Following the book industry’s example: SAZ calls for reform of fees for game designers
Game designers receive less money than book authors. The Spiele-Autoren-Zunft (SAZ) demands: This must change, as must the transparency of the accounting. Publishers cannot understand the criticism. We answer the most important questions about the disagreement.
Reading tip: How much do board and card game designers earn?
We asked publishers, authors and illustrators. The result: a sample calculation.
How much do game designers earn?
Game designers receive a share of the sales revenue for each game sold, usually around 6 percent. The key question is what this share is calculated from: the price the customer pays in the shop (net retail price)? Or the price the publisher invoices to the retailer (net trade price)? For most game designers, it is the net trade price, even if the terms used vary. Contracts also use terms such as net sales, net publisher revenue, net goods price, retailer purchase price, net income or invoiced amount.
What is the difference between net retail price and net trade price?
The price of a product in the shop without VAT is the net retail price. The price the publisher invoices to a retailer for a game is the net trade price. This is often lower because publishers grant retailers discounts.
What does the Spiele-Autoren-Zunft (SAZ) criticise?
The SAZ criticises that most game publishers calculate royalties based on the net trade price. This disadvantages authors. The actual selling prices of the games are not taken into account. As a result, game designers are worse off than book authors. The latter usually receive a percentage of the net retail price. The SAZ has created two sample calculations to illustrate the difference.
SAZ sample calculation for books (net retail price)
| Fixed retail price for a book | 29.98 € |
|---|---|
| 10 percent royalty for book authors (based on net retail price, regardless of discounts and other agreements between publisher, wholesalers and booksellers) 5 percent royalty for book authors 10 percent cannot be achieved everywhere, according to SAZ. For paperback editions, book authors in the tier “up to 20,000 copies” would receive 5 percent. | 2.80 € 1.40 € |
| – reduced VAT rate (7 percent) | 1.96 € |
| = net retail price | 28.02 € |
| Retail sales revenue (with 50 percent discount from publisher) | 14.01 € |
| Publisher sales revenue | 14.01 € |
SAZ sample invoice for a game (net selling price)
| Non-binding retail price for a game | 29.98 € |
|---|---|
| 10 percent royalty for game designers (based on net selling price – regardless of discounts and other agreements between publisher, wholesalers and retailers) 6 percent royalty for game designers In reality, the percentage for designers is not 10, but rather around 6 percent in licensing royalties. [Editor’s note: Commercially rounded, it would actually be not 0.75 €, but 0.76 €.] If you also factor in further discounts that publishers deduct and apply the average discounts from the trade price list of a major German publisher, as stated by SAZ, which amount to 23 percent, then with a 6 percent licensing royalty, only | 1.26 € 0.75 € 0.58 € |
| – VAT rate (19 percent) | 4.78 € |
| = Net retail price | 25.20 € |
| Trade revenue according to trade price list (with 50 percent discount from publisher, excluding further discounts and deductions) = Net selling price | 12.6 € |
| Publisher’s revenue | 12.6 € |
According to SAZ, the invoices show that royalties for game designers are lower and heavily depend on agreements between retailers and publishers. Designers are not aware of these agreements. SAZ goes on to say: “Publishers’ trade price lists usually start with a basic discount of around 50 percent of the intended or recommended retail price. However, the more influence a retailer has, the higher the price-reducing conditions. This is particularly pronounced with major customers such as Amazon. According to official settlements for a game from a major German publisher, these deductions from the trade price list ranged between 21 and 27 percent from 2018 to 2022.” This is opaque for designers.
The SAZ continues: “Worthy of mention in this context is also the questionable and clearly rejected attempt by another major publisher to involve game designers in the costs of TV advertising. The relevant contract clause stipulates that, in the event of TV advertising in the respective year and country, game designers receive 1% less in royalties, for example 5% instead of the agreed 6%.” Hermann Hutter from the Spieleverlage association says: “TV advertising is the absolute exception for games. So if a publisher invests disproportionately in marketing, they discuss it with the designers. They benefit from it and know: it’s a win-win situation. TV advertising usually massively increases the number of games sold and thus their earnings. What this specifically means for the percentage of royalties is a matter of negotiation.”
What information is missing from the sample calculations?
Sample calculations can and should only provide an initial guide. That’s why many details are missing, including for books, such as agencies. They help authors place their manuscripts with publishers. “For this, they receive between 10 and 20 percent of everything authors earn from their book,” writes Dr. Anette Huesmann in her blog. Information is also missing for games. You can find more details in our article Retailers, publishers, illustrators, authors: Who earns what from a board game?
What does the SAZ propose for royalty calculations?
According to the SAZ, when calculating royalties based on the net invoice price, only the invoiced amount should be used as the basis. All deductions such as discounts or cash discounts should be clearly defined in contracts. They should also be disclosed transparently. Only then can authors understand how their royalties are calculated.
Regardless of this, the SAZ proposes using net invoice prices (without deductions) as the basis for royalty calculations. The practice of some book publishers to use the recommended retail price (RRP) should also be discussed. As a reminder: the net invoice price is the price at which publishers sell games to retailers. The RRP is the price publishers recommend to retailers as the selling price to customers. Another alternative, according to the SAZ, would be fixed or minimum guaranteed royalties per game sold. However, this would require transparency in the publisher’s price setting as well as automatic and verifiable sliding scale clauses in the event of price increases.
What do game publishers say about royalty calculations?
The Association of Game Publishers is a specialist group within the German Toy Industry Association (DVSI). Around twenty publishers from Germany, Switzerland and Austria are organised within it. Hermann Hutter is the chairman of the specialist group. He says: “Contracts on the basis for calculation and the amount of royalties are always individual agreements between publishers and authors. That’s why we’re surprised by the SAZ’s public blanket condemnation. All the publishers I know have clear and proper licence settlements. If they didn’t, they’d be in hot water.”
He also says it’s difficult to compare the book and games industries. More steps are needed to get a game on the shelf than a book. Book authors write a manuscript, which is then edited, typeset, printed and sold. With games, editors develop prototypes with a lot of effort until they’re market-ready. The work of graphic designers and illustrators, as well as investment in tools for game pieces or other game-related materials, also increases the cost of developing a game. As a result, production costs for games are significantly higher than for books.
“With books, there’s price fixing and thus a fixed retail price. With games, there isn’t. The result: every publisher and every retailer calculates differently,” says Hutter. For this reason, royalties have to be based on the amount publishers actually receive. Only from that can publishers pay royalties. He also says it’s difficult to establish binding cross-publisher rules. “If all publishers in Germany, Austria and Switzerland were to agree on a course of action, it could raise cartel law issues,” says Hutter.