I just wanted to get everyones thoughts on the best method of deciding payment for people who collaborate on a project online. So far I can think of two methods of payment: 1) The person who sets up the project agrees to a payment rate when each person signs up to the project (like a regular job). 2) Each person gets a percentage of the profit of the title once it is released. Ideally I'd like to get peoples thoughts on the second option, things like how to make it fair. E.g. there are two people on a project (Person A and B), each going to get 50% at the end, but they need someone to write a manual, so they draft someone in (Person C) for, say 10%, but person B doesn't agree with that. I'm assuming there is always a project manager (Person A in this case), who sets up the project and controls who is hired / fired, but what is the best way to decide who gets what and still keep it fair? Any thoughts/comments etc.

Have a clear, well-documented plan and make this plan available to all your "employees." If you must go with the second option (which I find to be a bad option in general), make sure you explain the nuances to a new "hire" prior to actualy accepting him or her on your team.

To handle a situation like you described where you have two "actual employees" but you bring on a third person temporarily for what is basically a one-shot asset production (writing a manual, producing some art, et cetera) you may want to have a clause in your payment plan to say that people who work on a "contractual" basis like that will be paid a one-time fee for their work on won't figure into the percentage calculations for everybody else, or something.

Probably best to involve a lawyer if you can.

The reason I feel that "percentage of profit" payment options are bad is that hobbyist or indie projects rarely succede and/or make a whole lot of money (with a few notable exceptions). Because of their looser scheduling constraits (typically none), the project typically takes longer than it should to reach completion, if it ever does. This means that joining one such project is a huge risk - you may put in a lot of work and effort for a very minimal payoff, or none at all. This is why the first option (a regular payment rate) is often better for potential employees if you can afford it, because regardless of the ultimate success or failure of a project, a employee is still compenstated for his or her effort.

Discuss openly with people. You already answered yourself, partially. You can also count hours or decide the split according to what needs to be done. I still suggest keeping it 'rough' and trying to treat everybody fairly.

The most important rule (in everything in life): Would you accept the suggested profit sharing if you were in other person’s shoes? Think how you would feel if you were the artist/programmer doing the assigned task and getting the profit you suggested.

You should make sure that everyone in the team benefits. Don’t make this mistake that some team leaders/idea owners do: never hog the profits so that you get most of the profits just because you want. Aim for win-win situation. Ask and discuss openly about the profits. I generally think that artist (sounds & music) should get one time payments and rest is shared evenly among programmers/producers depending on the contributed tasks/hours they spend. Basically - if all team members put roughly 10 hours per week then each should get an equal share. I don’t believe making such a big noise about who is the most talented or who contributed 70 hours and who 80 hours . If your team is focusing too much on how to split the revenue then I think there’s something wrong with the team. You could make a plan and set profits according to the finished work (like gameplay coder could get more than interface coders). Make rough guidelines. Remember to include profit sharing also in the updates - usually game programmers need to update & fix bugs in the game after the release. Make sure you take this into consideration when producing the game. That is actually one reason why I think one-time payments for artists is good: they usually don’t do much work after the initial launch.

I wrote a small post about the issue: here.

Yeah I agree..."profit sharing" usually creates resentment, and reduced money for everyone. I personally have always avoided this type of arrangement with my "employees", and i've had to pass on some great talent because of this. But the bottom line is, as a small indie one-man band for the most part, I need to keep all the profit I can get. :)

Derek - Stormcloud Creations
www.stormcloudcreations.com

Quote: Original post by PolycountProductions
I generally think that artist (sounds & music) should get one time payments and rest is shared evenly among programmers/producers depending on the contributed tasks/hours they spend.

For composers, it is customary for there to be an upfront fee plus some sort of back-end compensation. The balance between the two is based on such factors as:
- how much the company can afford to offer upfront
- the project's potential for back-end revenue
- the exclusivity of the music license (can the composer re-sell the music to others?)
- the potential for the composer to receive broadcast/performance royalties (which cost the company nothing)

With most indie projects, the potential for broadcast royalties is practically nil, so usually that's not a good bargaining point. Likewise, many indie projects have a low potential for back-end revenue, so a larger percentage of profit in lieu of a fee isn't always attractive to a composer.

Instead you might consider being flexible with the composer regarding the music license. Consider negotiating a non-exclusive license with the composer. This would give you the right to use the original music in your game but leave ownership of the music with the composer. That way the composer could continue to exploit the composition by submitting it to music libraries, licensing bits of it for use in other projects, etc.

This may be a way to hold down the composing fee and yet still make the offer attractive to the composer. Since the project really doesn't have any use for the music beyond the game, you're not giving much away. The only real concern is whether a potential publisher will insist on owning the full rights to the composition. However, if and when this becomes an issue it can usually be resolved and is rarely a deal-breaker. In fact, many composers may be willing to renegotiate at this point. They want the game published as well!

It's wise to consult a lawyer when drawing up a contract like this. The contract does not need to be complex, but legal counsel will help you make sure that everyone's interests are represented.