2025-04-03
Revenue Sharing Agreement for Game Publishers: Royalty Structure (Service Provider Perspective)
Miky Bayankin
Revenue share is the default “currency” of modern game publishing partnerships—especially for indie titles, live-service games, and platform-driven distribution
Revenue Sharing Agreement for Game Publishers: Royalty Structure (Service Provider Perspective)
Revenue share is the default “currency” of modern game publishing partnerships—especially for indie titles, live-service games, and platform-driven distribution models. But a revenue split agreement game dev teams sign without precision can turn into recurring disputes about deductions, recoupment, refunds, chargebacks, bundles, VAT/GST, and whether a publisher’s spend is being counted fairly.
From the service provider side—game publishers, revenue-sharing platforms, and franchise operators—the goal is twofold:
- Offer a deal that developers trust and understand, so you can scale partnerships.
- Protect your operational reality, including marketing spend, platform fees, refunds, and cross-promotion economics.
This post breaks down how to structure a game publisher royalty agreement that is clear, enforceable, and scalable—without overcomplicating the contract. You’ll also see practical clauses you can adapt into a revenue sharing agreement template game publishers use across multiple titles.
Note: This is educational content, not legal advice. Revenue share terms can be heavily jurisdiction- and platform-dependent.
Why royalty structure is the “engine” of a game publishing contract
A royalty structure isn’t just the percentage split. It’s a system of definitions and rules that answers questions like:
- What is the revenue base? Gross? Net? Adjusted net?
- Which deductions are allowed? Platform fees, taxes, refunds, marketing spend, localization, UA, middleware, influencer fees?
- Is there recoupment? If so, which costs recoup first and at what rate?
- When and how do we pay? Minimum payout thresholds, timing, statements, currency.
- How do we handle bundles, subscriptions, and key sales? Weighted allocation vs actual receipts.
- How does revenue work across territories and storefronts? Steam, Epic, console, mobile, direct, subscription services.
In a standard game publishing contract, most disputes happen because “Net Revenue” isn’t defined with enough specificity. Fixing definitions upfront saves months of friction later.
The core building blocks of a revenue sharing agreement (publisher-side)
1) Define “Products” and “Channels” (avoid hidden scope creep)
Start by defining:
- Game / Product: base game, deluxe editions, DLC, expansions, in-game items, battle pass, soundtrack, art book, etc.
- Platforms: Steam, PlayStation, Xbox, Nintendo, iOS/Android, EGS, GOG, direct web, etc.
- Territories: worldwide or restricted regions.
- Monetization types: premium, F2P IAP, ads, subscription payouts, licensing.
Why it matters: royalty rules can differ by channel (e.g., mobile ad mediation vs Steam refunds vs console chargebacks).
2) Choose the revenue base: Gross vs Net (and what “Net” really means)
Most publisher deals use Net Revenue (sometimes called “Net Receipts”). But “net” must be explicitly defined.
A practical definition (publisher-friendly but defensible)
Gross Revenue (per channel) might include:
- amounts actually received from storefronts, payment processors, distributors, or subscription services
- receipts from DLC/IAP/ads attributable to the game
Then Net Revenue equals Gross Revenue minus specified deductions.
Common allowed deductions in a publisher-oriented structure:
- Platform/store fees (e.g., Steam/console cut, app store fees)
- Payment processing fees (for direct sales)
- Refunds, chargebacks, disputed payments
- Taxes collected and remitted (VAT/GST/sales tax)
- Returns and fraud-related losses
- Currency conversion costs and bank fees
- Third-party costs required to fulfill (e.g., age ratings, compliance testing, mandatory submissions)
Key drafting tip: Avoid vague deductions like “all costs” or “reasonable fees.” List them and define any caps or approval thresholds for discretionary spending.
3) Decide whether marketing and publisher spend is deducted (recoupment)
This is the biggest flashpoint in a revenue split agreement game dev teams sign: Are marketing and publishing costs recouped before the royalty split?
There are three common models:
Model 1: Simple net split (no recoup)
- Net Revenue is calculated after platform fees, taxes, refunds.
- Then split immediately (e.g., 70/30).
- Publisher covers marketing from its share only.
Pros: developer-friendly, simple, good for low-touch publishing. Cons: publisher takes higher risk and may under-invest in marketing.
