Casually Hardcore devlog

Compensating artists + developers

January 6th, 2008

In a startup, one can not always afford to pay for the best artists or developers but if one can find any of these artists/developers willing to take less immediate salary for company stock / royalties / profit-sharing then one should do it.

But what is the best type of deferred compensation? The first answer would be STOCKS!

However, that might be the bad answer as the only way for the artist/developer to cash out is when the game studio is sold and that takes years and by that time the initial stock might be diluted by later rounds of financing (publishers or angel investors or VCs). Dilution is a common problem with cash hungry companies and that is why early investors get burned.

Also, the “acquiring” company can purchase only the assets of the game studio without purchasing the company itself (barely rewarding the shareholders). This happened once to myself when Documentum bought The Bulldog Group (a media asset management company - the only non-3D position I’ve held). The Bulldog Group shares were worthless afterwards because Documentum never bought the company only the assets (IP + equipment + etc.). I assumed the money from the purchase was used to pay off Bulldog Group debt.

Is percentage of revenue the answer? What about a percentage of profits?

Since profits are hard to come by in game development and profit calculations nebulous (many things can be written off as “costs” which will lower “profits”) - it’s not the best option for the artist/developer. However, for the game studio, this provides some cost certainty as no money is paid to the artist/developer until the game breaks even.

In the interest of both parties, revenue sharing is best. Revenue as defined as game sales money from the publisher or distributor and NOT retail revenue which is beyond the control of the studio. Using wholesale revenue is NOT a good idea as the game studio has limited control of wholesale pricing and returns. All the game studio has control of is the revenue streaming coming in from the publisher or distributor…

Entry Filed under: Game Development