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Publishing Contract Expenses
Question submitted by (07 July 1999)
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In making budget estimations for negotiation for a contract with a
potential publisher, I'm curious what all could reasonably be considered
a "development" expense and therefore covered in an advance payments
from a publisher?
For example, would office rent and office supplies be considered in the contract negotiations? Are there any rules of thumb when determining the expenses that are development critical and those that would not be covered by a publisher's advance payments?
The general rule of thumb should be that all your expenses are figured into
the advance estimate.
The advance is an amount set by you, for how much you will need to finish the game. Space rental, computer purchases, software, salaries, insurance, benefits, everything that goes into running a business is absolutely OK to be in an advance. After all, you are getting an advance to run your business in a way that will produce a game.
However, just because you are right to add any expense that you will incur (or could incur given the chance) to the advance, doesnt necessarily mean that the publisher will want to give you that much money. So if you think you are going to be given an A-AAA budget, and the publisher isnt going to draw a line somewhere far before your estimates, then go ahead and give them the estimates for everything.
Break down the estimates into logical chunks, like salaries (with the number of each types of positions listed), computers/software, space rental, and other business needs. Then make a separate list breaking down your teams experience, resumes possibly, and other relavent information. Do the same for the other sections, so that if the publisher is interested you can show them where you are planning to spend the advance. If they are willing to pay that much they'll be glad you can put together a good budget as it shows a lot more competence in handling money than just asking for X amount of dollars. (They will usually request this if you dont present it to them anyway).
Most of the time, asking for almost anything, even if it seems high, wont end a conversation, especially if they are interested in your game. They will just tell you they arent looking to put down that kind of money at worst, then you need to give them a new estimate.
My advice would be to actually create several budget estimates that you can live with so that you can switch to back up plans if you absolutely cannot get what you prefer, though stick to your original estimates for as long as you can if you think that you will be able to eventually get it.
Just some thrown out advance estimates: budget titles often get between 30K and 80K budgets, 60K being more normal for a fairly involved game (3-4 month dev time). "A" titles and above (to "AAA") will have a totally varying budget that could be from 200K to 400K to a million or above budget.
This will depend on the publisher, on their line up and how your product fits into it, on how much time it will take you to finish your product. You will also want to find out about how they will push your product and get as much as you can of this into your contract, including the money that will be spent on advertising/marketing of your game. Some companies wont write this into a contract, and if its their policy there is not much you can do, but as almost always, it never hurts to ask.
Response provided by Geoff Howland
This article was originally an entry in flipCode's Fountain of Knowledge, an open Question and Answer column that no longer exists.