Two easy ways to succeed on Kickstarter (and two reasons you should look for these kinds of projects)

Over the weekend, Ars Technica put up a quick post on old games getting rebooted through Kickstarter. They talk about how it's fertile ground for rebooting old games. Unfortunately, at least for creative endeavors, revisiting well-trodden ground may be one of the only profitable uses for it. But surprisingly this might be a really good thing for people looking to back Kickstarter projects.

As someone who is mentioned twice (obliquely) in the promotional video for one of the most successful Kickstarter reboots (when at Microsoft I worked on Shadowrun), I have a bit of a sentimental interest in this topic. It would seem that if you want to succeed on Kickstarter, try for one of two things:

Four last things to remember for now about net profits clauses

1. If your publisher is doing deals with related parties, they have to charge what are called "arm's length" rates. A good way to show this is with an example. If your publisher is charging you a marketing fee  is using a marketing firm in the same corporate family, there's a really strong incentive for them to make the fee as high as possible. The "arm's length" rule says that they can only charge you the same fee that a company not in their corporate family would charge. If your publisher is charging fees against your book that you think are totally crazy, look for some industry data to see if you can use this to change their position.

Three common deductions that publishers and studios take, and tips on what to do in response

Here's three of the most popular or egregious deductions from book and film deals:

1. Distribution fees. Although there are always costs involved in shipping product, many times the distribution fee in a contract is determined as a fixed fee or percentage, such as "20% of gross profits". I'll let you decide whether this kind of calculation is based on actual costs of distribution. If it helps to figure this out: often the distribution company is a related party to the publisher. By the way, the same thing often happens with marketing fees: they are calculated as a percentage of profits and aren't usually tied to actual spending.
2. Overhead. Basically this represents salaries and other internal costs to your publisher. Publishers often try to pass through the cost of editors, accounting staff, lawyers, and other employees. Some even want to charge a fee for things like photocopies, long distance phone calls, and office rent. You'll see this as a percentage of your profits, which is a clear signal that it's nothing to do with the work they've actually done on your project.
3. Interest. If your publisher is paying you an advance, then that's money out of their pockets. If you read the advances and royalties post then you may recall that you don't get paid any royalties until your publisher recoups the advances. Some publishers also charge you interest on the advance; most film and TV studios will do this. So if you get a $15,000 advance and 10% royalties with a book whose wholesale price is $10 but 10% interest, then you don't get paid on copy 15,001. It takes another 1,500 units: you get paid at unit 16,501. Same thing for the marketing and distribution charges: some publishers allocate money to a project and then charge a interest against it even though the money isn't spent yet.

If you see these things, try these responses:

Why net profits can mean no profits: learn how to protect your money

Net profits clauses are almost a dirty word these days, but they didn't start that way and they don't have to be. It really comes down to the way they're written.

Taking net profits used to be something only big names got. One of the first people to take a net profits clause in a contract, if not the first one, was Jimmy Stewart in 1950. His version of the net profits clause would have worked similarly to the way these work today: talent and creators agree to take less money in advance but they get additional funds if the project makes money. The thinking is: if the project is a success then everybody wins, and if not then everyone loses less.


But as time went on that last statement became less and less true. Today there are often clear winners and losers in a net profits situation. And the publishers and studios do their best to make sure they're not the losers.

Understanding advances and royalties clauses, and two things to think about when deciding to take them

Getting paid is great, but getting paid over and over is even better. Or is it? Payments over time are a bit more complex, sometimes a lot more, than a flat fee. But at the end of the day they break down into two buckets:

• Royalties
• Advances on the royalties

You might see a contract say that you'll get $1,500 advance on signing against 10% net royalties. Let's use that as an example. Here's what that means:

1. On the day you sign the contract, your publisher/studio/whatever will give you a check for $1,500. You can cash that, it's yours. But...
2. Effectively, you've borrowed money from yourself. That $1,500 will be paid back from your royalties. If your book (for example) wholesales for $10, let's assume there are no deductions (which is a HUGE assumption and I'll come back to that), then you're making $1.50 per unit sold. So you don't get paid until you've sold at least 1,000 units ($1.50 x 1,000 units = $1,500).
3. At unit 1,001, you start getting $1.50 per unit sold.

Four steps in determining whether a flat fee is right, and three things to consider

In a previous post (http://bit.ly/P4CUUb if you missed it) I discussed the issues that might lead people to take flat fee deals. Now it's time to talk about how to calculate flat fees and whether a flat fee structure is right for you. I'm sorry, but there will be math today...

In the book world it's actually pretty easy to figure out whether a flat fee is a good deal:

Show me the money: what you need to know about getting paid

If you're creating valuable content, you may someday want to get paid. And that means you'll need to know something about how payments are structured in entertainment contracts. I know, this could be tedious. But when we get to talking about money, and especially in future posts when I go into net profits clauses, knowing the basics will be really important.

Oversimplifying drastically, there are two basic types of payments:

• Flat fees
• Payments over time (royalties and advances)

First I'll talk about flat fees. Then I'll cover royalties and advances.