Insights from the Royalties Summit

The anatomy of a gaming deal

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At Trusted Advisor we held our first Royalties Summit on May 6, where, supported by Miller Kaplan, we united business managers and industry experts to discuss the rapidly changing world of licensing, royalties, and ownership models. 

Vincent Leoni, also a speaker at the “Extending an Artist’s Brand” panel, is the partner-in-charge of the licensing and royalties department at Miller Kaplan. His presentation, titled “Gaming the Market: the Anatomy of a Gaming Deal,” is a deep dive into the royalties market of the gaming industry — he details how the $300-billion brand-licensing industry is structured, how it has grown, as well as the potential future of licensing and royalties within the space. 

The Global Video Game Market 

According to Visual Capitalist, the worldwide gaming market grew eight percent in 2020 to $165BN. 

  • Mobile gaming comprises nearly half of this growth, with a double-digit increase of 15.5% from 2019. 
  • The market is spread evenly across the globe, with frontrunners being the United States, China, Europe, Middle East and Asia-Pacific each contributing about 25 percent of market share. According to Leoni, unlike other types of entertainment, gaming is consumed fairly evenly across the globe. 
  • Leoni also found that gaming, with a global revenue of $152BN, exceeds Global Box Office and Global Recorded Music revenue three and eight times respectively. 

Leoni cites two recent examples in which celebrity and artist have been leveraged in the gaming industry: Cyberpunk 2077 with Keanu Reeves, and Death Stranding with Norman Reedus. These cameo appearances ask whether actors are needed to legitimize the gaming industry, or if instead, gaming in and of itself is providing an opportunity for artists to expand outside of their target market. 

“The data all shows just how much bigger the gaming industry is, and that there’s opportunity out there for your clients to benefit from the size and the growth,” Leoni said.

Platform Models: Distribution and Economics 

Leoni states that there are three types of gaming platforms: mobile, console, and PC, and that each platform has a unique platform of distribution for the consumer. While console and PC remain fairly similar, the growing mobile games industry has set itself apart from the market. Mobile has profited off its freemium and subscription model, in which downloadable content or ad removal are offered anywhere from 50 cents to 50 dollars. 

Mobile game revenue is generated from digital service providers, and generally 30 percent of the revenue is retained by the DSP’s with the balance remitted to the game publisher. Deductions can include hosting fees and third-party royalty fees.

With respect to consoles and PC platforms, revenue is generated with sales to the retailer or to the consumer. Deductions can include cost of goods sold, platform/console fees, discounts, hosting fees, and price protection — which, according to Leoni, is a particularly significant deduction in these agreements. Central to gaming industry negotiations are the marketing spend and the royalty rate, as well as the Net Sales definition.

With regards to how talent complements the industry, Leoni finds that while more artists are getting involved with gaming endorsements, gaming has been incredibly successful without the legitimizing of celebrity brands. 

“I tend to side with the video game industry in that while I believe the talent enhances the brand, the gaming industry has been doing things right for a long time, and continues to expand in their chosen markets,” Leoni said. 


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