What do normal royalties look like?

[Clint_L]

Asking the lawyer-types for context.

Like, what would Disney or someone ask for royalties on their IP? How much does it tend to vary, recognizing that some IPs are worth more than others? It would be nice to be able to compare what Hasbro is trying to do to normal market practice, if there is such a thing.

 

[Maxperson]

 

[Clint_L]

I specified "normal."

 

[Alzrius]

Strictly speaking, the closest thing we have to a "normal market practice" where TTRPG open licenses are concerned is...the OGL v1.0a, for which the royalties have been 0% for more than twenty years. Hence why anything more than that looks so unreasonable to so many people.

 

[Reynard]

Asking the lawyer-types for context.

Like, what would Disney or someone ask for royalties on their IP? How much does it tend to vary, recognizing that some IPs are worth more than others? It would be nice to be able to compare what Hasbro is trying to do to normal market practice, if there is such a thing.

As an example (and I don't know how standard it is) Pinnacle "Aces" pay a 10% royalty.

 

[Snarf Zagyg]

Asking the lawyer-types for context.

Like, what would Disney or someone ask for royalties on their IP? How much does it tend to vary, recognizing that some IPs are worth more than others? It would be nice to be able to compare what Hasbro is trying to do to normal market practice, if there is such a thing.

Disney? Your first-born child.

Asking what a "standard" rate is ... doesn't work. It varies from industry to industry, product to product. Music is different than film is different than (for example) the Google Play and Apple Store "cuts."

And it also varies over time- for a long time, certain bands & their music were impossible (or nearly impossible) to get - now, they are ubiquitous.

This might be entertaining (or not). It's the basic ASCAP formula:

https://www.ascap.com/help/royalties-and-payment/payment/royalties

 

[GMforPowergamers]

I have finalized contracts for between 3% and 17%. It normally depends on the value of the product being accessed. I have never done so for a market leader (although I did take a very small part in one that was close for construction that did not go through and the leader was asking for 22.75% but was negotiated down all the way to 12% before deal fell through)

in Hollywood I understand 3%-5% is 'good' and 1-3% is bad... but of course anything is better then 0. but that is from stories from a guy known to stretch the truth.

Edit: and in general the margins matter too. You can't ask someone with a 7% profit margin to give up 6% and expect it to work.

Edit 2: and to be clear I am on the accountant/money side not law/negotiate side of these businesses.

 

[Clint_L]

Just trying to get a sense of how egregious WotC's royalty demand is, setting aside the other parts of the OGL 1.1. It seems like the royalty rate alone is trying to make a not-subtle statement, then?

 

[Greg Benage]

As an example (and I don't know how standard it is) Pinnacle "Aces" pay a 10% royalty.

I believe that royalty only applies to PDF sales through One Book Shelf.

I can say we never paid Tolkien Enterprises, George RR Martin, Blizzard, or Lucasfilm any 25% royalty for tabletop game rights. OTOH, the royalties started from the first dollar (not $750,000+) and the royalty rate was only one of the financial terms in a conventional licensing arrangement.

 

[Stalker0]

So a very important point that people have to remember in these comparisons. WOTC royalty structure is NOT 25%, nor is it 20%.

Its a % of money made AFTER 750k. For example, lets say you make 1million dollars in revenue. You would pay 1 million - 750k = 250k, 250k * .25 = 62,500.

So overall your royalty % = 62,500 / 1 million = 6.25%.


On the flip side, it is based on revenue, not profit, whereas other royalty structures could be based on profit or sales or some other metric. Its very very very important to be consistent when throwing around %s, and make sure you normal each structure when comparing.