Let’s Make a Deal!

by Richard C. Levy and Ronald O. Weingartner
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So, you’ve invented a game and want to license it to a manufacturer. Well, no one understands the art of negotiating licensing agreements better than Richard C. Levy and Ronald O. Weingartner, whose critically acclaimed Toy and Game Inventor’s Handbook was released in July of ’03 by Penguin-Putnam (ISBN 1-59257-062-3).

The authors say that negotiating contracts is a skill that can be learned. People tend to make it complex. It is not.

Key Deal Points: Two key deal points in a game license are the advance and royalty. A fair advance is typically not less than a third of what the manufacturer estimates the inventor’s first year royalties will be.

Royalties are all over the game board, so to speak. A standard inventor royalty is 5% of the net wholesale price. But a company will pay more under special circumstances and/or to certain inventors. It will pay less than 5% if the game requires a third party license, e.g. the name of an entertainment property. Note: Chapter 9 includes a sample licensing agreement annotated by three successful agents.

Here are some general guidelines found in Chapter 9 of their book. The chapter is titled Molding the Deal: The gets and Gives.

• Assume everything is negotiable. If something is not, you have nothing to lose by asking.

• Never fear to negotiate. Never negotiate out of fear.

• Know in advance how you will respond to counter-offers. Have alternatives. Know your bottom line. In short, have a strategy for compromise.

• Negotiation is mostly about listening. You must understand where it is the other side is coming from. Once you do, keep listening.

Continued

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