1. CO1301: Games epts 2015
Lecture 4
Sales Contracts - A Primer plus Design & Development Summary (Revision)
Dr Nick Mitchell (Room CM 226)
Material originally prepared by Laurent Noel & Gareth Bellaby

2. On the Shelf… The developer The publisher The retailer / distributor
A “AAA” console game might retail at around £35+
Who gets this money?
The developer
The publisher
The retailer / distributor
The government
We will look at how this money is divided up.
We will also look at the contracts involved.
NICK’S PRICE
£34.99!

3. Game Sales – Who gets What?
This is a simplistic breakdown of a typical game sale.
Two points are immediately clear:
The retailer takes the largest slice of the money.
The game developer takes the smallest slice (the red slice).
Next, we will look in more detail at this breakdown.

4. Tax and Retail
In the UK, since January 2011, 20% of the game price is paid to the government in Value Added Tax. This amount is ignored in the remaining calculations.
So the effective price of the game is £28.
Many other territories have a similar tax.
The game publisher will negotiate a contract with the retailers (and distributors) to divide up the remaining money.
Here, we have assumed a 50:50 split, which is fairly typical.
However, there is a wide range of possibilities.

5. Developer Royalties
So in this example, the publisher will receive £14.00 after tax and retail costs.
Now the game developer will be paid some of this money as royalties for writing the game.
The royalty (if paid as a percentage of revenue) can range from 15% to 50%.
It depends mainly on the developer’s track record.
In this example the developer is paid 30% royalties. This is 30% x = £4.20 for each game sold.

6. Advance Royalties
Developers often get money from the publishers before the game is sold.
These are ‘advance royalties’.
When the game goes on sale, the developer gets no royalties until the publisher has recouped this money.
So developers get no royalties until a certain number of sales is reached.
Advance royalty example:
Developer is paid £500,000 in advance.
Developer should receive £4.20 per unit.
So there will be no royalties until there are 500,000 / 4.2 = 119,048 sales.
We will call this the ‘break-even’ point.

7. Advance Royalties 2
The majority of games do not reach the break-even point.
However, advance royalties are rarely paid back to the publisher, even if:
The game doesn’t reach the break-even point (the publisher doesn’t recover the advance royalties).
The game is cancelled (‘canned’) by the publisher.
This insulates developers from the unpredictability of the games market.
Publishers publish a large number of games to protect themselves. The minority of games that do break-even will pay for those that don’t.

8. Sales Examples Sample sales figures using our example:
Advance Royalties
Break-even Sales
Actual Sales
Further Royalties
Publisher Gross Income
Publisher Net Income
£300,000
71,000
100,000
£122,000
£1,400,000
£978,000
£500,000
119,000
50,000 £0
£700,000
£200,000
£1,000,000
238,000
60,000
£840,000
£-160,000
500,000
£1,100,000
£7,000,000
£5,055,000
Note that the publisher only has a negative income when the sales fall far short of the ‘break-even’ point for the developer.

9. Implications for Employees
The figures in the previous table are before costs. They do not tell us if the developer or publisher are making a profit.
In general, developers do make a profit if they exceed their break-even points.
If you are paid bonuses as an employee, you can only realistically expect them to be large if the ‘break-even’ point is far exceeded.
But check your contract and with also with management, don’t assume.
To get an estimate of the advance royalties: Total staff salaries for the project x 2

10. Implications for Job-hunting
Games development companies are stable environments so long as they have publisher contracts.
They are not directly affected by having low sales figures, although it will make future contracts harder to come by.
Look for games companies with several games in progress. Be careful with very small companies.
Try to join at the beginning of a new project rather than at the end of an existing one.

11. The Games Industry Reality Check: Game Development != Game Playing!
Games are developed and designed by a team.
Hard work – but the rewards are there.
But…
Rewarding, exciting, varied, relaxed, and all about games…

12. Design & Development Summary

13. Game Design Designs go through several stages:
Proposal/Pitch to Game Design Document
First drafts must capture interest
Detail is not important
Excitement, intrigue, and marketing is…
Later designs must be comprehensive
Otherwise expect unforeseen problems
But don’t forget the fun

14. Game Development Roles – Programmers – Artists – Designers
– Management, Testers, Musicians etc.
18 months of team working – like a film
Publisher provides funding
Developer must satisfy publisher
Royalties (+bonuses?) if game sells well

15. Programming Games are large and complex programs Programming Tasks:
3D Engine
Game logic
Tools and technology
Also, physics, networking etc.
Consider programming at design time
Code reuse is good, but so is innovation
Strike a balance
Expect trouble when you first reach program testing…

16. Artwork 3D artwork is half-sculpture, half-architectural drawing
It is highly skilled, don’t expect to be able to do much yourself
But do try to understand the processes
It will make you more productive in a team
Programming, art and design meet during:
Game design
Level creation
Testing

17. TL-Engine A simple, but realistic environment
For Assignment 1 you should know about:
Initialisation and the game loop
Loading and creating models
Controlling models and cameras
Coming next: Parenting and nodes
Coming soon: Basic collision detection / resolution

18. Learning and Teaching Lectures give you key information.
Practicals allow you to apply the information.
Play allows you to see what happens if...

19. Or to put it another way... Lectures are easy to forget.
Practicals let you learn.
Keep playing (= experimenting) and you will master programming.