December 01

Q: Jay, We're a small developer close to a publishing deal on a couple of titles. The publisher wants to "cross-collateralize." What exactly does that mean and should we do it?

A: No. Cross collateralizing stands to hurt you more than it would help. What this term means is that all the titles would be grouped together for the purposes of calculating royalties. For example, let's say you have 3 titles you are selling a publisher and they can guarantee 100,000 units on each one. Of these games, one sells 100,000 units, one sells 50,000 units and one sells 140,000 units.  Without cross collateralization you would see royalties on the title that sold 140,000. If these games were cross collateralized you would see no revenue at all. The total guarantee would have been 300,000 units and the games have only sold 290,000. This clause protects publishers against poor selling games by using a better game as "collateral". Don't do this. Set a guarantee and royalty rate for each product.  The only time you should even consider this clause is if you are talking about several different sku's of the same game.  I hope that helps.

Jay

Q: Jay, I own a small animation and game development studio. I recently read a children's book that I think would make a great game for kids. How do I go about licensing the book? Any idea on costs?

A: The costs can vary dramatically.  It's much cheaper if you get it before it gets really popular though. The easiest thing to do is look in the front of the book and find the publisher. Call the publisher and get the agent's name and contact info for that author. The author's agent is who you need to speak to. The publisher will rarely hold the rights.

Jay

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