CoG’s royalty rates are based on how much we can afford to risk in advances
As I said in my intfiction.org post, professional authors mostly ask us for higher advances, not higher royalty rates. We just raised our CoG advances to $10K advances against a 25% royalty and $15K advances against 10% royalty, to make our deal even more compelling to experienced authors.
(We’ve been planning to raise our advances for months; it’s not in response to the forum thread unfolding this week.)
Note that advances are always in the author’s advantage and to our disadvantage until the game earns out its advance. On the 25% royalty rate, if a game makes $20,000, even though we haven’t paid out any royalties, the author still has their $10,000 advance, which is 50% of the game’s proceeds.
When we stake an advance, we’re placing a bet that the game will earn out its advance. On 25% royalties, we’re betting that the game will have at least $40,000 in proceeds, or closer to $50,000 in sales (since Apple, Google, and Valve each take a 15%-30% cut of their own).
Some games haven’t earned $30,000 in proceeds after more than five years on the market. Some games haven’t even made $10,000. These games are total losses for us; those authors have collected more than 100% of the proceeds.
Taking these bets is expensive, but it’s absolutely worth it for CoG’s business.
CoG’s royalty rate puts a limit on HG’s royalty rate
We made a decision when we launched HG that we wouldn’t offer higher royalties on HG than we would on CoG, to give authors no reason to prefer the HG deal over the CoG deal.
It is absolutely true that HG is offering a worse royalty rate than we would if we weren’t paying advances on CoG.
It makes sense that HG authors would be frustrated by that, especially authors who aren’t eligible to write for CoG.
Choice of Games and Hosted Games operate on a mullet model: business up front, party in the back
CoG is our primary business, and maintaining our advances is essential to maintaining and expanding CoG’s audience.
But growing CoG’s audience also grows HG’s audience. The vast majority of every dollar that HG makes, especially for newbie authors, came from users who were originally drawn to the platform via CoG.
Without CoG’s audience, HG’s royalty rate could be higher, but HG’s top-line proceeds would be a fraction of what they are today.
HG does contribute a lot to CoG, but CoG grows HG’s business in exchange.
Each author has to decide whether HG’s deal is right for you
Since HG offers a 25% royalty rate on proceeds (after the app stores take their cut), you should only publish on HG if you believe that your game will sell at least 4x as much with HG as you would if you published yourself.
Some authors have a large, dedicated audience, who will buy all their stuff. Some authors have the technical chops to publish their own apps on Steam, on the Google Play Store, and on Apple’s App Store.
If you think that publishing under HG will only double your sales, then you should probably just publish yourself.
But if you don’t have an existing fan base, if you don’t know how to publish an app on mobile and Steam, if your go-to-market plan is to upload a Twine to Itch.io and hope that people find it organically, we believe HG will earn you significantly more.