3 ms·

A pretty vacuous statement. Where they given 5 million or 50 million in advance? Maybe 5 million copies wasn't enough to pay off their advance. I am ready and

A pretty vacuous statement. Where they given 5 million or 50 million in advance? Maybe 5 million copies wasn't enough to pay off their advance. I am ready and willing to believe EA is trying to fuck over everyone humanly possible, but what is the whole story? For instance: If they were given 50 million up front and had a royalty rate of 10% and an average sales price of $30 then that would be 15 million dollars no where near the dollar amount to expect a royalty check.

vonmoltke 12y ago
The following snippet, "Now fortunately someone told us to do that, and did the same thing, and that's ultimately how we got the company back," he explained. "Because when we were able to prove that things were not what they should be then it was ‘pay us or give us the company back', very simple. And so that's how we got the company back, 100 per cent." makes it sound like this was not the case and that they were, in fact, cheated out of royalties. The article is not completely clear, though, and awkwardly-worded at some points.
- stonemetal 12y ago
  Sure, I was more questioning the amount. Getting the company and all the IP back seems like it would be worth a few million. It just makes me wonder what the real difference in value was.
foldor 12y ago
If you read the article it states there were "Millions and millions of dollars of error not in our favor." found after doing an audit.
deleted 12y ago
[deleted]
NickPollard 12y ago
My understanding (as someone who worked in the Games Industry but not on the financial side) is that the developer normally gets an advance against royalties to finance production, so you're right that they need to earn out the advance before they see further royalties. The size of that advance will depend on the size of the studio, production costs etc. - it's probably aimed purely to cover costs and the developer won't really make a profit on that - and then any future royalties would go to the developer's coffers. However, at that point Hollywood Accounting enters the room, and the publisher will do a lot to ensure that most of the 'profit' of the game is actually written off as 'costs' to the publisher, so that they can avoid paying royalties where possible.
danko 12y ago
Read the article. He mentions that "someone suggested to them to audit and they found 'Millions and millions of dollars of error not in our favor.'" Shady accounting practices were used to intentionally mask earnings that would've contributed to a real royalty payout. This is a common practice in Hollywood as well. It's the reason why royalties as a percentage of net profits are called 'monkey points'. It's because you'd have to be a monkey to believe that the studio's accountants would ever allow that film to turn a profit in its official books.
- munificent 12y ago
  http://en.wikipedia.org/wiki/Hollywood_accounting http://en.wikipedia.org/wiki/Hollywood_accounting
  - Tloewald 12y ago
    Indeed the publisher model for games was copied straight from Hollywood's playbook, so this link is right on the money. In general, the accounting system works great if the distributor is also the developer (because tax) but really badly if the developer is external (because "net" is a fiction). This is also why powerful people negotiate for a percentage of gross vs. net. It's also how record labels do their accounting (and why most musicians make more money from touring than LP/CD/... sales). Based on my experience (I was involved in several contract negotiations with major game publishers), of the $40 that the publisher is paid by the retailer for a $60 AAA title before it starts getting discounted, at most $14* goes to the developer (and that assumes you deliver boxed media with instructions, etc.) -- if not the publisher will be happy to deduct those costs from your $14. This is assuming the developer created the entire product on their own dime. If the publisher does QA and packaging, that's coming out of your $14. * Probably more if you're a Brand Name. I imagine that if you've got brand recognition then, like Alec Guinness in Star Wars, you can negotiate a percentage of gross, and it's a whole different ballgame.
    - lotsofmangos 12y ago
      David Prowse has apparently been told that Return of The Jedi has still not made a profit, so he has yet to see any residual payments from it. “I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we’ve got nothing to send you. Now here we’re talking about one of the biggest releases of all time,” said Prowse. “I don’t want to look like I’m bitching about it,” he said, “but on the other hand, if there’s a pot of gold somewhere that I ought to be having a share of, I would like to see it.” http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-return-of-the-jedi-hasnt-made-a-profit/ http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-re...

vonmoltke 12y ago

The following snippet, "Now fortunately someone told us to do that, and did the same thing, and that's ultimately how we got the company back," he explained. "Because when we were able to prove that things were not what they should be then it was ‘pay us or give us the company back', very simple. And so that's how we got the company back, 100 per cent." makes it sound like this was not the case and that they were, in fact, cheated out of royalties. The article is not completely clear, though, and awkwardly-worded at some points.

stonemetal 12y ago
Sure, I was more questioning the amount. Getting the company and all the IP back seems like it would be worth a few million. It just makes me wonder what the real difference in value was.

foldor 12y ago

If you read the article it states there were "Millions and millions of dollars of error not in our favor." found after doing an audit.

deleted 12y ago

[deleted]

NickPollard 12y ago

My understanding (as someone who worked in the Games Industry but not on the financial side) is that the developer normally gets an advance against royalties to finance production, so you're right that they need to earn out the advance before they see further royalties. The size of that advance will depend on the size of the studio, production costs etc. - it's probably aimed purely to cover costs and the developer won't really make a profit on that - and then any future royalties would go to the developer's coffers. However, at that point Hollywood Accounting enters the room, and the publisher will do a lot to ensure that most of the 'profit' of the game is actually written off as 'costs' to the publisher, so that they can avoid paying royalties where possible.

danko 12y ago

Read the article. He mentions that "someone suggested to them to audit and they found 'Millions and millions of dollars of error not in our favor.'" Shady accounting practices were used to intentionally mask earnings that would've contributed to a real royalty payout. This is a common practice in Hollywood as well. It's the reason why royalties as a percentage of net profits are called 'monkey points'. It's because you'd have to be a monkey to believe that the studio's accountants would ever allow that film to turn a profit in its official books.

munificent 12y ago
http://en.wikipedia.org/wiki/Hollywood_accounting http://en.wikipedia.org/wiki/Hollywood_accounting
- Tloewald 12y ago
  Indeed the publisher model for games was copied straight from Hollywood's playbook, so this link is right on the money. In general, the accounting system works great if the distributor is also the developer (because tax) but really badly if the developer is external (because "net" is a fiction). This is also why powerful people negotiate for a percentage of gross vs. net. It's also how record labels do their accounting (and why most musicians make more money from touring than LP/CD/... sales). Based on my experience (I was involved in several contract negotiations with major game publishers), of the $40 that the publisher is paid by the retailer for a $60 AAA title before it starts getting discounted, at most $14* goes to the developer (and that assumes you deliver boxed media with instructions, etc.) -- if not the publisher will be happy to deduct those costs from your $14. This is assuming the developer created the entire product on their own dime. If the publisher does QA and packaging, that's coming out of your $14. * Probably more if you're a Brand Name. I imagine that if you've got brand recognition then, like Alec Guinness in Star Wars, you can negotiate a percentage of gross, and it's a whole different ballgame.
  - lotsofmangos 12y ago
    David Prowse has apparently been told that Return of The Jedi has still not made a profit, so he has yet to see any residual payments from it. “I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we’ve got nothing to send you. Now here we’re talking about one of the biggest releases of all time,” said Prowse. “I don’t want to look like I’m bitching about it,” he said, “but on the other hand, if there’s a pot of gold somewhere that I ought to be having a share of, I would like to see it.” http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-return-of-the-jedi-hasnt-made-a-profit/ http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-re...