Game Designer Contracts and Stonemaier Games

16 August 2018 | 54 Comments

By my count, Stonemaier Games currently has contracts with 7 game designers. While I’m not going to delve into the specifics of those contracts due to confidentiality, I’m happy to share the overarching details about what these contracts entail in the hopes of giving other designers and creators one perspective.

It’s important to note that I’m only going to focus on some aspects of the contract (the interesting parts, in my opinion). Please talk to a lawyer to ensure all necessary legalese is included in your contract.

Before I get into this, I should mention the timing of when we actually present a contract to the designer. Typically when we’re really excited about a game, we’ll have an informal agreement with the designer based on them making a few changes and then presenting the game to us again for our final decision. It’s only after that decision that we create the contract.

Definitions

  • Product: We define the product in such a way that all physical and digital versions of the game are encapsulated into one product. That includes accessories, expansions, localized versions, digital implementations, etc.
  • Gross Sales Revenue: This term will appear later in the contract when you discuss compensation. We define it as “the actual sale price to the distributor, wholesaler, consumer, international partner, digital producer, or other first point of sale from Publisher.” Basically, it’s actual revenue received, not the MSRP of the game. It doesn’t include shipping fees, but back when we used Kickstarter, we specifically mentioned in our contracts that the gross sales revenue was the actual funding amount on the Kickstarter page. I felt this was the most rewarding to the designer even though shipping fees are included in that amount, because it was easy for them to look at that number at any time and think, “Awesome, I’m getting X% of that!”

I would highly suggest that a designer sign a contract based on revenue, not profit. Doing so creates the potential for you to get significantly shortchanged by the publisher, as it enables the publisher to factor their expenses into the royalty calculation. That can lead to some fancy accounting that does not favor the designer.

Payments and Compensation

  • Expenses: Even though they rarely take me up on this offer, it’s in our contract that the designer can be reimbursed for all components, tools, software, and services used during the design/development process (e.g., paper and ink for prototyping).
  • Complimentary Copies: There was a time when we had a specific number of games in the contract that we would give to designers, but I’ve found it much easier to say that we’re happy to provide copies to the designer on an ongoing basis by their request.  Also, I make it clear that we will be sending away complimentary games to reviewers and conventions (play-and-win) for marketing purposes.
  • Royalty (timing): We pay designers on a monthly basis. I think the industry standard is quarterly, which can make sense if designers aren’t earning much each month, but it’s very rare that we don’t have at least $100 or so in royalties to send to a designer on any given month. I’m always excited to pay royalties to our designers–if we’ve received the payments from customers and distributors, I’d rather send the royalties to the designers rather than hold onto them for a few months.
  • Royalty (amount):  We pay a design unit 7-10% of gross sales revenue, with that range depending on the designer’s experience and name recognition (which, as I type it, seems a bit weird…I think that’s standard practice, but that doesn’t make it right, as a relatively unknown designer can work just as hard as a famous designer). I use the term “design unit” because we split that royalty if there are multiple designers. I don’t earn a royalty for the games I design for Stonemaier, but if I’m part of the design unit (like on a co-design), that factors into my co-designer’s royalty percentage.

7-10% may not sound like all that much, but let’s look at it from the publisher perspective. Say I make a $50 MSRP game and sell it to a distributor for $20 (that’s the gross sales revenue). It costs $10 to make and $2 to ship from the manufacturer to the distributor, and the designer gets 10% of the gross sales revenue, so, $2 royalty. The result is $6 in profit for the publisher, which we need to use to pay for all of the sunk costs (art, graphic design, etc) and ongoing costs like marketing and personnel, not to mention the cost of ideally reprinting the game at some quantity.

Plus, the royalty can add up to be quite a bit without any additional effort from the designer (if they so choose). We try to make a minimum of 10,000 units of a new game, so if we sell 9,000 of them to distributors at $20 each and 1,000 of them direct at $50 each, the designer makes $23,000. And that’s just the first print run.

Update: Gerald in the comments asked about advances. This hasn’t seemed important to our designers, though if any of them ever needed/wanted an advance against future royalties, I’m happy to do that for them.

Responsibilities

This section is all about setting expectations. I’m going to share it verbatim so you can see our methods, but they may vary widely based on the publisher.

  • Overall: The Designer’s main responsibility is completing the design of the game. All other responsibilities are the Publisher’s, both in terms of execution and expense: development, blind playtesting, art direction, graphic design, manufacturing, logistics, shipping, marketing, distribution, etc.
  • Development: The Publisher agrees to assist in the development of the Product. This will mostly include talking with the Designer about the game and providing intermittent playtest reports, with the main playtesting being driven by the Designer. The Publisher may also design aspects of the game for the Designer to consider. The Publisher will coordinate, organize, and run blind playtests for the game.
  • Final Decisions: The Publisher has the final say on any decisions regarding the Product, including the theme, mechanisms, name, art, graphic design, and marketing strategy. The Publisher will give reasonable and respectful consideration to the input of the Designer in this decision-making process.

