Clarification on 25% royalties

[chrisk]

It say 25% on REVENUE over the first $5000.
Does this mean that if you have profit margin of 25%, you are paying all money you earned to Epic Games?
Furthermore, if your profit margin is less than 25%, you loose money by selling more game, because you owe 25% of your revenue no matter what profit you have. Is this correct?

I thought 25% is out of your profits, not revenues. These two are very different and out-of-revenue doesn't make sense. Even if it's out-of-profits, it seems little too hefty. Anyone agrees?

[ffejnosliw]

I don't think it sounds hefty when you take into account what they are giving you for almost nothing up front. It should be out of revenue as they have no control over what you say your profit is. And, since this is technically a cost of making your game/doing business, it should be factored into your profit-margin estimations and thus shouldn't be an issue. So, I guess what I am saying is: No, I do not agree.

[micahpharoh]

First of all, how else are they going to make money? Secondly, I believe that it's like this

let's say you make $6000. You keep $5000 for yourself, and 75% of whatever's over the $5000. So in this case, you'd make $5750 and pay $250. That's not too bad. If you make $10,000 then you'd pay $2500, leaving you $7500.

I believe that's how it goes, anyways.

[Angel_Mapper]

Jebus, where's the other 75% going if you're failing to make a profit?

[Masakari]

I think what he meant was:

If you publish your game on Steam (for example), and Valve takes a (for example, it's not real) 75% cut (say 7500), leaving you with only 25% (2500), that would be the amount you would have to pay Epic, leaving you without money.

But that's not what it says, imo, it says Epic will get 25% (2500/4=625) of that post-Valve 25% cut.

Although it's a relevant question. Rumoured Steam % is usually 30%, leaving 70% to the developer, and it's different if Epic gets 25% of the total gross (30% Valve + 25% Epic + 45% you) vs Epic getting 1/4 of the 70% (which would be roughly 17,5% of the total gross)

[Angel_Mapper]

I understand that but if 75% of your revenue is going somewhere else you're doing something wrong heheh.

[ambershee]

Edit: Masakari, I was under the impression the first was correct; you don't take percentage cuts consecutively, you take them all at the same time - otherwise you'd end up with people carefully shifting the respective order in which they give royalties. You sell a game for $10, Epic gets $2.50. If you digital distro takes 40%, they get $4. You then get $3.50, assuming no tax.

Jebus, where's the other 75% going if you're failing to make a profit?

40-50% on publishing and 15-25% on sales tax.

[darthviper107]

I think it's reasonable

To be realistic, it's unlikely anyone's going to make much money off something they made with this. The only way this would be too much money is if you made something millions of dollars on the game--basically if their royalties would exceed the amount that it would normally cost to license the game. But most people won't even get close to that so it's not a worry.

[Makaze]

I would think it would have to be developer revenue. If you publish something through a traditional advance/royalty publisher then you have virtually no control over the pricing or distribution channels. There have been epic lawsuits over developers trying to get into publishers books to determine how many games were actually sold and for what price to determine royalties owed. So it's not entirely reasonable to expect a developer to even know how much the gross sales were to pay Epic royalties on them.

[Lost Haven]

Not , really . If that game is just that good , I would think you would make a lot of money. It just have to be really good , triple a standard . Which is not easy to make , all it takes is a good game everyone would like . asume how many members steam have a lot , there is a lot of clientele out there waiting for good games , it comes down to do you have what it takes to produce a master piece .

[elmuerte]

If you sell your game through steam, and steam takes a 75% cut, then your revenue is that 25%, of that 25% Epic takes 25%, you in the end you have 18.75% income of the original sales. The 75% tale of steam in the initial sale is not part of your revenue, because you don't get that money and then hand it off to steam. It's just like selling a game in retail, the cut of the retailer doesn't count towards your revenue.

Because:
You offer your game for $25 to retailers. They sell it for $100. Your revenue from a sale is $25, not $100. For the retailer their revenue is $100.

[Digit]

If you sell your game through steam, and steam takes a 75% cut, then your revenue is that 25%, of that 25% Epic takes 25%, you in the end you have 18.75% income of the original sales. The 75% tale of steam in the initial sale is not part of your revenue, because you don't get that money and then hand it off to steam. It's just like selling a game in retail, the cut of the retailer doesn't count towards your revenue.