Model 2: Recoupable costs first, then split
- Publisher spends on UA, PR, trailers, influencer marketing, localization, porting, QA, ratings, etc.
- Those costs are recouped from Net Revenue before profit splits.
Pros: aligns incentives for publisher to invest. Cons: developer worries about overspend or “forever recoup.”
Model 3: Hybrid recoup (caps + shared recoup)
- Certain costs are recoupable up to a cap, or require developer approval above a threshold.
- Or recoup is shared (e.g., 50% of Net Revenue goes to recoup pool until recouped, remaining 50% split as royalties).
Pros: balances trust and flexibility. Cons: more complex to administer.
Publisher best practice: If you want recoupment, define:
- what qualifies as “Recoupable Costs”
- approval thresholds (e.g., dev approval required above $X)
- documentation requirements
- timing (when costs are booked)
- whether internal overhead is excluded (often should be, unless clearly defined)
- whether interest applies (often a negotiation point; many indie deals avoid interest)
4) Royalty split structures publishers actually use
Here are royalty structures common in modern game publisher royalty agreement negotiations:
A) Flat split
Example: 60% developer / 40% publisher of Net Revenue.
Use when: you want simplicity and easy onboarding across many deals.
B) Tiered royalties (performance-based)
Example:
- 70/30 until $500k Net Revenue
- 75/25 after $500k
- 80/20 after $2M
Use when: you want upside alignment and a “fairness story” for indies.
C) Recoup-first + post-recoup split
Example:
- 100% of Net Revenue to publisher until recoup
- then 70/30 going forward
Use when: publisher is funding significant development and marketing.
D) Platform/channel-specific split
Example:
- Console split differs from PC
- Mobile ad revenue treated differently than IAP
- Subscription pool allocated under a special rule
Use when: your business model varies by channel economics.
5) Handle subscriptions, bundles, and “non-linear” revenue carefully
If you distribute through Game Pass/PS Plus/Apple Arcade, or do deep bundles, you’ll face attribution issues.
Key questions your game publishing contract should answer:
- If a subscription pays a lump sum across many titles, how do you allocate revenue to this game?
- based on hours played?
- downloads?
- a platform-provided allocation statement?
- a reasonable method determined in good faith?
- If a bundle sells multiple games, how is the revenue allocated?
- list-price weighting?
- platform allocation?
- actual receipts by SKU?
Best practice: define an Allocation Method and attach examples, or require using the platform’s reporting where available.
6) Timing: reporting, payments, and reconciliation
A clean royalty clause should include:
- Statement frequency: monthly or quarterly (quarterly is common because platforms report with delay)
- Payment deadline: e.g., within 30–45 days after the statement period
- Minimum payout threshold: e.g., no payment until $100 / $500 accumulated (reduces admin costs)
- Currency: USD/EUR, and conversion method (e.g., bank spot rate on payment date)
- Payment method: ACH/wire; who bears fees?
Publisher-side tip: include a buffer for platform reporting delays. Many storefronts finalize revenue after refunds settle.
7) Audit rights: make them fair and operationally manageable
Developers will ask for audit rights; reasonable audit provisions can build trust without exposing your entire business.
Consider:
- audit once per year with prior written notice
- limited to records relevant to the game
- performed by an independent auditor
- confidentiality requirements
- cost shifting: if discrepancy exceeds a threshold (e.g., 5%), publisher pays audit cost; otherwise developer pays
8) IP, brand, and franchise considerations (franchise & partnership lens)
Because you’re operating in Franchise & Partnership, revenue share is often tied to brand standards and cross-title synergy.
Make sure the agreement covers:
- IP ownership (who owns the game, code, assets, sequel rights)
- license to publish (exclusive vs non-exclusive, territory, term)
- franchise options (right of first negotiation on sequels/DLC)
- brand guidelines (logo use, store page, tone, PR approvals)
- community channels (Discord ownership, social accounts, mailing lists)
Revenue share is easier to enforce when the publisher has the practical rights to distribute and market.