Other Notes

Here I discuss what happens to the rights and royalties if another company buys Stonemaier Games, if the designer dies, or if there is a contract dispute regarding a governing body.

Also, this is where you could note that the designer’s name will go on the box. I would never think of not putting the designer’s name on the box, but a designer may be more comfortable having this in writing.

Term and Scope

  • Duration and Termination: Our contracts are perpetual unless they’re terminated. For a while we had contracts that lasted a certain number of years and then needed to be renewed, but that didn’t much sense to have a timed contract if there were no issues. Rather, see the next point.
  • Termination of Contract: There are lots of different ways our contract can be terminated (though this has never happened with a designer). We created a list of 8 situations that would allow for termination; some protect the publisher, others protect the designer. This allows either party to get out of the contract if things don’t go as planned:
    • Mutual agreement of Publisher and Designer.
    • Any reason leading up to the blind playtesting stage of the Product’s development.
    • Publisher’s failure to pay Designer any compensation due within 30 days after written demand for payment.
    • Publisher’s failure to release the game within 1 year of the start of the blind playtesting stage.
    • Publisher’s material breach of any representation or agreement contained in this agreement.
    • Designer’s failure to complete the services specified in the Responsibilities section.
    • Designer’s material breach of any representation or agreement contained in this agreement.
    • Publisher’s failure to print at least 1000 units of the Product for a period of 3 years.

***

That’s our approach to game designer contracts. The current template I use is 3 pages long, which I feel covers all the necessary elements without getting lost in the legal weeds. I try to use the contract to present clear expectations and to protect both the publisher and the designer.

Of course, I’d love to hear your thoughts and questions in the comments.

Also read:

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54 Comments on “Game Designer Contracts and Stonemaier Games

  1. Jamey, thank you so much for this. It may come as no surprise that I intend to submit my design to you when I feel it is ready and worthy of your time, so all this information is incredibly useful. It helps me to understand what I would be taking on when signing with a publisher as opposed to self publishing, but it is also very helpful as an inspiration uration to keep me going during the tougher moments. I have a few of these posts printed out and tacked to my wall above my desk to read. Even if it turns out my designs aren’t a good fit for Stonemaier, I can still look to this information as excellent advice.
    Is
    Again, thank you so much.

  2. Sounds like a really fair contract for both publisher and designer. The 3 year auto-renew is a nice touch. I assume the publisher would still own the game title and trademark, even if terminated due to it not being published for 3 years. I see some games get name changes under different publishers, and some don’t.

    I found a little, kind of “loophole” :)
    An unknown designer gets 7%. But if an unknown designer and say Alexander Pfister team up then they would get 10% (5% each). So, if an unknown designer gets a game signed (7%), but you end up doing a lot of development work, thus becoming a co-designer, that means the royalty goes up to 10% split in two (5% each), rather than 7% (split in two), as you are a well known designer :)

    1. Thanks! A couple of clarifications about that “loophole”: Development is different than design. I spend a lot of time developing each game, but that’s just part of my job. I only consider myself a co-designer when I really am working with another designer as partners from the beginning of the project, not just coming in to figure out the final 20% of the game.

      Also, for co-designs, the royalty isn’t necessarily split in half–that’s up to the designers to decide.

      1. That is very fair. I forgot that you would not sign a game that needs drastic changes. No fun loophole then.

        Thanks again for sharing this.

        I heard some well known designers advising new designers not to sign a contract unless there is a token advance of $1,000 or $2,000 to show that the publisher is serious. I can see how they would be important with small publishers, but not really if Stonemaier Games or Zman Games want to publisher your game as that has a higher level of security/peace of mind.

  3. Bookmarked for life.
    So far I only publish my own designs, but I’ve long wondered what I would do if I found a designer who’s pitch sung to my soul. ..and I’ve been close a few times.

    Thanks!

  4. Thanks for posting this. I’m a first time designer and it’s very useful to see your contract info compared to what I’ve seen from another publisher. As always your candor and transparency is super appreciated and helpful for trying to learn how to navigate this industry.

  5. Not a designer or publisher here, just a gamer with a thought:

    > We pay a design unit 7-10% of gross sales revenue, with that range depending on the designer’s experience and name recognition (which, as I type it, seems a bit weird…I think that’s standard practice, but that doesn’t make it right, as a relatively unknown designer can work just as hard as a famous designer).

    I think it makes sense to pay a known and unknown designer differently. You’re taking a bigger risk with an unknown designer. A known designer also comes with their own brand and helps sell the game just by their name alone.

