How does it work? Is the developer able to track every sale made?

> How does it work?

It's not too different than any other sales portal on the Internet.

> Is the developer able to track every sale made?

Depends on the operator. Most will simply wire quarterly royalties and not bother giving you more details. You can try negotiating some registration code mechanism with the operator whereby the operator must give you the customer email / phone number so you can email / SMS back the registration code. Not every operator allow this, however.

-cb

So the relationship between the developer and operator is mainly based on trust?
Wouldn't this leave scope for fraud?

Are there third party tools that allow automated generation and delivery of registration codes?

Thanks.

> So the relationship between the developer and operator
> is mainly based on trust? Wouldn't this leave scope for fraud?

It's usual to negotiate some kind of financial auditing or purchase feedback mechanism with a distributor; operators are no different. I leave the contract negotiation details and how you plan to enforce them up to you; an experienced lawyer will help with this.

In the retail industry, one way to get customer information without disturbing the distributor relationship is via coupons (available at the point of sale, or mass-mailed, or made available online, etc). The distributor still get its cut, but you offer direct financial incentives to the end customer to communicate their contact info to you. Product registration after purchase (for hints, extra level unlock codes, community & support, etc) is yet another mean. Note that either way, the redemption rate is very low (as low as single-digit % in some industries) but it's better than nothing at all.

-cb

Quote: Original post by chand81
So the relationship between the developer and operator is mainly based on trust?
Wouldn't this leave scope for fraud?

Trust is essential.

If you do not trust them, run (don't walk) away from the deal.

If you do trust them, make sure that your contracts and other agreements allow you to verify. "Trust but verify" is a useful mantra in life.



In an honest and perfect world, having even a single difference between actual sales and reported sales would be a breach or maybe even a material breach of contract.

This isn't a perfect world, so the lawyers generally include a certain percentage of error that is allowed. Mistakes happen, sometimes numbers get lost in email or paper trails, or computer hardware/software failures cause numbers to be lost, or maybe a software bug reports the sales made on Thursdays between 2:00 and 2:15 twice, and so on. Contracts need to allow for this type of flaws. Again, you need to be able to trust that they really are keeping accurate records.

But this isn't an honest world, either. The exact number for that error before it becomes a material breach of contract is a very harsh negotiating point, and sadly, most operator/distributor people want the number to be extremely high. Since they're generally the least interested party, they have the most control in the negotiations, and unscrupulous companies will use these contracts terms to [creative accounting words] the money in their favor.

A good lawyer will know how to craft your agreement so that you are able to audit the receipts and other sales records, their download logs, shipping logs, manufacturing BoM or BoS, or any other replication or distribution or whatever methods as appropriate, at a reasonable frequency, at a reasonable cost, with an appropriate penalty for violations.


There is a lot to be said for reputations. Companies get bad reputations whenever audits show they are off by a lot (they should always be quite accurate) or when they frequently shortchange their developers, or even appear to shortchange their developers. Look carefully at their reputations before jumping into business with them.