Vault Dweller: Age of Decadence needs to sell 45,000 copies to be successful

[Kz3r0]

My rule of thumb to gauge perspective sales of games is this:
-How well Kickstarter did.
-Amount of copies sold on Early Access.

Usually games sell as much as they did on Early Access on release.

For AoD this means:
No Kickstarter(a mistake for me).
15.000 copies on Early Access.
15.000 copies sold on release(my estimate).

Thus the game will sell between twenty and ten thousand copies less than VD hopes for in my opinion.
Hope I am wrong.

 

[Vault Dweller]

To clarify my comments:

- it's not all doom and gloom, overall, I think we're doing well, considering the nature of the game and the price
- the quote was in response to sales expectations and the perceived lack of optimism (which I see as a realistic approach)
- the 30k copies isn't the minimum requirement, it's what I would consider a success (i.e. selling 2/3 of what DS sold will be a very successful venture for us)
- we'll need at least 3 years, possibly 4, to make the colony ship RPG, which means that AoD will need to sell enough to pay for 3-4 years development. At the moment we have 2 programmers, an artist/designer, a writer/designer, animator, and 2D artist. I want everyone working full time (otherwise we can forget about 3-4 years estimate). Ideally, it would be nice to hire another artist. So we're talking about 6-7 people working full time for 3-4 years, which is a considerable expense no matter how low the pay is.

 

[Vault Dweller]

$30 at half price (to include steam discounts over time) = $15 game

$15 game X 30,000 copies = $450,000

Wow...that seems like a lot of cheddar to be profitable...what gives? Have the expenses been that high to make this thing? $450k, on top of what they've already sold, seems like an extremely high threshold.

Minus Steam's cut and taxes.

 

[Vault Dweller]

My rule of thumb to gauge perspective sales of games is this:
-How well Kickstarter did.
-Amount of copies sold on Early Access.

Usually games sell as much as they did on Early Access on release.

For AoD this means:
No Kickstarter(a mistake for me).
15.000 copies on Early Access.
15.000 copies sold on release(my estimate).

Thus the game will sell between twenty and ten thousand copies less than VD hopes for in my opinion.
Hope I am wrong.

It is the most likely scenario.

I feel a little guilty for coming up with the "urban intrigue simulator" moniker now...

I like it. It's very accurate.

 

[Zorba the Hutt]

So in Canada the tax rate is about 15%, the US wants 30% (not from all Steam sales but sales to the US citizens which is a majority). The US tax code is a time-honored mess and subject of many debates, so I'm still not sure how much exactly we're supposed to pay.

Yes, US tax is a mess. Double-taxation agreements mean you should be able to offset the US tax paid against your Canadian tax bill though.

http://www.uscanadataxexperts.com/dbltax.php

 

[Awor Szurkrarz]

Maybe the game wasn't expensive enough? For some reason it seems to have very limited appeal in-itself.

 

[Straight elf]

Well maybe you don't need to make all the money to fund future development in 1 month year? I know AAA titles mostly sell after release, but that might be different for games like AoD. You can definitely exploit Christmas sales etc. Furthermore, you can budget your next game and try to do a kickstarter to cover the costs in advance and lower the risk.

 

[Vault Dweller]

Well maybe you don't need to make all the money to fund future development in 1 month?

I said in the first year after release not in the first month.

I know AAA titles mostly sell after release, but that might be different for games like AoD. You can definitely exploit Christmas sales etc. Furthermore, you can budget your next game and try to do a kickstarter to cover the costs in advance and lower the risk.

We won't get what we need on KS and I don't want to do pointless 'we need 30-50k' KS.

Yes, US tax is a mess. Double-taxation agreements mean you should be able to offset the US tax paid against your Canadian tax bill though.

http://www.uscanadataxexperts.com/dbltax.php

It still doubles the tax due to the difference.

 

[Mastermind]

the US wants to tax every penny made on the US soil.

How would they even know? Is part of your team American? Is this something all indie devs have to deal with?

 

[Infinitron]

How would they even know? Is part of your team American? Is this something all indie devs have to deal with?

Valve is an American company.

 

[Mastermind]

Valve should be paying income tax out of their own income though.