      1. As an unknown designer I’ve always felt like my early days and first designs are a sort of apprenticeship. I’d be getting paid, but I’m also learning and proving myself. It would be horrendously arrogant of me to assume I was worth as much to your brand as, well Markus and Inka Brand or Uwe Rosenberg. I’d need to prove my worth and earn that higher percentage. Only way to do that is to build a good reputation through designing good quality games.

  6. Thank you so much for sharing this Jamey!! This is really interesting to me especially as I have started debating self publishing vs. trying to get signed more and more.

    Have a great week!

    1. I had this exact same debate with myself a few months ago. Whilst I’m still willing to go self publishing if necessary, I think pitching to a publisher is just a far smarter idea. Yes in KS you can technically make more money, but the amount of extra effort involved is huge, plus you’re banking everything on your own skill to design and test everything to a sufficient degree. Going with a publisher though, they pick up the slack on the development side, the manufacturing and distribution, the promoting and networking is all theirs to handle.Plus there is an added bonus in having your name attached to a respected publisher, that carries some weight. If your game is good, having it published by someone else can be more effective than what you can do on your own. There is a strong measure of pride in having a completed kickstarter, but I think there is pride enough to having your game signed by a publisher, that’s why I decided to go this route instead.

  7. So if I understood well, the designer will only get payed if the game is published at the end.

    Does it often happen that you sign a contract with a designer, he works for sometime refining his design, but finally the game is cancelled for various reasons (I am thinking of disappointing playtests, or some flaws where no solution is found to solve it)?
    In that case, the designer works for a while but will never get paid? How will the advance proposed by Gerald work in this case?

    Or, are you experienced enough to be certain that once you sign a contract the game will be published?

    Thanks.

    1. Well, this is a publishing contract, so it’s a commitment from the publisher to publish the game. There are contingencies to terminate the contract if the publisher doesn’t actually make the game.

      I try to stay away from signing games that I’m not confident will get to a publishable state. However, in the rare case where this happens, if I’ve paid out the advance, that’s on me–I would not recover it.

  8. > Publisher’s failure to print at least 1000 units of the Product for a period of 3 years.

    How does this work when you bundle digital versions into one product. You might have a game that sells thousands of digital copies over a 3 year period but you don’t print any copies. That seems like a lose-lose for both sides as you’re still selling the games and generating money for the designer just not as physical copies.

    1. BK: That’s where the key word is “print.” It looks at printed copies. Of course, the contract is structured around things that make sense, so if they stop making sense, we talk about it with the designer and work it out.

      1. Apologies to pepper you with comments and questions, Jamey, but the topic is very engaging for me! :)

        I have a question here about your choice to use “print” versus another metric such as “sell”. Do you have specific reason that you could share why you choose to have the minimum quantity be for “printing” and not for “selling” copies?

        Thanks so much!

  9. Great to see this! Back when I was first getting into design, one or two similar-ish articles (though from the designer’s perspective) were super-helpful for setting my expectations; it’s awesome to see publishers sharing this sort of info too. I’ve bookmarked it to share with folks who ask about what to expect in a contract.

    > The current template I use is 3 pages long

    *two thumbs up*

    I’ve had contracts both shorter and longer – and generally speaking, I’ve felt happier about the shorter ones.

    One question I’m curious about: do you address sublicensing in the main contract?

      1. Sure! One example would be doing a foreign-language version by partnering with another company (giving them a sublicense in exchange for royalties) rather than publishing it directly yourself.

          1. Hey Jamey! I also had questions around this. I’ve heard from some designers that 10% royalty (the top of your range) is very generous / quite high, but then the same designers expressed that 10% from sublicense agreements is quite low. I am curious, are you at liberty to share what your sublicense agreements look like? The one’s I’ve been included in / witnessed had the original publisher receiving about 5% of the MSRP of the product being sublicensed. So I’m very curious how this is handled at Stonemaier games.

            Also, as a side note, I’ve heard a designer say that there is a loophole if the main contract allows for sublicenses. The loophole is that (and not that I would think you would ever do this) the publisher could form a second company and sublicense the game to themself, thereby cutting the designer out of higher royalties. Now obviously this is totally silly, not a real-world scenario, and would lead immediately to distrust and severed relationships, but let us just pursue it hypothetically. Have you been alerted to this concept before? And whether yes or no, is there a way your designer contracts prevent this from happening?

            Thanks for any insight you can provide and huge thanks for this post in general, it has been extremely helpful for us in building out our contracts at Quality Beast!

          2. I’m traveling and can only answer in brief, but the wording of my contract covers ALL revenue earned by the game, including localized games where we typically make about 30% of MSRP. As for weird loopholes, we don’t do that, and I would recommend not working with anyone who would even consider that a possibility.

