Revenue Spreadsheet

edited in General
Hey all,

Last night I decided to play around with some numbers to see how much devs make after all deductions. There was some whiskey involved in the making of this, and I'd love some fresh eyes to spot any mistakes I've made. Here is the gist of it.

The 4 key inputs are:
- Est. Units Sold (This assumes you've done your market research and have an idea of how many units you'll sell)
- Avg. Unit Price
- Investment Amount (this assumes you took financial backing)
- Target sales without pub (This is solely for calculating how many copies you need to sell if you bring on a publisher, before you break even if you didnt have one)

The Costs fields can also be modified depending on your deal.

This doc assumes the following:
- VAT is paid first
- The platform them takes their cut (is this the correct order?)
- The publisher takes their cut

The investment part is calculated on the following terms:
- The investor will receive 70% of the developer cut until the full investment amount has been recouped
- Once the investment is recouped, the split swaps to a 70/30 split (on the developer amount, post publisher cut)

This may not be the case for everyone, but is the case in my current situation.

The outputs are:
- Output (Standard output at each deduction phase)
- Investment output (Shows how much you make with/without the investor)
- Publisher output (Shows the number of copies you need to sell with a publisher before they become valuable)

I randomly use the term +/-EV every now and then. That means Expected Value. -EV means you losing money from the deal, +EV means you make money.

I am fairly certain some of my assumptions are wrong, so I'd love feedback. In the end though, I hope some people find it helpful. It was a real eye-opener for me seeing that I would only make ~$2.30 per unit sold if we had a $15 price tag and I had a 50/50 split with one other person.

The Spreadsheet: https://1drv.ms/x/s!AqOPmfAaj-qqlcZZmMjRadBOc4RpuQ
Thanked by 2Tuism Krummelz

Comments

  • One other thing worth considering... for a game that's available in a place like Steam, after a couple years a significant number of the sales made will be at significant discounts.

    When a game is 33% off or 50% off for the first time there will be massive spikes in purchases often exceeding the original launch. And on a platform like Steam it is possible to have regular discounts, each time seeing a moderate spike in sales (compared to the baseline).

    I'm curious about what you're working on? The investment amount looks fairly low so I imagine you're working by yourself and keeping costs down.It looks like you're hoping for 14,000 or so sales for everyone to walk away happy, which might be a lot or a little depending on the game.
  • One other thing worth considering... for a game that's available in a place like Steam, after a couple years a significant number of the sales made will be at significant discounts.
    This is kinda why I used Avg. Unit Price instead of Unit Price.
    'm curious about what you're working on? The investment amount looks fairly low so I imagine you're working by yourself and keeping costs down
    Basically, yes, keeping costs + scope down, for a few reasons. I'd love to go through what I (we, one other dev) are working on. Give me a shout if you wanna have an early look and have a chat.
  • edited
    CiNiMoD said:
    This is kinda why I used Avg. Unit Price instead of Unit Price.
    Oh! Yeah, I thought 12 dollars was an odd price :)

    I presume you're working from Durban? (So there's no chance of inviting you round to one of our informal Cape Town game design gatherings to do a little feedback session)
  • @EvanGreenwood Ha, Im actually in the UK :P A little further to travel.
    Thanked by 1EvanGreenwood

  • I presume you're working from Durban? (So there's no chance of inviting you round to one of our informal Cape Town game design gatherings to do a little feedback session)
    I'm in Durban working with Dom. Unfortunately barely ever come to CPT
    Thanked by 1EvanGreenwood
  • @CiNiMoD It's definitely a good idea to do these type of calculations to get an idea of how much money you really can make. @SUGBOERIE and I did the same thing making Semblance, and it helps you break a lot of assumptions!

    Riffing off Evan's input, a bunch of the publisher sale projections I've seen usually calculate Avg. Unit Price at about 63% of the Unit price to offset the discounts. So for Semblance, the sale price is $9.99, but all sales projections were at $6.28 for it's lifetime projections.

    For your VAT calculation, I see that it's right at the top? Is that a UK thing? I don't really understand VAT in this context apart from knowing that you can get a waiver from US taxes. Could you explain it a bit? Particularly why it's a cut taken right off the top?

