The next thing do is license and protect the intellectual property of the game design. This will protect your rights to the design of the game and any unique aspects of that game. Of course, this really only applies if you have someone else doing development or production and retailing of your game. If you’re doing everything yourself, licensing isn’t required.
There are (basically) three kinds of licensing to understand;
1. Character / image property– typically thought of as cartoons, but any image or illustration could apply. Royalty rates will vary widely, based upon demand. Toy companies often pay for exclusive rights to utilize a popular image. The dollar amount paid for the top properties can be staggering, plus, there may be many demands placed upon a licensee for performance, advertising, etc. Licensee are limited to a very narrow and specific product or product category.
2. Trademark property such as: Royalty for the top “brands”, trademarks and properties can be a staggering dollar amount for a licensee. Companies seek brand identities as they do character or images for their ability to have immediate public awareness and appeal. Companies often add a popular identity to their product instead of expending money advertising. Therefor, they need that broad consumer “reach”.
3. Product or patent properties: This probably includes any product that you have invented. These are traditionally unproven and “risky” propositions for the toy companies. Product / patent licensing is where most toy inventors are likely to be. Payment is typically based on the wholesale selling price of your item. The typical royalty percentage is 5%.
Some Advantages of Licensing:
- Low to no initial investment (the cost of your time and prototype)
- If you work with an agent, licensing usually requires no further effort on your part
- You can make a lot of money each quarter without doing anything
- You benefit from the financial backing, marketing and development efforts, and more from your licensee
- Spin-offs or line extensions of your product are possible- giving you a broader royalty base
- Toy company licensees will be aggressive in protecting your concept
- Worldwide opportunity without complex distribution
Some Disadvantages of Licensing:
- High demand for innovation- few products will be appropriate for most manufacturers
- Your product will likely need to be shown to numerous companies
- It can take a while to get a license. Eighteen months or more is not uncommon.
- It is also not uncommon to enter into a licensing agreement with a company to find that your concept never “goes anywhere”
- Auditing may be necessary to assure proper royalty payments
- Sometimes smaller companies “forget to pay”
- 5% of the wholesale price isn’t anywhere near what you can make if you self produce and market your item. An item that wholesales for say $7.00, will give you $0.35 cents per unit.
- Licensees may expect royalty free accounting for returns, samples, defects, shipping allowance, discounts and much more
- You are at the mercy of your Licensee for performance
- Licensee will likely change your product- a lot
Once you’ve convinced a game company to produce your game, they’re going to offer you a contract. In this case you will probably need to get the licensing contract in place before working on the development. A deal is a deal and there are no “standard” industry contracts. Every licensing contract is unique. Read contracts carefully. Look for loopholes. It never hurts to have a contract lawyer review it for you (except, of course, for the cost of the contract lawyer). Reputable companies are usually quite good about dealing with changes or clarifications that you ask for, if you explain your concerns well.
This usually means covering the following and more:
- Royalties to be paid, often by percentage of a pool of funds.
- Length of time of the contract.
- That the design is indeed the original design of the designer.
- Scope of the agreement. Does it cover digital rights, spin-offs, expansions, different languages, and more.
- Royalties to be paid on sub-licensing.
- Transferability of the rights.
- Laws under which the contract should be held.
- AND MORE!
A good contract should be designed to protect both parties in the known cases that are important to them. While each designer is different, I know that I want:
- Sub-license rights
- Transfer rights
- Ability to publish into perpetuity without contract renegotiation as long as the game is continuously in print.
- Global rights for all languages
- Digital rights
- Rights to all expansions and spin-offs
Copyrights apply to the actual wording and language as written on your components and the rules, as well as the actual artwork assets and specific graphic design. Copyrights do not apply to the actual mechanics or what your game “does”, just what the actual components are from a written and artwork standpoint. Copyrights are established automatically upon creation of the work – so you don’t need to file official paper work, hire a lawyer, or mail yourself copies of your rules to be covered.
Patents apply to unique devices/products or processes but that are non-derivative – in other words they need to be purely original. Generally speaking, patents are not used by boardgame designers. They are VERY expensive and time consuming to secure and require extensive legal resources to enforce and protect. Forget about patents.
Trademarks are used to secure a brand identity for something. Publishers will generally trademark the name of their game, and depending on the intellectual properties used in the game other references might be trademarked as well. In general, designer’s don’t need to deal with this either.
Basically, if you starting out in design and you aren’t a publisher – you can more or less ignore all of the above issues. One exception to this is the use of other people’s potentially copyrighted materials in your physical prototypes. If you are using clipart or placeholder graphics, it’s best to use public domain or other assets where you have permission to use them.
ADVANCES AND ROYALTIES
Generally, you want to get some sort of non-refundable cash advance paid to you upon signing the contract. Based on who you’re dealing with, this can be anywhere from a few hundred dollars to $5000 or more.
The reason you want this is that, in many cases, the manufacturer never actually publishes the game, but sits on it until the contract expires. Without the advance, your game would have been tied up for a couple of years, with nothing to show for it.
Your advance is always taken out of your eventual royalties, so even if the company sells 1000 copies, you aren’t likely to see any money from it until you’ve earned more royalties than your advance was worth.
The royalty is best calculated as part of net sales; what is actually collected in cash, rather than the retail price. This way they can give away samples, give discounts, or sell at full retail at cons and you get a cut of the actual net sales. This is fairly standard. Most contracts are anywhere from 5-8% of net, though some have been as low as 2% and as high as 10%. How much of a royalty you are offered completely depends on the manufacturer; if they expect to market a million copies expect a lower royalty. Royalties are generally paid quarterly or semiannually.
Expect the contract to die at some point so that the rights revert back to you if the company isn’t continuing production.
A good idea when it comes to termination dates and renewals is to stipulate a minimum number of copies for the termination period to renew, or have a fixed termination date regardless of the number of copies sold with renewal negotiable. Some contracts will state, “if we sell XX number of copies during the period, then the contract automatically renews for X years”. Sometimes the company will just have a fixed duration contract, then contact you to renew it if the game is still selling well for them. egardless of how it’s done, you want a termination date. One allowance you’ll often see in a contract is that if the contract is terminated, they’ll be allowed some time period to sell their existing stock.
You can, of course, opt to outright sell the rights to your game at a fixed price. There’s nothing wrong with this, but if the game does fabulously well, you’ll never see a penny of royalties. On the other hand, for an outright sale, you should expect more money than a simple advance would get you; at least double.
Here is where a lot of weirdness can happen.
Sublicensing usually consists of one company selling the rights to print a game to another company for a fixed price, for which you get a much larger percentage, as the licenser (the company you sold your game to) isn’t actually doing any of the labor except for selling it to someone else. They’re acting as a middle-man. It’s reasonable in this case to ask for 20-40% of the sublicensing fee that they get from the licensee. Alternately, you can stipulate that in the case of sublicensing, the licensee also pays you a royalty on each copy sold, and you don’t get any of the sublicense fee at all.