 

[Dyskolos]

As a matter of curiosity - since it seems something you've probably given a lot of thought to - what's your idea on an acceptable pace of sales? Does Steam give any generic help with projecting 6mo or 1yr totals based on performance in the first few weeks?

I guess the question is more your sense of what line you have to cross and when in order to feel like you're going forward on the next project with security rather than just faith.

 

[Vault Dweller]

How would they even know? Is part of your team American? Is this something all indie devs have to deal with?

Everyone who sells via Steam and any other US-based business. I asked Styg, he has to pay tax twice (no treaty).

https://www.law.cornell.edu/uscode/text/26/882

"A foreign corporation engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 11, 55, 59A, or 1201(a) on its taxable income which is effectively connected with the conduct of a trade or business within the United States.", i.e. if you make a buck selling something to the American citizens, Uncle Sam wants 30% or more.

Thus Valve is required by law to separate the US-based income from the non-US based ones.

 

[Mastermind]

Isn't that Valve's problem though? You're not a corporation as far as I can tell, nor are you engaged in trade or business within the United States. It's Valve selling your game after all.

 

[Mustawd]

Thus Valve is required by law to separate the US-based income from the non-US based ones.

To play devil's advocate, not sure if this makes much sense. As a taxpaying company they're required to make tax payments and/or report their own taxable income. This doesn't necessarily mean they're reporting the sales of each game. It'd be more like a total line item of digital sales.


That being said...it's stupid to try and play this "Let's see if the IRS catches us evading taxes" game. Theoretically, all US citizens can play this game....but again..it's stupid as the consequences of being caught outweigh the benefits IMO.

 

[Mastermind]

VD is Canadian though. AFAIK the US has no sales tax on online items (though some states might) and there's no reason for them to tax VD's income seeing how he does not live in the US. Valve takes their cut, pays income tax, then pays VD what it owes him out of what it sold. Styg is American so of course he has to pay income tax but VD has no business in the US himself.

 

[Mustawd]

Isn't that Valve's problem though? You're not a corporation as far as I can tell, nor are you engaged in trade or business within the United States. It's Valve selling your game after all.

The way the IRS views it, selling a game through a platform in a US company, to US customers, is considered engaging in commerce in the US. It's the same as if you were a Chinese company selling to US customers...the IRS would want their money...if you end up paying is up to you and whether you care if the IRS catches you or not.

 

[likaq]

Everyone who sells via Steam and any other US-based business. I asked Styg, he has to pay tax twice (no treaty).

https://www.law.cornell.edu/uscode/text/26/882

"A foreign corporation engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 11, 55, 59A, or 1201(a) on its taxable income which is effectively connected with the conduct of a trade or business within the United States.", i.e. if you make a buck selling something to the American citizens, Uncle Sam wants 30% or more.

Thus Valve is required by law to separate the US-based income from the non-US based ones.

usa -> land of the free.
Oh wait.

 

[Mustawd]

VD is Canadian though.

Well, ok then...didn't know that. I was thinking sales tax or tariffs (which incidentally is handled by US Customs anyhow). Whatever, I hate tax and it's not my thing. And since my last and only tax course in college was 6 years ago, I'll bow out of the conversation on this.

 

[Zorba the Hutt]

Guys, Steam specify this withholding tax so there's not much point disputing it:

https://partner.steamgames.com/documentation/payment_info

Generally, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to a U.S. tax rate of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person's country of residence and the United States. In order to exercise the benefits under the tax treaty, you will need to complete a Form W-8BEN and that requires either a foreign TIN or a US TIN. Countries that have tax treaties with the U.S. can be found here:

http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z

What VD could do is try to get a reduced withholding rate by filling in the forms. Having briefly read over some of the treaty details, it seems as though he would be able to claim relief as he doesn't have a permanent entity there (not sure if he has US employees though):

http://www.bdo.ca/en/Library/Services/Tax/Documents/Tax-Bulletins/Tax-Consequences-for-Canadians-Doing-Business-in-the-US.pdf

As well, if you use a U.S. broker, general commission agent, or any other independent agent, you will not be considered to have a PE in the U.S., as long as the broker or agent is of independent status and is acting in the ordinary course of their own business.

you will have a PE in the U.S. if services are performed by an individual (you or an employee) who is present in the U.S. for 183 days or more in any 12-month period. and during that period, more than 50% of the “gross active business revenue” of the business consists of income derived from the services performed by that individual in theU.S.