A royalty structure “template” outline (what to include)
If you’re building a reusable revenue sharing agreement template game publishers can deploy repeatedly, your royalty section should include:
- Definitions
- Gross Revenue
- Net Revenue (with itemized deductions)
- Recoupable Costs (if any)
- Royalty Rate / Revenue Share
- Platforms / Channels
- Revenue calculation examples
- A simple table for a Steam sale
- A mobile IAP + ad month
- A subscription allocation example
- Recoupment mechanics
- approval thresholds
- documentation standards
- Reporting & payment
- frequency, deadlines, thresholds
- Audit
- Dispute resolution
- short window to dispute statements (e.g., 12 months)
- Special cases
- refunds/chargebacks timing
- bundle allocation
- keys and reseller programs
- promotional giveaways
Including examples is one of the highest-ROI drafting choices you can make—everyone reads examples.
Example royalty clause concepts (not legal language)
Below are concept-level snippets you can adapt with counsel:
Net Revenue (concept)
“Net Revenue means Gross Revenue actually received by Publisher from exploitation of the Game, less: (i) platform commissions and fees; (ii) refunds, chargebacks, and fraud losses; (iii) sales/VAT/GST and similar transaction taxes collected and remitted; (iv) payment processing and currency conversion fees; and (v) third-party costs required for distribution and compliance.”
Recoupable Costs (concept)
“Recoupable Costs include third-party, out-of-pocket marketing and distribution expenses directly attributable to the Game (e.g., UA spend, trailer vendors, localization vendors, PR agencies), provided that any single expense above $X requires Developer’s written approval.”
Royalty split (concept)
“After deduction of Recoupable Costs (if any) from Net Revenue, the remaining Net Revenue shall be split: Developer __% / Publisher __%.”
Reporting & payment (concept)
“Statements issued quarterly within 45 days after quarter end; payments due within 15 days thereafter, subject to a $___ minimum payout threshold.”
Common pitfalls (and how publishers can avoid them)
Pitfall 1: “Net revenue” defined too broadly
If you deduct broad “overhead,” “internal labor,” or undefined “administrative costs,” developers will assume the worst. If you must include internal costs, define them precisely and consider caps.
Pitfall 2: No rule for discounts, bundles, or keys
Steam keys, Humble bundles, deep discounting, and influencer keys can distort revenue. Your contract should specify whether free keys are permitted and how heavily discounted sales are treated.
Pitfall 3: Recoupment without governance
Recoupment needs guardrails: approval thresholds, spend categories, and visibility. Otherwise, you’ll get slowdowns, mistrust, and painful renegotiations.
Pitfall 4: No survival clause for late platform adjustments
Refunds can hit after month-end. Create a mechanism for negative adjustments in later statements.
Pitfall 5: No dispute window
Set a timeframe for disputing statements (e.g., 12 months). Otherwise, you can face open-ended liability.
Designing a “developer-friendly” publisher royalty agreement without sacrificing your needs
If you want more developers to sign quickly (and reduce legal back-and-forth), bake in trust signals:
- Transparent definitions with examples
- Reasonable audit rights
- Spend approvals above thresholds
- Tiered royalties that reward success
- Clear payment timing and statement formats
- Mutual obligations (publisher performance obligations and dev delivery obligations)
In competitive indie publishing, clarity is often a better differentiator than squeezing a few extra percentage points.
FAQ-style learning: other questions readers ask
- What’s a typical revenue split between publisher and indie developer?
- Should marketing spend be recoupable in a revenue split agreement game dev teams sign?
- How do refunds and chargebacks affect royalties on Steam, console, and mobile?
- What’s the best way to define Net Revenue in a game publishing contract?
- How are subscription deals (Game Pass/PS Plus/Apple Arcade) handled in a game publisher royalty agreement?
- Can a publisher deduct internal labor or overhead from Net Revenue?
- How do you structure tiered royalties and milestone-based improvements?
- What audit rights are reasonable for a developer—and manageable for a publisher?
- How do you handle DLC, IAP, and ad revenue in the same royalty structure?
- What happens if the game is delisted or the publisher terminates—do royalties still get paid?
- How should cross-promotions, bundles, and key reseller programs be treated in revenue reporting?
- What’s the difference between an exclusive publishing license and a distribution agreement?
Build your royalty structure faster (and more consistently)
If you manage multiple partnerships, you already know the operational pain of rewriting definitions, revenue waterfalls, and reporting clauses for every title. A standardized, configurable template can reduce negotiation time while keeping your terms consistent and defensible. To generate a tailored revenue sharing agreement template game publishers can adapt to different channels, recoupment rules, and tiered royalties, you can use Contractable, an AI-powered contract generator at https://www.contractable.ai.