In this episode, Jamey Stegmaier talks about how to make money creating games.
We talk about how to monetize creativity and the many roadblocks people run into. Jamey unpacks what he would do if he had to start over and build a publishing company from scratch. He opens up about his biggest financial mistake. We talk about why people should design games. And a whole lot more.
3 comments on “How to Make Money Designing Games with Jamey Stegmaier”
Comments are closed.
Hello Gabe,
I wanted to make a brief comment about why 6% royalty is good. Let’s assume that it’s 6% off of Retail and as you mention having a $50 USD game. Well here is a bit the breakdown how that 94% is spent:
1> 50% goes to the retailer to support their brick-and-mortar stores or their online website presence plus their employees.
2> 10% goes to the distributor to pay for things like drop-shipping to store, warehousing and logistics (and personnel) required to run larger quantities of product on-hand for the entire USA or a regional area.
3> And so there is 40% left-over. Now we have not covered the cost of manufacturing or the logistics of freight to get product from China to the USA or Canada. That’s another 20% which handles the cost of making the game.
4> There is 20% left-over as profit to the Publisher less the cost of paying the Game Designer his/her royalty.
Figure-wise things go like this:
$50 x 50% = $25 USD
$50 x 10% (or 60% of MSRP) = $5 USD
Cost to make goods x 5 = MSRP.
$50 x 20% = $10 USD (Manufacturing + landed cost)
$10 USD Profit from each game sold (another 20%).
If you get 6% = $3 USD and the Publisher make $7 USD (or 14%).
Total it all up and you get: $25 + $5 + $10 + $3 + $7 = $50 USD!
So the 94% is fully explained in this brief but to-the-point explanation. Don’t worry Publisher are NOT ripping-off Designers. It because people are UNAWARE of the break-downs and percentages required by each step of the process to SELL game in-store or online.
Even if you SELL yourself… You will realize that you will have to respect the percentages (%) as they are the margins of each step in the sales chain. By not selling to a Distributor you save 10% or $5 USD. But in return the Distributor can get 10x the amount of sales than you can make trying to sell direct to stores or online shops. So unless you are like Jamey with a reputable BRAND and BRAND recognition, most stores will only order 1 or 2 copies of a game due to the drop-shipping type of situation with their Distributor.
Anyhow … I just wanted to share this with YOU (Gabe). As it can clarify that you WON’T ever get control of the 94%. Most of the monies are already set in stone and they are normal markups for the different tiers to the sales ladder.
Cheers and congrats on such a great Podcast!
Hello again,
I just wanted to add … That sometimes Designers work with Illustrators and artists on commission… Lot of people in the business say that it is HARD to get a specific Illustrator to do art on a product because as you can see by the slim margins left over (about 14%) somewhere in that 14% lies the cost to making the artwork for the game. Now many Publishers have on-staff design members to do Art and Graphic Design like card templates, rulebook layouts, logo design, etc. You get what I mean. So this is a reason most Publishers will do the art for a product “themselves”. It’s a question of margins especially when they already have talent that may work on other products in their catalog too.
As per James Mathe (RIP) … He said that the average budget for Art of a $50 USD game is about $3,500 USD. So base that on 1,000 units sold @ $50 USD we get $50,000 USD total.
If you compute that you’ll get 7%… With 14% this means that artwork “accounts” for 50% of the profit that is being made… Now you see why have on-staff design members are very relevant! You can’t expect everyone to commission art knowing that EVEN IF you stay within the budget at 7% … That’s HALF of the profit and most likely Publishers would NOT explore that avenue unless there are FAVORABLE conditions (which vary from one product to another and require additional creative thinking and business skills to appeal and make worthy contractual-based art).
Again fantastic Podcast … You’re a natural in the Video/Podcast production realm. I know it take a lot of work putting all of that together too… So Kudos to you!
I was so psyched to see the new episode posted! Looking forward to more BGDL podcast episodes.
Gabe, you mentioned Plaid Hat starting without any crowdfunding. If memory serves correctly I think part of how they did that might’ve been that they had some goodwill from being big members/creators in the HeroScape community before they started their own company. So they had something going for them already without crowdfunding. Even then, I’m sure it was tough.