The risks of revenue sharing

What is Revenue Sharing

Revenue Sharing (or "Revsharing" for short), is the act of splitting (sharing) revenue that the project collects between all active party members (artist, writers, programmers, composers, etc). This is something many new developers tend to default to when starting an unfunded project because it seems the most fair. Unfortunately, revenue sharing is generally not a safe investment, which is what this article will cover.

Why Revenue Sharing Is Risky: Team Leader

If, as a team leader, you are looking towards revshare, there is an extremely high chance that you are promoting a commercial project. There is also a rather high chance you do not have the funding to pay for an artist/writer/composer/programmer outright. So, many default to what seems like the best solution — revenue sharing! When your game launches and you begin making a profit, you can finally start paying back your team members for their hard work. Makes sense... in theory, at least.

Money Isn't Guaranteed

On paper, this could be a great idea! If your project is a hit, everyone has the chance to go home with a large payday. But... that's the rub. You're banking on making a lot of money. More likely than not, the probabilities of your project becoming large enough for revenue sharing to cover all the assets you commissioned is extremely low — especially if this is your first project. It is likely that the project lead will not make back even the time that they invested into the project, let alone their teammates.

Paying Your Teammates

You will need a contract with every teammate about the terms of the revshare agreement. How often will you send money to them? How long will the revshare agreement last for? What payment method will be used to send the money? What share will each person get? How will the shares be effected if/when people leave the team and new people join? How will you maintain financial transparency with the team about the game's earnings? These are all questions that need to have answers before starting work on the game.

The vast majority of platforms (Steam, for example) pay out twice a month — on the first day as well as the last. This raises another much tougher issue, namely... taxes. As the project lead, you will have to keep reports on how you pay out to each of them (with detail, especially if they reside in a country you do not) for taxation purposes. Depending on your local laws, you may even have to officially register yourself with a business license.

Conflicts of Interest

Unlike with a volunteer project or a project where you as project lead commission assets, revenue sharing implies the idea of a pretty general contract. They, as contractors, do the work, and you pay them after the release. However, if there becomes an issue with one party member where they wishes to leave the project or are forcibly removed from the project, rights regarding their assets and payments to them can be tricky, as no payment was exchanged. Specific contracts akin to the ones used by comic book artists and the sorts can help to mitigate this issue, but there is a good chance that this still leads to issues down the line which can jeopardize the project.

Retaining Team Members

After recruiting people, there is only so long that they will remain interested in your project without being paid. If the production schedule drags out over several months (or even years), it is likely that team members may drop or ghost the project over time. This will result in even more production delays when you have to recruit new people who can either match the existing game style or potentially redo assets from scratch.

Why Revenue Sharing is Risky: Team Member

Money Isn't Guaranteed

You will need a contract stating what the terms of the revshare agreement are before starting any work. If a team lead refuses to provide a contract and define the revshare terms, it is likely that they do not intend to honor that claim if the game ever makes money.

Just as how funds weren't guaranteed to be paid out at the end for the team lead, the same goes for the team members. Unfortunately, there is no guarantee that a project will ever be completed. While the team members may have put 40 hours a week into this project as if it were a full time job, if the development ends for any reason there will never be any payment. From the risks of a team lead refusing to pay the developers at the end due to lack of contract or simply the project falling through, it is a giant risk of time and energy for developers to take without any guarantee of reward.

Passion Problems

As much as the team lead and writer may adore the project, and even if everyone involved starts with the same love, game development is a lot of work and can take up extreme amounts of free time. That same passion is rarely shared equally by all members of the team (even among close friends) and without a financial incentive, teams tend to fizzle out — especially without a clear and defined time frame for the project. If something feels never-ending and has no defined end, teammates tend to get disheartened.

Alternatives

Let's go over some alternatives to revsharing.

• The easiest, #1 guaranteed way to get people to work on a commercial project is to hire and pay them. Of course, this may not be an option available for everyone, but it is hands down the simplest and easiest way to ensure fairness.
• Kickstarter! This is a lot less guaranteed but you can set your goal at a certain dollar amount and use that to fund each asset of your project! (See back to bullet point 1). Initial demos and assets will likely have to be funded out-of-pocket, however.
• If you're unable to get funding to pay people but still want to make a game and express yourself creatively, the best option is to recruit volunteers for a non-commercial game for a game jam. Game jams run for short periods of time and participants know not to expect payment in exchange for making a free game. Due to the short timeframe and explicit goal, developers will volunteer for game jam projects like this for many reasons: For fun, practice, expanding their portfolio, passion, and more! This is the BEST way to get started and build a portfolio of works and is Devtalk-approved!
• More alternatives and methods to fund a game are available on the budgeting article.