When Do Royalty Checks Arrive?

Finally, most publishers pay royalties on a quarterly basis, and only on copies that retailers have paid them for (because they have been sold to consumers). This means that it takes some time for money to flow back into developers' pockets: if a game reaches the target sales numbers required to generate royalties on October 21, the fact will be reflected on the publisher's fourth-quarter report, which might only be completed in February—and accounting might not print the developer's check until March.

Case Study 1.3.2: Royalties versus Guarantees

Sarbakan, a developer of online games based in Quebec City, is most notorious for its mystery serial Arcane and its action series SteppenWolf, both published by Warner Bros. Online. Sarbakan's business model relies on a balance between original intellectual property (whether sold outright, work-for-hire style, or licensed to distributors according to non-exclusive agreements) and service deals.

"We want to maintain a 50–50 split between creating our own projects and providing our services to other intellectual property owners," says Richard Vallerand, Sarbakan's vice president for creative affairs and production. "These are very different businesses, but they complement each other very well."

In SteppenWolf 's case, Sarbakan sold all rights to the property to Warner Bros. The publisher provided a budget sufficient to insure profitability, and Sarbakan retained a share of future earnings tied to the property. "This way, we gained access to Warner's tremendous marketing machine. This allowed us to gain more players faster than we could have on our own. And since they own the rights, our partners will be more interested in migrating the property toward other media; television, for example. Obviously, they are in a much better position to do so than we are."

By selling the rights to SteppenWolf to Warner Bros., Sarbakan accepted a smaller share of the property's revenue. However, with the power of the conglomerate behind SteppenWolf, this small share might actually amount to more, in the long run, than what Sarbakan might have been able to generate on its own.

"Plus, Warner has allowed us to retain a great deal of creative control over the characters and storylines. This is not the case when we work on someone else's intellectual property: when we do so, the decision process always involves a lot of back and forth."