Determining payouts for a new game

I lead a studio of 5 friends plus myself working on an unreleased game in our free time, and we have had no prior discussions regarding pay. Until now, we have essentially been operating under the premise of a Non-Agreement Agreement without actually signing contracts (but I am going to draft one soon). This is nice while a game is in early development, but there will come a time when the game is ready for release and we have to determine payment. This has been weighing on my conscience recently, so I am turning to you all for assistance.

Here are some thoughts of my own.

  1. Divvy up all of the revenue by percent based on time contributed

    • What happens if somebody quits? Do they get royalties?
    • Some might feel that their work is more valuable than another’s, causing tension
  2. Same as #1 but set aside a certain percent for hiring contractors as needed

  3. Pay an equal hourly rate that adjusts to the game’s monthly revenue

    • Avoids the problem of paying somebody who quit
    • Does not account for pre-release work. Do we pay for pre-release work after the fact?
    • Still based on time, so some might feel that their work is more valuable than another’s, causing tension

I would appreciate any feedback on the ideas above as well as your own advice and prior successes/failures. As this is my first time leading a game development team, I don’t know if it is too early or too late to be asking these questions. If that’s the case, let me know too.

EDIT: In reading back my post, it seems to be a major red flag that I haven’t discussed this with my team yet. I will bring it up at our next meeting, but I am still curious to know what has worked for you and what hasn’t.

In theory, #3 would be the model that scales most easily; you’re currently working with 5 motivated developers all working on the game who you can fairly compensate with an hourly rate. Future contractors can be paid if the budget allows for it, and if the game does well you can bump up the rate for future work and give a bonus over worked ours pre-release.

however this would only work if you have the funds to pay these developers in advance. You mentioned the issue that it does not account for pre-release work, which means everyone is sharing the risk of the game being successful. Your role as the lead in this situation doesn’t give you as much financial involvement as being able to pay your developers in advance would.

In this situation, I would argue that if the financial success of the game is going to depend entirely on developers who are working for free right now, thus fully sharing the risk and being in the same position as the studio lead, they should be compensated equally. That means they should receive a revenue split. They carry the risk of the game not doing well and being underpaid, so it should come with the possible rewards as well.

I think this ties in well with the Non-Agreement Agreement too. Because the bunch of you have started the project without there being a clear “You’ll be paid this much”-structure, everyone should and probably will assume that the possible rewards are being harvested by everyone involved. If you were to sweep back in now and suddenly decide that another model is going to be followed, that’s something that should have been part of the ‘agreement’ beforehand.

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You should set a meeting where everyone in the team is present and relay the situation to them, discuss thoughts together and I’m sure you’ll find the perfect solution you’ll all like, as after all you are friends and have all invested your time to bring this game to life.

This would highly depend on what everyone’s goal is with this game, is this something that is only meant to bring in some money for the short term, and then you move on? Do you want this to be a way for your studio to grow capital and be able to expand? Those are some questions you should discuss with everyone.

You’re all partners in this, as again you’ve all invested your time and effort into this project. A very common downfall to a lot of teams is the lack of transparency and communication between one another, about payouts or otherwise, you should all make sure everyone feels they can be heard without judgement and I personally believe that’ll get you through anything.