I’m currently researching funding options, specifically what kind of revenue split I have to expect. There isn’t a whole lot of information available online, probably because these deals can vary greatly from project to project. What I was able to find, however, are the terms from the Indie Fund, which state the following:
That’s all well and good, but UE4 also wants their 5% cut from the gross revenue. So… I have to pay 105% of my gross revenue? Additionally, going by this answerhub thread, gross revenue is calculated before Steam (or any other platform holder) takes their 30%, which would mean I have to pay much more than I receive, which obviously (Hopefully!) can’t be right.
If anyone here knows how this works, I would greatly appreciate a short explanation of how to calculate these percentages. It would also be interesting to know if publishers generally take their cut *before *or *after *taxes and Steam, and how large that cut usually is.
You would have to ask them, since Steam will automatically take out their percentage and you’d need to pay Epic as well, I would think it would be the remaining amount.
I was hoping to find some devs who went through this process already and can shed some light on it, but it appears I really have no choice but to contact the respective parties directly.
If you take from the publisher $50.000 to make your game, from day one commercial release, you earn $0 (zero pennies) until the day Publisher makes back those $50K you borrowed from them.
After that, only after that, they begin splitting profits shares with you, the developer; that’s how publishers are.
In such a case, you must include Epic’s 5% as part of the expenses you take the loan for.
Thanks Bruno, that’s exactly what I wanted to know. Not exactly the answer I was hoping for, but definitely good to know.
And yeah, I won’t get around hiring an accountant sooner or later, but I don’t think I’m at that point yet. I just needed a basic understanding of this stuff so I can plan ahead.
If you borrow $50.000 from the publisher to build your game, you will receive $0 (zero cents) from the day your game is released commercially until the publisher repays the $50K you borrowed.
Then, and only then, do they start sharing earnings with you, the developer; that’s how publishers work.
As you say each case is different but any deal involving gross profits is something to be “very” careful as to terms and conditions.
To be careful is if the contract is written as a loan or as venture capital investment which would make the investor an owner of your project. Think Shark Tank where a Shark will invest in a company or product in exchange for a owner percentage based on a market evaluation.
A loan on the other hand is self supporting as to pay back terms and conditions as to the amount that can be borrowed as to available collateral.
Credit cards = unsecured loans high interest rates. Collateral loans = larger loans lower interest rates. Then there is equity loans which is relevant as to the amount of equity you have already built up in the current game project, also some time refereed to as a bridge loan.
That said lets now consider this.
“Developer shall pay to Indie Fund one hundred percent (100%) of the gross revenue received by Developer …] until the total amount paid by Developer to Indie Fund equals the Loan.”
This is a last in first out condition as to a venture capital investment that the investor sets up as an escrow account where they do the accounting to determine payouts as to development costs. They usual pay themselves first followed by any additional costs like engine royalties. More or less you become an employee of the VC and given an allowance from the gross profits.
You see things like this run away and hire a contract lawyer.