    Also, I see that the investor and publisher are separate entities in this case? One missing thing I see perhaps is that you don't calculate for the publisher recouping marketing costs (standard is 100% recoup). But I'm not sure if I've read the sheet wrong, because I see there is a recoup calculation for the investor - just not the publisher.
    Thanked by 1CiNiMoD
  • @Bensonance from what I understood from the contract sent through from our publisher, it says they will be responsible for the VAT payment. They will then take their cut and pay us, which really sucks, because that mean I then need to pay VAT on that amount that they pay me. I'm not entirely sure if this is correct, but from my understanding, I think it is. Do you guys have a different experience? It would make a world of difference if that was not the case.

    As for the 63% as avg. unit price. Thats awesome to know. Ill update my spreadsheet :)
  • You won't be paying VAT on your income from the publisher as it's not a vatable transaction (the contract is more akin to royalty payments than a services agreement)
  • You won't be paying VAT on your income from the publisher as it's not a vatable transaction (the contract is more akin to royalty payments than a services agreement)
    From what I understand, Steam would pay the publisher who would then have to pay VAT on that. If thats not the case,
    that would be magical. Is that not how it works?
  • Ok lets break it down.

    (Remember the VAT is 15% of selling price. so gross selling price would be sellprice x 1.15)

    Lets assume, the customer who buys the game is in SA, your publisher is in the UK and you the Dev Studio are in SA.

    Your game sells for $15. Valve collects the $15 from the customer. Because of Valve's agreement with SARS, the 15% VAT is inclusive of that price. Valve collects the VAT on behalf of SARS and will pay it out to them (and the VAT amount in this instance is $1.96.

    This leaves $13,04. As per the distribution agreement with Valve they are entitled to 30% of this value (so $3,91). This leaves $9,13 to be split between you and your publisher (assuming you have one), in your publishing contract this $9.13 would usually be defined as the "Gross Revenue" or the amount actually received by the publisher.

    Now the publisher would not have to pay VAT to their tax authority on this amount, as, unless their country is particularly anal about it, this type of transaction isn't seen as vatable because it is the distribution of cash, not goods or services, and VAT was already paid for the sale of the good/service when the customer bought it. The publisher is likely to have built in some recoupment or earmarked certain expenses that it can deduct from the Gross Revenue, this will be listed in your publishing agreement. What is left after these deductions are made is the Net Revenue. This will be split then between you and the publisher . Lets go for the standard and say it is 70% to you and 30% to the publisher. So this means that you would receive $6,39 from them. As before you do not need to collect VAT on this amount as it is not a vatable transaction. You may end up paying Company or Income tax on this amount though if your company turns a profit.

    Does that make it a bit clearer?

    Obvs this is all subject to various tax laws and could be different between country to country
  • @LexAquillia Aha, I follow. That is kinda how Im working it out at the moment, except that Im taking off the platform cut before the VAT cut. Ill swap those around. Are you aware if the VAT deduction is factored into the 63% avg. unit price @Bensonance mentioned above?
  • @CiNiMoD I don't think it is, no - that 63% is the average price the game sells at, and from that amount Steam + VAT cuts are taken.

    In our publisher contract, VAT is only mentioned once, at 6%, and it's not clear where that comes out really - that's why I was curious.
    Thanked by 1CiNiMoD
  • This is a great conversation, and really belongs in a sticky list of "stuff you should know about the business end of gamedev". Thanks all.
    Thanked by 3roguecode CiNiMoD Tuism
  • CiNiMoD said:
    @LexAquillia Aha, I follow. That is kinda how Im working it out at the moment, except that Im taking off the platform cut before the VAT cut. Ill swap those around. Are you aware if the VAT deduction is factored into the 63% avg. unit price @Bensonance mentioned above?
    Avg unit price is the selling price, so VAT would be deducted from that first to get your the selling price. Remember VAT varies from country to country (5% to 25%). Steam has a table that shows what the various VAT rates are: for different countries and whether the VAT will be inclusive in your selling price or not. https://partner.steamgames.com/doc/finance/taxfaq

    Thanked by 1CiNiMoD
  • @LexAquillia Thanks! That's super helpful. I didn't know that existed
  • No worries. Remember the VAT rate is determined by the country of the person buying the game, not you the seller :)
    Thanked by 1CiNiMoD
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