SigninG a Publishing Contract

Publishers fall into two camps regarding how they receive money from their localization partners. It is important to understand which accounting method your publisher uses, and to build in safeguards that guarantee that you get paid reasonably for international copies.

1. Sublicensees pay a sublicensing fee

Most localization partners pay the manufacturer directly for their own print runs. They pay the primary publisher a licensing fee for each copy. Under this model, publishers typically give roughly 33% to 50% of that licensing fee to you. This is a common approach.

The main problem with this approach is that even though the percentage rate seems much higher than your base royalty rate, it is a percentage of a smaller, unknown number. In fact, there is no requirement that your publisher charge their sublicensees any fee at all. One designer tells us that their publisher struck a deal with another publisher: they each had a game the other wanted to localize, so they each waived the other’s sublicensing fees on the two games. With no fees exchanging hands, there were no royalties to be paid. 

One way to prevent your publisher gaming the system in this way would be to guarantee a minimum royalty amount per sublicensed game (see point 3, below).

2. Sublicensees treated like distributors

Some publishers lump the international copies of the game with their own print runs, to lower their manufacturing costs (manufacturers often charge less per unit for larger print runs). Under this arrangement, the localizing company pays your publisher for the manufacturing cost plus a licensing fee. Publishers using this model typically pay you a royalty for these international copies at your base royalty rate. This should work out to be similar to the amount you’d get for a game your publisher sells to an in-country distributor.

Be careful here: do not accept single-digit royalties for sublicenses thinking that your publisher uses this model, only to discover that you’re getting a small percentage of a small sublicensing fee. Again, the guaranteed minimum amount below should help safeguard against this. 

3. Setting a floor for sublicensing royalties

Because both of the above methods can leave things unclear about what your actual royalty will be for copies sold by another publisher under a sublicense, some designers have started asking for a floor on these royalties. Here are some examples: