Anyone produce DVD-based training on a royalty-fee basis?

[Dave ©]

I have an opportunity in front of me to work with a consulting firm, which had a book on leadership published and is now interested in making a DVD-based curriculum to use as a study/companion guide.

Has anyone ever worked on a project like this on a royalty-fee basis? By that I mean, you got paid based on the sales of each DVD? So if 10,000 DVDs were sold, you got 10,000 times X fee? On the flipside, if just 10 DVDs sold then you got paid just 10 times X fee.

If you've ever worked under this kind of arrangement, would you mind sharing your experiences here? What worked well? What sucked? What kind of fee/percentage did you agree to?

And if you've ever been offered this type of arrangement but turned it down, will you also share reasons for turning it down?

Fundamentally, I understand fully that this is a risk/reward play. If the DVD sells well, I could get paid well. And if it doesn't, then I don't.

Please, only share your experiences here if you have either a) worked under this type of arrangement or b) been offered this kind of deal but turned it down.

I'm really not interested in responses like, "I would never do it because of x, y, and z," if you haven't ever been faced with the opportunity. Further, I think this will be a much more valuable thread to the entire community if those with actual experience share with the rest of us rather than just a bunch of people waxing poetic about something they don't know anything about (not that this would ever happen on this board, right?).

 

[Sean Smith]

I’ve been in both of these situations.

I don’t know enough about the firm so I am throwing out a few quick fire questions that come to mind. Do they have an actual plan to market these DVD’s beyond putting a clip on their website and on YouTube to go “viral?” Do you have access to the number of book sales? Do they keep in contact with their customers? Are you responsible for replication? Are you covering the shipping of the product? Are you getting a piece of the video on demand sales if any? Are their other revenue streams to offset the cost of production, like sponsors or special interest groups? Will their name push the sales like John Maxwell would or is it just another life coach trying to be a leadership guru? Are they leaders of men or middle managers trying to sell a book? Do you actually believe in the information? Did it change your life? Have you met anyone that it has changed their lives? Trust your gut.

I would try very hard to get some money upfront to at least cover your operating expenses like labor, hard drive storage, insurance, and depreciation. I am assuming you plan to create a product beyond a PowerPoint show on DVD. You will be emotionally tied to a product once you use your money. If they do not put some money into this project, where is their risk or incentive to actually sell the product? What is your break even point? Let’s say your total operating cost it $1,000 (not counting time) to produce a DVD master. That is a nice flat screen teevee or better yet, $1,000 you can put into a Roth IRA.

I have had people I personally know promise me and repeatedly give me their word that they would promote our finished DVD knowing they were getting 50% net and did not have to put up a dime for production or manufacturing cost. All they had to worry about was promotion. With the missed sales window, I had to scramble to break even without their help. My profit was learning that they will devalue the product if their cash is not on this line. At this point it becomes a hobby or a vanity item over a business. Kinda sucks to have to pay for an education that you didn’t plan on taking. C'est la vie!

I have had savvy marketing people passionately tell me about their pilot idea and how they want me to produce a promo to get the viral buzz going. It’s a great idea with huge potential with percentage points on the back end. I was genuinely interested in doing the work but I told them I needed about $2,000 for basic operating cost. I was okay with this tiny amount because I believed in the project. They only had to produce a microscopic $2,000 to incubate a viral chain reaction of pandemic proportion! I still haven’t received a return phone call.

I have another partner on a different project where we split 50/50 after all expenses. We produce and sell DVDs but this is not our only revenue stream for this product. The operational cost are covered before we risk our time. It’s a great relationship.

Just keep telling yourself that you bring skills to the table as well. If they are a client, charge what the market will bare. If they are a partner and they control the rights to the content, make them pay the operation costs and you take 50% of the DVD net for your skills if you believe in the product. Handle replication separate. Turn their pitch back on them. Tell them that they have a potentially earning $100,000 by selling 10,000 DVDs with help from your leadership and skills. $25 for the retail sale? That is $5 for manufacturing, shipping and taxes on each DVD and $20 to split 50/50. So by them investing $1000 into their own product, they could potentially earn $100,000. Read their book and support your argument with their own teachings. Empower them so they can invest in themselves. Your mileage may vary.

 

[Dave ©]

Thanks Sean. Excellent questions and advice. It's not a Maxwell-like name so the DVDs won't sell themselves. The company does have a pretty well-respected and widely-known name associated to it, just not as directly as I would like. In short, a well-known organization created a set of tools and this company bought them and created a consulting organization around those tools. The founder then wrote a book centered on the same leadership principles. I completely believe in the products and services offered by this company and the concepts presented within the book. They have personally transformed my career and what I do on a day-to-day basis (and where I am going, which is very different from where I was headed a few short years ago).

I think you are totally right about getting some money up-front. The reality is that we humans just don't appreciate free stuff and, even though this wouldn't be free, it has that same feel.

 

[MichaelP]

Certainly some money to cover expenses would be a minimum up front. As long as you (or someone) has access to the target market via blogs, forums, email addresses, etc. you can create a very targeted marketed campaign. The more indentified it is, the easier and lower costs it becomes.

Michael

 

[msorrels]

I've never done this with video production, but I have done this with software development. At the time it seemed obvious they would sell thousands of copies and my 10% of the gross would be worthwhile(I was also paid small amount as a base fee, though much, much less than a normal rate). After several years they had managed to sell 300 copies. As a result of this and a few other deals, I don't do "investment" style projects like this anymore.

In hindsight the real problem was a lack of marketing: selling things is hard. I suspect what's true for software is also true for videos. And if they are willing to be cheap on the production/development side(hire you for free) they are also likely to not be investing in the sales and marketing side.

The kinds of videos your talking do not sell well without massive, intense promotion. And there is always the chance they never ship the videos at all, for reasons that have nothing to do with your work. I'd recommend structuring any deal so that if they don't sell a single copy you are still happy with the end compensation.

 

[Richard Crowley]

I have been burned by that sort of deal and subsequently learned to turn them down. If they don't pay anything for your work, they have less incentive to get out there and sell copies to make their investment back.

At minimum, if they can't pay at least your direct expenses up front in cash, then their motivation is questionable.

 

[NoahK]

I can tell you if you're not getting an advance of some sort up front it may not be worth the time. Chances are it will take a long time to break even after expenses are charged. Which means you'll be last in line to get paid.

So... you could assume that the advance you receive may be all the money you ever see. That's one good way to avoid ever getting 100% burned on this sort of project. At least ask for double the production costs. So if you think you'll spend say $3,000 in out of pocket expenses to produce and post the thing, ask for that plus a $3,000 advance.

Clearly for them this is a testing of the waters and they want it done for the least amount of money possible. They are counting on you to produce the video for free and then they'll share the profits- assuming there are any with you. You're investing your time in exchange for that share- they're basically investing their name and nothing else.

Now if you really think that name is worth a ton in the field the video would be destined for, then you could take the risk and do it for production expenses only. But if that's the case make sure your share is at least 50% of the gross and that your share comes from the proceeds before any unrelated expenses are charged. But personally I'd want an advance of at least double the production expenses. That tells me they are serious about the project and about me and not just throwing darts for free.

Noah