Because:
You offer your game for $25 to retailers. They sell it for $100. Your revenue from a sale is $25, not $100. For the retailer their revenue is $100.

I'm afraid I have to disagree, you'd be correct if Epic said that they charge 25% on your profit however.
Sadly, Revenue != Profit
Revenue is usually known to be the total sales from goods and/or services, before any expenses and taxes.
So basically this means, if you offer your game on Steam for $50, and Valve takes a 50% cut, Epic isn't going to take 25% on $25.
Epic takes their 25% cut from the $50 because the $50 is the amount of money you receive before any expenses or taxes are taken out of it.

Profit is the total money you're left with after all expenses and taxes are taken out.
So since Epic states that they take 25% on your revenue they take their cut from the listing price of your product, not the profit made from your product.

[elmuerte]

I'm afraid I have to disagree, you'd be correct if Epic said that they charge 25% on your profit however.
Sadly, Revenue != Profit
Revenue is usually known to be the total sales from goods and/or services, before any expenses and taxes.
So basically this means, if you offer your game on Steam for $50, and Valve takes a 50% cut, Epic isn't going to take 25% on $25.
Epic takes their 25% cut from the $50 because the $50 is the amount of money you receive before any expenses or taxes are taken out of it.

But you don't get $50 from Steam and a bill from Valve for $25. You get $25 from Valve because that's the price they payed you for your product. This is just like the brick and mortar retailers. They buy products from you fro price X, they add Y to the price to cover their costs + profit margin. And they sell it to customers for X+Y.

[Digit]

But you don't get $50 from Steam and a bill from Valve for $25. You get $25 from Valve because that's the price they payed you for your product. This is just like the brick and mortar retailers. They buy products from you fro price X, they add Y to the price to cover their costs + profit margin. And they sell it to customers for X+Y.

Not quite.
A lot of electronic distributers, like Steam, often subtract their "cut" from your earnings based on sales obtained directly through them.
They don't buy your game at a predetermined price and redistribute X number of prepurchased units for a profit, as most brick and mortar retailers, since you're not selling physical copies to them.
Now I don't mean that they directly pay you $50 then bill you for $25/game later in the year.
At the moment of sale however, they take their percentage from the $50.
It doesn't matter that the money never went into your pocket in the first place, their 50% charge is considered an expense taken from your product's revenue.
Thats why you'd still have to pay Epic 25% on the initial $50.

Now if you solely meant establishments that buy directly from you for a preset negotiated price, thats different.
Because if you tell me you want to buy my game for $25 and you go sell it for $50, you're correct, my revenue would be $25.
However it depends on how the store itself does business and what type of contract you have with them.

So depending on where you sell your product and your particular country's tax laws, 25% on your revenue can easily suck the life out of pocketbook.
Which is why I actually specifically made an account to weigh in on this discussion.
Its more than likely an attempt to get people to shell out for seats, which is completely understandible.
However if you (the user) misunderstand exactly what they mean, you're potentially setting yourself up to get sued.

[Hourences]

It is quite heavy, especially with European taxes, up to a point where it is unsustainable. It are especially the taxes too that put a huge burden on everything. Here is a very rough quickly calculated example, with the information I have.

20USD Game
25% goes to Epic, that is 5USD
35% goes to Valve (or any similar digital distributor), that is 7USD

You have 8USD left after costs.
On that 8USD you pay, in Europe, around 60% tax.
You end up with 3.2USD for a 20USD game. A 20USD game would be the upper limit for most UDK games. Most games would sell for less. 10USD perhaps?

This takes into account that you made the entire game on your own. If you have 5 people you make 0.64c a copy, or 40 euro cent.

You also have development costs to pay for too, not included in this calculation. There may also be VAT to deal with.

So a 5 member team on an expensive big UDK title of 20USD title earn 0.64c a copy. At 10 000 copies sold that makes each member 6400USD nett.

They would have to sell 50 000 copies to make a modest year salary each, or sell the game solely through their own website.