What do normal royalties look like?

[GMforPowergamers]

I made a post before showing what a kick starter with a 20% royalty over 750k would look like

D&D General - Example of what 20% looks like

Here is from another thread. IT is an example for everyone to see what WotC is REALLY asking for. Small by what metric? Would the publisher of The Griffon's Saddlebag be a small publisher by your terms? Griffon Macauley hit a windfall of $1.2 million on his Kickstarter for volume 2. His goal...

www.enworld.org

lets take some quick math here on 25% over 7k compared to flat 7%

now of course anything under 750k that flat 7% is a lot more then 0

at 1 mil that is 25% of $250,000 is $62,500
at 1 mil 7% overall is $70,000
at 1 mil 6% overall is $60,000

so on a 1 mil kick starter it is about 6% off the top... remember CC and KS both take a cut too... I would need someone that has run a KS to confirm but I am betting 6% is MORE then the average profit on a TTRPG KS, but not more then the MOST profit on a TTRPG KS

Remember that what you pay retail is not what the wholesalers at Amazon or FLGS pay... they get a 40-55% discount, so a $50 book to you may only be getting the publisher $25-$30 having to increase that by 6% doesn't sound SO bad until you see the ripples...
lets say I sell to your FLGS for $30 and to amazon for $25 (bulk diffrence) I now need to add 6% and that is $1.80 so the store now pays $32 and amazon pays $27 that means the new price to YOU is $52 at the store or $40 at amazon instead of $50 or $38

 

[HomegrownHydra]

Just trying to get a sense of how egregious WotC's royalty demand is, setting aside the other parts of the OGL 1.1. It seems like the royalty rate alone is trying to make a not-subtle statement, then?

The royalty structure was deliberately set to prevent any company from getting over $750k. There is no company that could afford such a crazy rate and so none of them would bother trying. This is why people are mistaken to think that the point of the royalties is to get a piece of the pie when the point is really to keep every pie small.

 

[GMforPowergamers]

On the flip side, it is based on revenue, not profit, whereas other royalty structures could be based on profit or sales or some other metric. Its very very very important to be consistent when throwing around %s, and make sure you normal each structure when comparing.

It would be a rare royalty (although not completely unheard of) to be off profit.

It is too easy to manipulate profit.

"Hey I own the company and need to structure my debt and costs... and it looks like my payroll expense just went up along with my equipment expense... of course that is my, my wife and my 3 kids pay and the 2 cars now in the company name... and as such my profit is almost 0"

 

[GMforPowergamers]

The royalty structure was deliberately set to prevent any company from getting over $750k. There is no company that could afford such a crazy rate and so none of them would bother trying. This is why people are mistaken to think that the point of the royalties is to get a piece of the pie when the point is really to keep every pie small.

I think it's both. I think it;s "lets grab some Green Ronin and Piazo money, making them charge more so our products look like a better value" AND "lets make it so no one wants to be the next Piazo or Green Ronin and they all want to stay small"

the 5-10 KS they would grab that money from as 1 time offerings is frosting on the cake.

 

[Gadget]

I'm not an industry insider nor one who deals with royalties in real life, but here are a few observations:

• The OGL 1.1. Royalties are based off of total revenue, not 'profit.' This may make WOTC seem more greedy and evil (which they may well be), but this is actually good business practice. In the past, movie stars have been able to negotiate salary based on the movies' total revenue or profit. It was quickly found out that movie studios could become "creative" with costs and profit to make almost any movie show next to no "profit." The one example I have heard is the guy who played Darth Vader (the guy in the suit, not James Earl Jones) got a % of profit deal for Return of the Jedi and never really saw anything from it due accounting shenanigans. I'm not 100% sure if that is true, but it is illustrative how things can go in the business world, even if that is a different industry.
• As I understand it (I could be wrong) it is only % of revenue after 750K, not total revenue, which makes it sting a bit less.
• If this is still a high royalty fee (and it seems it is) it may be designed to to either: a) keep "big" products down, or b) encourage negotiating a separate license deal with WOTC directly on a case by case basis.

 

[Morrus]

In the TTRPG industry, typically about 10% (revenue, not profit, is standard) with licenses I've been involved with or privy to, with an advance against royalties of varying sizes.

I know what the advanced on licences I've signed are. I have heard second-hand what the advances on Star Trek (Modiphius) and Star Wars (FFG) were, but can't vouch for those numbers. I will say that the latter, if those numbers are correctl, was 5 times the former.

 

[Snarf Zagyg]

In the TTRPG industry, typically about 10% (revenue, not profit, is standard) with licenses I've been involved with or privy to, with an advance against royalties of varying sizes.

Just a quick addition to this-

Royalties based on profit are disfavored in general, simply because they are so difficult to correctly account for. Heck, "Hollywood accounting," is based on the principle that you can zero out profits for anything.

 

[HomegrownHydra]

I think it's both. I think it;s "lets grab some Green Ronin and Piazo money, making them charge more so our products look like a better value" AND "lets make it so no one wants to be the next Piazo or Green Ronin and they all want to stay small"

the 5-10 KS they would grab that money from as 1 time offerings is frosting on the cake.

Paizo and Green Ronin can't afford a 25% royalty, it would destroy their businesses and WotC knows that. And the money WotC would get from Kickstarter projects would be an utterly trivial amount relative to their corporate revenue goals. Tens of thousands of dollars is nothing to a corporation worth billions of dollars like Hasbro. The royalty is not meant to raise even a penny but to kneecap competitors.

 

[Stalker0]

In the TTRPG industry, typically about 10% (revenue, not profit, is standard) with licenses I've been involved with or privy to, with an advance against royalties of varying sizes.

For context, the equivalent for this WOTC license would be a company that makes 1.25 million in revenue.

 

[goondocks]

I'm not an industry insider nor one who deals with royalties in real life, but here are a few observations:

• It was quickly found out that movie studios could become "creative" with costs and profit to make almost any movie show next to no "profit." The one example I have heard is the guy who played Darth Vader (the guy in the suit, not James Earl Jones) got a % of profit deal for Return of the Jedi and never really saw anything from it due accounting shenanigans. I'm not 100% sure if that is true, but it is illustrative how things can go in the business world, even if that is a different industry.

From the creator of the original Men in Black: