Royalties Give me A Headache
May. 18th, 2015 09:52 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
shadowkatI've always found royalties to be confusing. When I was trying to figure out whether to do the 30% or the 70% royalty formula on the Kindle, I read the fine print and threw up my hands - okay that's it, I'm doing the 30%. Screw it.
They even have a YouTube video explaining it:
Now, I'm second guessing. Don't know why, right now -- I'm basically giving it away in a free promotion for two days. (It will be available again in paperback soon - by Thursday at the latest.) So I changed it to 70% royalties. You can actually change it.
Anyhow, I handled royalty calculations for books and video games in a prior life. Regarding books? I was working for a library reference publishing company, my job was to convince various journal, magazine and periodical publishers to give us their content to distribute in electronic databases to libraries. The fun part - is we weren't going to pay them that much for it. (Negotiated a sweet deal with Time Warner.) I felt like a used car salesman. Remember sitting at a restaurant with the rep from the Economist - where I explained the royalty formula to the rep, and the rep responds...so according to your formula, we're making approximately $10 a year, and you are making $10,000? Distributors always get the bigger part of the pie. After all they are distributing the equivalent of 1000 articles, and you are providing 5.
It's the law of percentages. After I left the evil library reference publishing company (by the way, they are all evil), I worked at a video game distributor company. I was attempting to set up a royalty calculation database - only one problem, the sales team had decided to do different royalty formulas for every distribution channel and developer they acquired or contracted with. One channel had a bizarre "infinity" formula created by the owner, who was allegedly a mathematical genius and the only one who understood the formula. Also many of these agreements were verbal and not in writing. I remember the Chief Financial Officer bringing me into his office and asking how the company was making any money? If they were giving the distributor 50% and the developer 47%, what did that leave us? I shrugged. Beats me. Also, who is the CFO, me or you? (Suffice it to say, I didn't stay there very long, actually no one in the finance or legal department did. Note - if there is heavy turn over in the administrative, legal, and finance sections of a company and they hire a new controller every five months - this is not a company you want to work for.)
Honestly, here was a guy with a Masters in Business Admin with an emphasis on finance asking a former English Lit major and lawyer how the company was making money.
[As an aside: When I was in law school and we ate out at a restaurant, all ten of us, we couldn't figure out the tip - we ended up handing it to the CPA. While I was at the video game company, I went out to lunch with the Accounting Department...and they figured out the tip down to the smallest possible percentage. In other words - you'll probably get bigger tips from lawyers than accountants. The lawyers tipped 20%, the accountants tipped 18.5%)
Anyhow, the video game company could not get their new expensive royalty calculation database to work. Tried everything. No one could figure it out. They'd sit in rooms and just stare at the numbers. People would make complex calculations. So one day, they dragged me into the room, and I stared at it for a couple of hours. Finally, I asked the database consultant, who taught Algebra II in his spare time, what happened to the third party developers? Don't they need to be in the calculation?
See in video games - there are channels, distributors to the channels, and developers of the video games - often the developers have designers, or people who design different portions of the game, who also get a royalty.
Example: Candy Crush (hypothetical - I don't actually know what the breakdown is on Candy Crush)
1. First party - they came up with the idea.
2. Second party - hired to write it or creative
3. Third party - maybe did the art or a portion of the game, maybe they developed a new app on the game
4. Distributor - OBeron
5. Channel - ABC
The video game company (distributor) that I was working for, forgot to include the third party. Mainly because only two-three games had a third party.
So why worry? Because as anyone who has ever dealt with mathematical formulas knows, if you leave a portion of the formula out - the numbers won't add up.
And no you can't add them later or after the fact. Math is fairly logical, when you think about it.
Book royalties work in a similar fashion - you have the writer and the distributor dividing up the pie. If a publisher is involved, it's the writer, the publisher, and the distributor dividing up the pie. Add in derivative or movie rights - and you have the publisher, the movie people, and the writer dividing up the pie. Writers are often screwed in the process.
It's hard to make a living as a writer.
The movie business is even worse - at least in novels - you maintain some control, in movies - the director has all the control. Television actually is great for writers - they get to run the show. Theater - that's the actors medium, once the show hits the stage, anything can happen, actors can if they want to, go off script and there's zip a writer can do about it. In television - you can make them do it again. And in film, well - the director controls the show.
Like I said, above, royalties give me a headache.
They even have a YouTube video explaining it:
Now, I'm second guessing. Don't know why, right now -- I'm basically giving it away in a free promotion for two days. (It will be available again in paperback soon - by Thursday at the latest.) So I changed it to 70% royalties. You can actually change it.
Anyhow, I handled royalty calculations for books and video games in a prior life. Regarding books? I was working for a library reference publishing company, my job was to convince various journal, magazine and periodical publishers to give us their content to distribute in electronic databases to libraries. The fun part - is we weren't going to pay them that much for it. (Negotiated a sweet deal with Time Warner.) I felt like a used car salesman. Remember sitting at a restaurant with the rep from the Economist - where I explained the royalty formula to the rep, and the rep responds...so according to your formula, we're making approximately $10 a year, and you are making $10,000? Distributors always get the bigger part of the pie. After all they are distributing the equivalent of 1000 articles, and you are providing 5.
It's the law of percentages. After I left the evil library reference publishing company (by the way, they are all evil), I worked at a video game distributor company. I was attempting to set up a royalty calculation database - only one problem, the sales team had decided to do different royalty formulas for every distribution channel and developer they acquired or contracted with. One channel had a bizarre "infinity" formula created by the owner, who was allegedly a mathematical genius and the only one who understood the formula. Also many of these agreements were verbal and not in writing. I remember the Chief Financial Officer bringing me into his office and asking how the company was making any money? If they were giving the distributor 50% and the developer 47%, what did that leave us? I shrugged. Beats me. Also, who is the CFO, me or you? (Suffice it to say, I didn't stay there very long, actually no one in the finance or legal department did. Note - if there is heavy turn over in the administrative, legal, and finance sections of a company and they hire a new controller every five months - this is not a company you want to work for.)
Honestly, here was a guy with a Masters in Business Admin with an emphasis on finance asking a former English Lit major and lawyer how the company was making money.
[As an aside: When I was in law school and we ate out at a restaurant, all ten of us, we couldn't figure out the tip - we ended up handing it to the CPA. While I was at the video game company, I went out to lunch with the Accounting Department...and they figured out the tip down to the smallest possible percentage. In other words - you'll probably get bigger tips from lawyers than accountants. The lawyers tipped 20%, the accountants tipped 18.5%)
Anyhow, the video game company could not get their new expensive royalty calculation database to work. Tried everything. No one could figure it out. They'd sit in rooms and just stare at the numbers. People would make complex calculations. So one day, they dragged me into the room, and I stared at it for a couple of hours. Finally, I asked the database consultant, who taught Algebra II in his spare time, what happened to the third party developers? Don't they need to be in the calculation?
See in video games - there are channels, distributors to the channels, and developers of the video games - often the developers have designers, or people who design different portions of the game, who also get a royalty.
Example: Candy Crush (hypothetical - I don't actually know what the breakdown is on Candy Crush)
1. First party - they came up with the idea.
2. Second party - hired to write it or creative
3. Third party - maybe did the art or a portion of the game, maybe they developed a new app on the game
4. Distributor - OBeron
5. Channel - ABC
The video game company (distributor) that I was working for, forgot to include the third party. Mainly because only two-three games had a third party.
So why worry? Because as anyone who has ever dealt with mathematical formulas knows, if you leave a portion of the formula out - the numbers won't add up.
And no you can't add them later or after the fact. Math is fairly logical, when you think about it.
Book royalties work in a similar fashion - you have the writer and the distributor dividing up the pie. If a publisher is involved, it's the writer, the publisher, and the distributor dividing up the pie. Add in derivative or movie rights - and you have the publisher, the movie people, and the writer dividing up the pie. Writers are often screwed in the process.
It's hard to make a living as a writer.
The movie business is even worse - at least in novels - you maintain some control, in movies - the director has all the control. Television actually is great for writers - they get to run the show. Theater - that's the actors medium, once the show hits the stage, anything can happen, actors can if they want to, go off script and there's zip a writer can do about it. In television - you can make them do it again. And in film, well - the director controls the show.
Like I said, above, royalties give me a headache.