 

[Mustawd]

Or he could just tell them to go fuck themselves and he can make payments to the IRS himself; no need for their own withholding

And then not..

Spoiler

EDIT: ahh, nevermind...

Q. What happens if there is no income tax treaty between my country of residence and the United States?
A. We will be required by the IRS to withhold 30% of your revenue share payment and remit these taxes to the IRS. You may want to consult with your tax advisors on whether you can recover these taxes as a foreign tax credit on your tax return.

 

[Vault Dweller]

Isn't that Valve's problem though? You're not a corporation as far as I can tell, nor are you engaged in trade or business within the United States. It's Valve selling your game after all.

No, it's not. If you sell to the US citizens via a US company, you're engaged in trade within the US whether you like it or not (nobody does).

To play devil's advocate, not sure if this makes much sense. As a taxpaying company they're required to make tax payments and/or report their own taxable income. This doesn't necessarily mean they're reporting the sales of each game. It'd be more like a total line item of digital sales.

That being said...it's stupid to try and play this "Let's see if the IRS catches us evading taxes" game. Theoretically, all US citizens can play this game....but again..it's stupid as the consequences of being caught outweigh the benefits IMO.

1) We had to open up an account with the IRS to sell via Steam. 2) Like every other business payer, Valve is obligated to report what they pay, so they sent us a form stating the US income and I *assume* that the IRS got a copy of that. 3) IRS has notified us that we should file the return, listed forms we should submit, etc.

Overall, after spending a week figuring it out, I understand why the US corporations use every loop hole to avoid paying taxes. The tax code is a retarded mess that punishes people who can't find a 'creative' solution.

VD is Canadian though. AFAIK the US has no sales tax on online items (though some states might) and there's no reason for them to tax VD's income seeing how he does not live in the US. Valve takes their cut, pays income tax, then pays VD what it owes him out of what it sold. Styg is American so of course he has to pay income tax but VD has no business in the US himself.

As far as I know he isn't. Anyway, it's not a sales tax, it's income tax on all business done in the US, even if you don't have a presence there.

 

[Darth Roxor]

To clarify my comments:

ABANDON SHIP!

 

[Mustawd]

1) We had to open up an account with the IRS to sell via Steam. 2) Like every other business payer, Valve is obligated to report what they pay, so they sent us a form stating the US income and I *assume* that the IRS got a copy of that. 3) IRS has notified us that we should file the return, listed forms we should submit, etc.

thanks for the explanation VD. Looking forward to playing AoD when it comes out

 

[tuluse]

Minus Steam's cut and taxes.

Edit: Steam takes 30% so 450k, which IS a lot of cheddar instantly becomes 315k, which is still a nice number but not nearly as nice as 450k. Then comes taxes. We have to file both in Canada and the US because the US wants to tax every penny made on the US soil. It's the only country in the western world that does it. So in Canada the tax rate is about 15%, the US wants 30% (not from all Steam sales but sales to the US citizens which is a majority). The US tax code is a time-honored mess and subject of many debates, so I'm still not sure how much exactly we're supposed to pay.

Well almost every other industrialized nation on earth has a national sales tax. The US doesn't have that, so they have to get it through income tax.

As mentioned you should get a credit for taxes paid to Canada.

I know this still doubles your tax rate for US revenue, but it also means your prices are lower in the US hopefully leading to more sales. It's probably worth hiring a US tax accountant to find all the deductions you could take too. You're supposed to pay taxes on profit not revenue, so anything you can claim as a business expense gets taken out first.

$30 at half price (to include steam discounts over time) = $15 game

$15 game X 30,000 copies = $450,000

Wow...that seems like a lot of cheddar to be profitable...what gives? Have the expenses been that high to make this thing? $450k, on top of what they've already sold, seems like an extremely high threshold.

Following what Vince said, assuming all sales are in the US and he's really bad at his taxes so he pays the full 30%, that's 220k dollars.

Now ask yourself, if you wanted to fund an rpg where 3 people are drawing salaries and the last one took 9 years from start to finish, how much money would you need?