This post gets a bit technical, but if you ever need to deal with a publishing agreement, you need to be aware of the stuff that follows. Not enough developers are !
I told you about a friend developer who had a 50% royalty rate on a game that cost 2MUS$ to create and that sold over 500K units. I tried guessing how much money my friend developer received from the game. (Note that the numbers have been simplified for making my case and preventing identification of who I’m talking about, but the message stays the same.)
The game retailed at 49US$ so the price in wholesale must’ve been something around 39US$, meaning that on 100K units, 3.9MUS$ revenue would be generated.
Of those 3.9MUS$, the publisher could reasonably argue about 1.5MUS$ in costs, split over such esoteric goodies like sales cost, MDF, marketing, logistics, freight, first party royalty(it was a console title), dry goods & assembly.
That left 2,4MUS$ profit.
Since over 500K units were sold, in theory there was 12MUS$ in profit, but obviously some further price reductions needed to be taken into account, so let’s say they made 10MUS$ .
Of that 10MUS$, I guessed my developer friend should get 5MUS$, but since he signed what’s called an advance versus royalty deal, the 2MUS$ he received for development should be subtracted from the 5MUS$.
That meant he should get 3MUS$.
But he got nothing.