developer fees

[Wolfgang M. Bereuter]

am 18.06.2002 16:49 Uhr schrieb use-revolution-request at lists.runrev.com
unter use-revolution-request at lists.runrev.com:

> The way to answer this question is by comparison to the simple fee
> alternative.
> 
> Decide what would be your flat fee for the job  - or more easily, decide
> what your hourly rate for this work should be, in pounds.  Multiply by 600 *
> 4 (because 25p = one quarter of a pound, for those not in the UK).  Over
> what will almost certainly be a limited life (two years would be average)
> the product needs to exceed that number of sales by a considerable margin,
> for it to be worth your while to take this deal.
> 
> If you are taking some or all of your fee in royalties, then you trade off
> some security (getting paid in full when the job is completed, or even
> earlier) against the possibility of greater rewards if the title is a
> massive seller.  Even if it does pay off, you're getting paid later - hence
> the need to exceed the simple break even point by a considerable margin.  As
> well as the risk of the product not succeeding, there are also other risks -
> eg the product sells just about OK from your point of view, but not
> sufficiently well for the publisher or whoever you have your deal with; so
> they either cease distribution of the product, or go bust.
> 
> So there are two questions.  One is what are the probabilities are: how
> likely is that the product will sell sufficiently well for the publisher to
> stay in business and keep selling it, for long enough to pay you better than
> if you'd taken the fee upfront and put it in the bank.  You can get some
> help in this question by talking to the publisher (or whoever) about their
> sales forecasts, marketing plan, etc.  How much are they investing in the
> product, both in production and marketing?  The other question only you can
> answer, which is how much of this risk to you want to/can take.   If you've
> got plenty of money in the bank, nothing else to do with your time, and
> you'd enjoy working on the product even if you didn't get paid, then you
> might be prepared to take a large risk.   Other circumstances, on the other
> hand....
> 
> Note that the choice isn't limited to an upfront fee, or doing it all on
> royalties.  Two common models are a fee plus royalty (ie you hedge your bets
> by taking some of your fee upfront in cash, but discounting it against a
> royalty of some size) - in this case you still need to weigh up the same
> calculations about the chances that this will work out better than taking
> the whole fee upfront, but you've reduced the downside risk.  The second
> common model is an advance on royalties - so you keep the same (or similar)
> royalty rate, but get paid an advance fee as well; in this case, you get
> royalty statements, but don't start getting royalty cheques until sales have
> passed the point where your advance has been recouped.
> 
> Finally, you can also get some idea about the publisher's expected sales by
> exploring these alternatives with them.  If they're very happy to pay you
> the full fee instead of a royalty, it suggests they're confident about the
> sales.  You may still want to make your own judgement about whether their
> confidence is justified (and still need to decide whether you can take the
> risk).  If on the other hand they won't countenance more than a £5 advance -
> then you should be considering very carefully how much you're prepared to
> invest in this product.
> 
> Hope this helps,
> 
> Ben Rubinstein               |  Email: benr_mc at cogapp.com
> Cognitive Applications Ltd   |  Phone: +44 (0)1273-821600
> http://www.cogapp.com        |  Fax  : +44 (0)1273-728866

brilliant analysis!

I would sign this ;)

regards
Wolfgang M. Bereuter

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