WHY WE DON'T SUB-LICENSE
Steve Cole reports:
We got an Email today (we get one like it at least once a month) wanting us to license somebody to do a Prime Directive book with our background and another game system. We declined the opportunity, which produced some confusion (and, due to that confusion, some frustration that was headed for anger). We declined the deal for several reasons.
The big one is that our contract with Paramount doesn't allow us to sub-license other companies to do Star Fleet Universe products and pay us royalties. There is a way around that (doing it as a joint venture), but this option is only practical for the kind of project we cannot do for ourselves. (That might be a project so expensive we couldn't afford it, such as producing $50,000 worth of plastic clicky-base starships in China. Or it might apply to some kind of project we cannot do because we don't know how, say, a computer game. Such a project would have to produce a lot of money to be worth the hassles of the special contracts required; the royalties we would be paid on an RPG book would not pay the cost.) In the case of an RPG book, we have Jean Sexton to edit them, we have two writers asking to do that particular system, and we have the Kyoceras to print them. We can do RPG books (that somebody else writes) just fine. No need to license somebody to do them. Well, there theoretically could be a reason to license somebody to do a book we could do ourselves (say, more book available to be done than we can do ourselves), but there's a reason that situation cannot (by definition) actually arise. I'll get there in a minute.
The reason people want us to license them to do products is that the publisher of a product makes more money than the licensor or the designer. It's just the way the game market works. If you do a $25 RPG book that sells 10,000 copies to the wholesales (at a 60% discount, meaning $100,000 total sales), the writer might make $4,000-$7,000, the game system licensor might make $5,000, and the publisher might make $20,000 (profit after paying expenses, including licensing fees to a big motion picture corporation). So you can see why a writer would rather make $24,000 than $4,000. While every dollar is earned by hard work, the publisher has the opportunity to do the work and make the profit. (Think of being the publisher as creating a profitable job for yourself, not as winning the lottery. Whoever makes that $20,000 is going to work hard to get it.)
Now, the writer's idea is that we should be happier to make $5,000 in royalties from him than to make nothing if the book isn't done at all. True, but in this case, the book can and will be done, without licensing it to somebody else. Why would we hand over the $20,000 part of the deal? We'd be crazy to do that, and some writer will come along willing to make the $4,000. (Two writers are competing for this deal even now.) We have no moral obligation to give away money -- money that we need to make to keep the company healthy.
We managed to confuse (and through confusion, induce frustration) with the writer by noting that if he wanted to write the book for us, we'd consider that deal, but that two other writers were already bidding on the project (perhaps he would be good enough to beat their audition chapters?) and that due to the massive amount of editing a new system RPG core rulebook requires, we only expect to do two new core rulebooks during 2009, and that we have about six game systems to pick from. (We also noted that we were guessing about the amount of work a new core book would take based on one very bad experience and that it might turn out we could do the books faster, but we wouldn't know for six months or a year.) His frustrated response was that if we could only produce two of the six available new systems during 2009, would we not make more money by doing those two AND licensing him to do a third one? We explained that, no, we would not make more money. We would in fact make less money.
The reason is that we could not risk our name and brand by allowing him to publish a book we had not fully checked. It would take exactly the same amount of work (and the use of the very limited and valuable number of Steve Cole Hours and Jean Sexton Hours that the company has) to edit-check a book for him to print under license as it would for us to edit-check a book we were going to print ourselves. Editing and checking HIS book would REDUCE the number of books WE published, so it would not be "two books we did and one book he did under license" but "one book we did and one book he did under license." That would mean far LESS money for us to do the deal with him than it would for us to pass on the deal.
We got an Email today (we get one like it at least once a month) wanting us to license somebody to do a Prime Directive book with our background and another game system. We declined the opportunity, which produced some confusion (and, due to that confusion, some frustration that was headed for anger). We declined the deal for several reasons.
The big one is that our contract with Paramount doesn't allow us to sub-license other companies to do Star Fleet Universe products and pay us royalties. There is a way around that (doing it as a joint venture), but this option is only practical for the kind of project we cannot do for ourselves. (That might be a project so expensive we couldn't afford it, such as producing $50,000 worth of plastic clicky-base starships in China. Or it might apply to some kind of project we cannot do because we don't know how, say, a computer game. Such a project would have to produce a lot of money to be worth the hassles of the special contracts required; the royalties we would be paid on an RPG book would not pay the cost.) In the case of an RPG book, we have Jean Sexton to edit them, we have two writers asking to do that particular system, and we have the Kyoceras to print them. We can do RPG books (that somebody else writes) just fine. No need to license somebody to do them. Well, there theoretically could be a reason to license somebody to do a book we could do ourselves (say, more book available to be done than we can do ourselves), but there's a reason that situation cannot (by definition) actually arise. I'll get there in a minute.
The reason people want us to license them to do products is that the publisher of a product makes more money than the licensor or the designer. It's just the way the game market works. If you do a $25 RPG book that sells 10,000 copies to the wholesales (at a 60% discount, meaning $100,000 total sales), the writer might make $4,000-$7,000, the game system licensor might make $5,000, and the publisher might make $20,000 (profit after paying expenses, including licensing fees to a big motion picture corporation). So you can see why a writer would rather make $24,000 than $4,000. While every dollar is earned by hard work, the publisher has the opportunity to do the work and make the profit. (Think of being the publisher as creating a profitable job for yourself, not as winning the lottery. Whoever makes that $20,000 is going to work hard to get it.)
Now, the writer's idea is that we should be happier to make $5,000 in royalties from him than to make nothing if the book isn't done at all. True, but in this case, the book can and will be done, without licensing it to somebody else. Why would we hand over the $20,000 part of the deal? We'd be crazy to do that, and some writer will come along willing to make the $4,000. (Two writers are competing for this deal even now.) We have no moral obligation to give away money -- money that we need to make to keep the company healthy.
We managed to confuse (and through confusion, induce frustration) with the writer by noting that if he wanted to write the book for us, we'd consider that deal, but that two other writers were already bidding on the project (perhaps he would be good enough to beat their audition chapters?) and that due to the massive amount of editing a new system RPG core rulebook requires, we only expect to do two new core rulebooks during 2009, and that we have about six game systems to pick from. (We also noted that we were guessing about the amount of work a new core book would take based on one very bad experience and that it might turn out we could do the books faster, but we wouldn't know for six months or a year.) His frustrated response was that if we could only produce two of the six available new systems during 2009, would we not make more money by doing those two AND licensing him to do a third one? We explained that, no, we would not make more money. We would in fact make less money.
The reason is that we could not risk our name and brand by allowing him to publish a book we had not fully checked. It would take exactly the same amount of work (and the use of the very limited and valuable number of Steve Cole Hours and Jean Sexton Hours that the company has) to edit-check a book for him to print under license as it would for us to edit-check a book we were going to print ourselves. Editing and checking HIS book would REDUCE the number of books WE published, so it would not be "two books we did and one book he did under license" but "one book we did and one book he did under license." That would mean far LESS money for us to do the deal with him than it would for us to pass on the deal.
posted by Federation Commander at 11:27 AM
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