🚀 go-pugleaf

In article <1990Feb19.233223.11341@stb.uucp> richard@stb.uucp (Richard Conner) writes:
>In article <9002160434.AA12227@cie.uoregon.edu> dsears@CIE.UOREGON.EDU writes:
>>The open letter below was on a local BBS, and I pass it on because I think
>>some net.programmers might find it interesting and useful.
>>
>>For several years I had pondered the state of the software industry from
>>the point of view of a programmer developing a new program, and what I
>>saw bothered me quite a bit.  They had several choices: all bad!
>
>>They can go the traditional route and sell it to a Software house. 
>>Software houses may buy the program outright if they think it's a real
>>killer.  In one typical story a programmer was overjoyed to receive $75K
>>for their program only to later learn that the company already had a
>>marketing slot for it, and made over $2M in the first year of sales.
>
>	"Typical" horror story... the "Software House" basically
>	"buys off" someone they know to have a product that could
>	be sold very succesfully for a "pitiful" amount compared
>	to what the program will earn for the company.

Developer beware! If the developer was willing to accept $75K for
his program, so be it. That's why I caution people against selling
their software outright. They should always retain some level of ownership in 
the package if the sales go well. 

On the other hand, what if the company failed? What if they sold only 
$200K and then withdrew the product? The $75K would have been a real good
deal then. (Even then, partial ownership might permit the developer to
regain his rights so he could then go to another company).

>
>>On the other hand they may elect to pay the programmer royalties -
>>typically 5-15% of the *net*.  Guess how small the net is by the time
>>they get down to figuring royalties?!?
>
>	I keep hearing this 5-15% royalty number everywhere also.
>	"ooh how generous."
>

First you don't accept royalties based on net, ever. A company could
hire "uncle Ned" as a special consultant to marketing your product,
pay him thousands and say, "Well, I sorry, but we just didn't make
any profit this quarter. . ."

The 5% to 15% rate is pretty standard, depending on how finished the
final product is. If you come to the company with a slick Object oriented
drawing  program which still needs postscript support. And the company
foots the bill for hiring some hotshot PS jocks to finish it, don't 
expect 15% royalties. Otherwise if you program is completed, debugged,
and with manual, don't be afraid to argue for 18% or more.

Now, if you have a known product with a good reputation and established
user base, you can probably talk the publisher into substantially higher
figures. (Another argument for jumping to another publisher the moment
your current one screws up.)

Also, note the economics of publishing. Introducing a game for instance,
into the Amiga market will take $15K to $30K. And since distributers
work generally on a 90 to 120 payback plan the publisher may not see
any money for 3 months or more from shipping date. Plus they must buy
ads 2 or 3 months ahead of time in the major magazines (perhaps the largest
single expendature), so they're out thousands of $$ for at least 5 months
before anything comes back in. With an I*M or Mack product its much worse
since the ad costs are so much higher (a full page ad in a major magazine
might run $8K to $10K or more!).

Once you subtract packaging cost, your royalties, advertising, tech support,
and general office help, the publisher may end up with only a few bucks 
profit on a game. Not much more than the developer's own 15% royalty.

>>A third choice is trying to market your creation yourself.  Given the
>>need to have a fair amount of expertise in publishing, packaging,
>>marketing, and other esoteric callings, not to mention the inordinate
>>amount of time and energy needed to get a new product off the ground,
>>this is obviously something that is *not* for everyone.
>
>	Obviously this takes alot of time and energy, not to mention
>	resources and contacts.  Well, before you "commit" to some
>	other "Software House"  contact as many as you can, and be
>	sure to find out details about what each will give you as
>	far as one-time payoff, or royalties.
>

Amen brother! I talked to a dozen different places, Epyx, Antic, Discovery,
etc, and each had their own potiential sales figures, policies on advances
and so on. The going rate of advances on royalties on Amiga products with 
Epyx was around  $15K to $20K. Most of the other other companies, both
large and small said "advances? What are they?".

If a company says that they want to market you product, you already know
that it is good enough to be a commercial money-maker. So don't fall
down and kiss their feet, since if they think it will sell, chances are
other firms will feel the same way. So take your time, don't sign the 
first contract that comes along. It may take months, but it will be 
worth it if you link up with a real first rate publisher.

>Then... talk to us.

Sure, why not.

>We don't believe 5-15% royalties are quite fair to someone who may have
>worked quite awhile on something.  Especially considering the fact that
>"games" are almost guaranteed to sell more in the Amiga market than
>"utilities."  

Not necessarliy. The average game will sell 85% of it's potiential in
4 months. The average Amiga product sells about 4000 copies. Since games
are generally one-shot deals, expect to sell about 3400 units, with another
600 in residule sales. 

If a utility or business package is any good, its liftime will probably be
much longer then 4 months. Witness Lotus, Weirdperfect, Aztec-C. So even
if it sells only 2000 copies a year, within 2 years you would have beaten
the "average" game. And considering the fact that untilities, et al generally
cost more then games, that is, earn bigger profits, you'd be ahead. Also since
non-game software will probably be upgraded every 1 to 2 years, it can 
continue earning money thru upgrade fees long after the original sale.


>We are interested in helping provide the non-game market
>with as much quality and usefull product as possible.  This is what will
>help sell the Amiga into the larger businesses.

Great! We need that!!

>We have contacts with the two largest Amiga distributors in America, and
>smaller distributors as well.  We also have on hand a full-time Artist
>as well as printing, and packaging contacts.  We also have the advertising
>contacts.  So instead of going shareware, or settling for "generous"
>5-15% royalties - talk to us, depending on the quality of your product
>we may offer royalties upwards from 25% (or higher depending on quality
>and saleability of your programs)  We also have on hand Full-time expert
>Amiga programmers available to perhaps add that final polish to your
>program.  We felt you'd like to know of "other" alternatives.
> 
>-Richard Conner
>Conceptually Advanced Technologies
>P.O. Box 3302
>Santa Monica, CA  90403
>213/452-1732

If a company comes to you and offers 25% royalties and promises massive
sales (to make it worth their while),, you can conclude three things :

      a) They don't know what they're talking about
      b) They trying to take you for a ride
      c) They don't want to earn money

Chances are it'll be a or b. So be careful. If they offer you a contract,
make sure to hold them up to their original promises and think twice about 
giving them slack. The idea is to be able to go somewhere else the moment
reality hits. (If you think that someone else can do a better job that is).

Don't be afraid interview prospective publishers about financing, outstanding
debts, previous funky goings on, sales plans. . .. Get names of their other 
developers and call them up to find out about their experiences. Call up 
distributers to see how reliable these guys are.  

Even if it all checks out, I would still be a bit wary. The company may
be sound and  may be able to operate and earn money with generous royalties. But
what happens if a software slump comes for a few months (witness Epyx downfall),
will they have been able to make enough to get through it? What happens if
they start new development, and it takes alot longer and costs alot more then
estimated? Would they have $100K extra if they needed it? Would they be 
able to secure bank loans?

Working with a publisher can be a real nightmare. I know! It can also be
a real dream if you find the right one. After talking with all of these
other publishers for 8 months and collecting extensive notes, I think I 
found the best of the lot for my software. It took time and it was 
well worth it.

I with the best of luck to Richard and Co. and look foward to seeing what
wonderful products they have in store for us.

More ramblings from. . .

                                                      *** mike smithwick ***

"E Pluribus Unix!"
[disclaimer : nope, I don't work for NASA, I take full blame for my ideas]