013. In the same year i showed my game on Essen and after a lot of nice responses i received an email from a company in North America. I'm based in the Netherlands myself and would like to focus myself first on the European market myself.

Now i had this email with the question if the company can buy the exclusive rights of the game for the North American market. My first response is 'ofcourse! why not!' It will cost me or future buyers quite a lot to ship it to America, even though it's a small box. It takes about 18 euro's to send it and the game costs 15 euro's to buy.

My question is if anybody has an idea what a reasonable price is to sell the rights for? Is it smart to sell the rights for a particular time (like 5 years)? Do you sale the rights per sold copy or for the rights alone?

Anyone any idea?

Thanks in advance,

William

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Fri, 01/03/2014 - 11:00
#1
Corsaire
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Are they just distributors or

Are they just distributors or do they also plan to publish + distribute?

If they are distributors only, then I'd think you'd make your per item profit from the publishing side and fixed rate makes sense.

Do they have market penetration? Can they get it to all game stores? What about department stores?

You need to protect yourself to some degree from being bought out of a market versus having a motivated distributor. That's where a performance clause comes into it (they must sell X units by Y date or you have the option of withdrawing from the contract.) They may also want a performance clause where you guarantee you can deliver so many units given a certain amount of notice.

I'd ask them what they are offering and how they derived their offer price. My anticipation would be they talk about some small percent of their expected sales over the next like two years. My gut instinct (based on lots of reading on non-game product marketing) is that around 1-2% of your retail price per unit expected to be sold is a fair price (if they expect to sell 1000 units with $25 retail price in the next 2 years then $250 to $500 would seem right to me.)

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Fri, 01/03/2014 - 12:17
#2
anonymousmagic
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Corsaire is right. Although

Corsaire is right (although I'm not sure I agree with his price calculation). North America is a big market and next to Germany it's pretty much the biggest board game market out there. I feel you could ask more for exclusive distribution rights to that particular market and still be fair. Also, the rights are only a part of the question, you need to agree on a percentage per sale that you receive (and make VERY sure what that percentage is taken from).

Although the question what price is fair is relevant, your first question should be "what can this company offer me?". Set your excitement to one side for a moment and look at it critically.

Do they have a proven track record in publishing or distributing?

Is it the type of company you'd be proud to be associated with?

What would working with them do to the final price for North American customers?

Make sure you know who you're dealing with and what they can do, before you accept such an offer.

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Fri, 01/03/2014 - 12:22
#3
lewpuls
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It used to be common to

It used to be common to license games for individual regions on a royalty basis, now most publishers want world rights. By licensing it to N America you may limit your options in Germany.

If they are publishing the game, why wouldn't you expect the normal designer's royalty? (Approximately, 5% of their revenue, or sometimes 2-2.5% of the list price for each game.)

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Fri, 01/03/2014 - 12:54
#4
Corsaire
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Just to emphasize, the bulk

Just to emphasize, the bulk of my above post (esp. the pricing) is based on assuming it is a distributor rather than a publisher, because a flat rate is the sort of thing a distirbutor would offer and it is currently self-published.

If it is a publisher then move along to the more appropriate responses from everyone else. And my knowledge is from the consumer products field rather than games and publishing.

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Fri, 01/03/2014 - 13:30
#5
KrisW
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Exclusive Rights

Do make sure there is some sort of clause allowing you to take back rights if there are few or no sales. There are some companies who buy exclusive rights in order to NOT distribute the item, allowing other products they have a stake in to sell with less competition.

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Fri, 01/03/2014 - 14:21
#6
MrTacoBueno
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Already thanks for the

Already thanks for the replies.

I will take contact and ask what their offer might be. I'm curious what they will come up with. I know a fellow designer here in the Netherlands who also presented his game on Spiel and they also contacted him today to ask if they could licence the game, although not exclusive...

If you are interested i can update here later what the response will be!

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Fri, 01/03/2014 - 17:25
#7
anonymousmagic
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Of course we're interested.

Of course we're interested. Please share!

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Sat, 01/04/2014 - 10:19
#8
MrTacoBueno
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So oke, i asked the company

So oke, i asked the company on what terms they would like to get the exclusive license to the game. And i have a response...

This is what their offer will be in some bigger lines:

- a contract for 5 years
- approx. €1800,- dollars in advance
- 3% per item sold (first earnings go off that €1800,-

for that they want to have an exclusive license of the game mechanic for the North American market. I say mechanic because they will produce the game with some changes in rules and artwork.

What are the opinions on the offer?

My thoughts here are the following:

- i think 3% is perhaps a bit low and i should go for a little bit better percentage, thinking of 5%
- make sure they will do something with the game instead of storing the idea to avoid competition
- make sure the rights will be returned to me afterwards

Not sure yet what to do, sounds somewhere interesting to me, because the American market is still somewhat far away for a indie-designer.

Hope to hear some thoughts and perhaps some experiences

William

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Sat, 01/04/2014 - 15:50
#9
questccg
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Not what I have searched

lewpuls wrote:
If they are publishing the game, why wouldn't you expect the normal designer's royalty? (Approximately, 5% of their revenue, or sometimes 2-2.5% of the list price for each game.)

Hmm... I'm not sure this is what I have read in terms of royalties... I have seen a percentage of 8% as the Publisher's *standard* royalty. I'm assuming this is off the the price the publisher sells the game. Also I am not looking for an advance - which may cause the royalty to be lowered in value. So it's not the list price, but the price the distributor's pays. Also certain publishers also retail their product via a website.

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Sat, 01/04/2014 - 19:53
#10
anonymousmagic
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If they're willing to spend

If they're willing to spend 1800 bucks on you, I think it's work spending some time to look into the offer.

1) I'm not sure if the 3% is standard. Maybe there's some info about that in some of the pinned/stickied threads of the forum. Either way, make sure you know if it's 3% of list price or wholesale price.

2) Weigh the advantages and disadvantages of a 5 year contract. I would definitely include a revert of rights clause that allows you to pull out of the contract if less than X units are sold within a certain time period. That avoids them buying the game to stop it from being in competition with something else. (Obviously, you also need to spell out the revert of rights after the contract period, perhaps offer them an option to renew if things are going well.

3) Check out the company. What have they already published? Are those games still in shops? Would you be proud to have designed something with that look? Can you track down other designers they've worked with? How do they feel?

4) How serious are the changes in rules and artwork they're considering? Are you willing to give up control in return for money? For how much money?

5) Make sure the contract spells out when you're paid for both the advance and the royalties.

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Sat, 01/04/2014 - 20:46
#11
Corsaire
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With such a solid advance and

With such a solid advance and them publishing, I wouldn't worry about a revert clause as they've tied themselves into performance of the contract. With your EU focus I'd be seeing it as found money.

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Sat, 01/04/2014 - 23:24
#12
lewpuls
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questccg wrote:lewpuls

questccg wrote:
lewpuls wrote:
If they are publishing the game, why wouldn't you expect the normal designer's royalty? (Approximately, 5% of their revenue, or sometimes 2-2.5% of the list price for each game.)

Hmm... I'm not sure this is what I have read in terms of royalties... I have seen a percentage of 8% as the Publisher's *standard* royalty. I'm assuming this is off the the price the publisher sells the game. Also I am not looking for an advance - which may cause the royalty to be lowered in value. So it's not the list price, but the price the distributor's pays. Also certain publishers also retail their product via a website.

8% of revenue is very high, especially for an unknown designer. Sometimes publishers subtract some shipping costs from revenue, too (FFG used to, don't know if they still do). 4-5% of revenue is without an advance, if you were to get an advance then the percentage might be lower. Obviously, it varies by publisher.

You should be able to find some past discussions of royalties on BGG, you don't need to rely on people here.

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Sun, 01/05/2014 - 05:45
#13
anonymousmagic
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Corsaire wrote:With such a

Corsaire wrote:
With such a solid advance and them publishing, I wouldn't worry about a revert clause as they've tied themselves into performance of the contract. With your EU focus I'd be seeing it as found money.

A revert clause is something that belongs in a contract as a standard. Sure, they tied themselves to performance to make back that first 1800 bucks, but after that sales might slow down. And if the game underperforms through no fault of either of you, it's a good thing to be able to sell it to someone else. The game is yours. A revert clause means you'll get your own property back. Always a nice thing to happen...

lewpuls wrote:
8% of revenue is very high, especially for an unknown designer. Sometimes publishers subtract some shipping costs from revenue, too (FFG used to, don't know if they still do). 4-5% of revenue is without an advance, if you were to get an advance then the percentage might be lower. Obviously, it varies by publisher.

You should be able to find some past discussions of royalties on BGG, you don't need to rely on people here.


If they do subtract shipping cost, you should make sure they are the ones paying for shipping. Otherwise, you're paying double yourself.

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