16 August 2018 | 49 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.
- 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.
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.
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.
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