How do I decide on licensing terms for my popular app?
I wrote a sudoku application and put it in the chrome app store. It is quite popular. I have received serious requests from media companies asking to include my application as part of their mobile applications platforms.
I have absolutely no idea what sort of licensing/compensation would be appropriate, and am seeking guidance. I implemented the application on my own time; if I had to estimate, I put in about a month of full time effort into it. I also paid a designer for the css/user experience design, which cost $1250, which I paid out of pocket.
I can see a bunch of possibilities:
1) A yearly fee, or a lifetime fee.
2) A cut of all subscription fees the media company collects.
3) If they advertise, a cut of advertising revenues.
I have no idea what is appropriate for all of the scenarios above. Complicating matters, if the company requested exclusive rights to my software, what would that do to these estimations?
Finally, integrating the software would require some work on my part...how do I charge for that? Should I just charge them my hourly rate for the integration work?
As a related question, what type of legal agreement is customary for these sorts of relationships?
Thanx in advance.
Sales Business Licensing Software Licensing
4 Answers
Look at it from the perspective of those media companies. It seems there is nothing about your app that would be difficult to reproduce. They could do it themselves or hire a freelancer. It is not critical to their business either, just a tiny nice-to-have add-on. They are only willing to pay for the convenience of having it right now. They do not want the complexities of recurrent fees or revenue sharing.
Unless the popularity of your app is within one order of magnitude from that of Angry Birds, what you can realistically expect in these circumstances is getting paid for a month of work, albeit at a very good rate, and receiving compensation for the designer work. You can try doubling that in exchange for exclusive rights.
Personally, I'd say that if you want to get back to writing code, sell all rights to your app to one of those companies and move on. If you want to experience the business side of software business, you can try the other scenarios you've listed. Even if you lose time and money in the end, you would learn a lot.
UPDATE: Ensure that you will be under no obligation to provide support after you sell the rights, or at least get paid for your time on a hourly basis at a good rate.
And in any case, talk to a lawyer.
Good luck,
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Dmitry, i am under no delusions about what the app is worth. In fact you guideline of a month of development cost is more than i expected to hear. I am here for guidance, and I appreciate your perspective. Before posting I was thinking a few hundred a month, so a few k a year at best – Hvgotcodes 13 years ago
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Would you mind posting an update here when your negotiations are over? – Dmitry Leskov 13 years ago
We don't really have much information here to provide you with guidance on pricing. Looking at https://chrome.google.com/webstore/search/sudoku there are tons of sudoku app in the store, so what makes yours special? Also, at this point, the Chrome app store is quite small compared to IOS or Android store.
On the other hand, since there are multiple people approaching you, the easy approach is to tell them that, and ask for offers. Competition is a good way to get people to close the deal quickly and give you a good price. Just be careful to keep all options open until you have a signed agreement. A common strategy, is to give you a high bid, and then when you've told the other people no, to try squeeze you.
I disagree with some of the other posters saying "They could do it themselves or hire a freelancer. It is not critical to their business either, just a tiny nice-to-have add-on."
That's not how an established company thinks. Even if they had the expertise in house, they'd need to allocate time from
* A project manager
* A developer
* A designer
They'd need to wait till these people have time to do this job, since they're currently busy on other tasks, and at the end of the day, they'd probably need to budget at least $50,000 to take into account everyone switching tasks, meeting, getting used to the platform, etc.
They could hire a freelancer or two, but they would still need the project manager, meetings to discuss features, and they risk ending up with a product that they're not happy with.
Much easier to find something ready and proven in the market.
Finally, if they're asking for exclusive rights, they're pretty much buying the software, not licensing it.
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thats a good way to look at it. I was thinking about starting with 'well what would it cost you to build it?'. That price, and they can have it without the hassle of actually having to build it. – Hvgotcodes 13 years ago
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What you are saying, Dror, does not nullify my statement that a media company could do it itself. You are just showing that their cost would be high. That is why I said "at a very good rate". And that is also why a media company won't be willing to pay a recurring fee. – Dmitry Leskov 13 years ago
I have absolutely no idea what sort of licensing/compensation would beIn a perfect world, which is where you should start from, you shouldn't price based on the costs involved in producing the software. This is all the more true in the software industry where unit costs are typically very low, and a huge majority of the effort is measurably-less-tangible development time.
appropriate, and am seeking guidance. I implemented the application on
my own time; if I had to estimate, I put in about a month of full time
effort into it.
No, in a perfect world you should price according to the value derived by the customer. Check out Neil Davidson's ebook on software pricing - http://neildavidson.com/download/dont-just-roll-the-dice/. I don't think it covers your case in huge detail but some of the concepts in there will be helpful.
A yearly fee seems most suitable in this case. It will be useful to have an option in your agreement that allows to revisit the fee when you provide new versions of your app.