  10. Jamey, thanks for sharing this information. It’s valuable for us new designers to get our expectations right.

    I am also a fan of your submission instructions, I wish all publishers had something similar. As for now I can save us both some time by not sending my designs your way as they are clearly not within your scope.

    But someday I will hopefully create something that fits Stonemaier games!

    Keep up the good work!

  11. Does this method of compensation based on revenue result in the designer receiving significantly higher payment from direct-sales from Stonemaier compared with retail?

    1. Joshua, in the example Jamey gave above the designer would get 10% of $20 (money received by Stonemaier from selling a game to distributor) and 10% of $50 (money received by Stonemaier from games sold on the Stonemaier web store…. and perhaps at conventions). So yes, if Stonemaier gets more then the designer gets more. That is my understanding.

      1. But in the example Stonemaier received $180,000 from distributors, and only $50,000 from direct sales.

        The designer would get $18,000 from the distributor revenue and $5,000 from the direct sales revenue. Even though Stonemaier and the designer get a lot more money per game from direct sales both of them would prefer less money per game from distributor revenue as that is higher volume.

        Stonemaier gets a lot less per game from distributor revenue, but gains a lot more money through it.

        1. Distribution will also make sure that the game is available to a wider customer base. Which will itself generate more buzz and hopefully even more sales.

          It feels like a good mix of distribution and direct sales gives you both profit and builds a crowd.

          Jamey: Would you say that the 90/10 numbers used in the example are a common scenario for you?

          1. Magnus: For the first print run and based on the new Champion system we’ve been using, 90/10 is accurate. For subsequent print runs, it’s probably very close to 99/1.

    2. Joshua: That’s correct, for any revenue we receive (ranging from direct customers paying full MSRP to localization partners paying about 30% of MSRP), the designer gets X% of that revenue. So a designer would get the most money from a direct sale.

      1. Hey Jamey. I left a comment above and I don’t mean to double-post but I was hasty to post above before reading through all the comments. My bad!

        I did want to ask here: are “localization partners” equal to sublicenses? If so, it sounds like the math on what such partners pay is higher than the 5% of I’ve witnessed. We do a lot of our math based on a target manufacturing cost of 20% of the MSRP. I presume that at the volume you are printing you are able to get this lower, but presuming that’s a good baseline cost it would leave a 10% margin of what the localization partners are paying.

        Is my math (and my understanding) here basically correct?

    3. Thanks, Gerald. I missed that example my first read through. It makes me wonder if this puts designer profits at odds with FLGS profits. I’ve never considered before that where I choose to buy it directly impacts the designer’s royalty.

      Magnus made a good point about exposure though. If that creates volume that would be otherwise hard to come by, it seems well worth it. Obviously Jamey values FLGS and had written about that elsewhere.

  12. Hello, Jamey! Thank you for such a detailed overview!
    In one comment you wrote “For subsequent print runs, it’s probably very close to 99/1.” Did I understand you correct that a design unit will get only 1% on any print-run starting from the second one?

    1. Michael: Oh no, that’s not correct. :) The designer’s royalty remains the same. 99/1 refers to the percentage of games we sell to distributors versus how many we sell direct from our website (for reprints).

  13. This is a great rundown of the revenue a designer can expect. I know I’ve often wondered how much of MSRP the designer makes. Thanks for the post!

  14. This is probably the third time I’ve come back to this excellent post. :)

    Question: Do you use a work-for-hire agreement, in which Stonemaier owns the game, or some other arrangement by which some rights revert to the designer if the contract terminates?

    Thanks as always!

  15. Thanks for this article! I have a question. A publisher is currently in the process of writing up a contract to send my way. I’m interested in being hired as a freelance graphic designer and possibly the illustrator for my design. Is that the type of arrangement I should be bringing up to have in the contract? I realize you typically have a separate agreement for artists. This is also not a deal breaker, and I’m fairly certain they already have in-house artists. This is my first time and I’m just trying to navigate the process.

  16. Hi Jamey. As always, thanks for your insightful articles! I have a question about sub-licenses. As I understand it, the designer getting a percentage (20%?) of the royalties received by third parties could mean the publisher may virtually give away the title (for whatever reasons) to a publishing partner and the designer would get virtually nothing for it. Have you heard of something like this happening? Have you considered a minimum royalty payment per copy sold (by any means) to keep this possibility in check? Thanks again for taking the time to respond to all our questions and comments.

    1. While we don’t do those types of sublicenses, I could see a game designer getting a higher cut from that revenue (though I could also see their royalty remaining consistent across all forms of revenue). Any royalties a publisher receives from an accessory company are pure profits anyway, so it’s not like a higher designer cut of them would really hurt the publisher.

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