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Valve & Paid Content/Mods unofficial FAQ's

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Offline kat

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[updated 28th April 2015]

The following is an unofficial list of common or frequently asked questions about Valves new Paid Content initiative.

Notice: The following is provided for informational purposes only and should not be construed as advice pertaining to Tax or Legal matters. Persons are urged to seek advice from appropriate qualified Advisors BEFORE signing or submitting any Legal or Tax documents.

Q: Valve is taking 75% of revenue
A: It's a bit more complicated than that because it depends on how Valve manages it's Tax Obligations with respect to Workshop sales, and how permission to sell items for a specific game has been granted. With respect to the latter this is likely granted through LICENSE so a FEE or ROYALTY will be due on any transactions, paid by Valve to the licensor - the games developer or publisher. This should be from Valves split of the revenue because it's an interest THEY are obligated to as licensee's of the Developer/Publisher. However, this might not be the case and it may be taken from the overall income (which reduces the revenue of the creator and Valve, not just Valve). As this is an aspect of VALVES business it's unlikely this will be clarified[$].

Q:Modders earnings are tax-free (I)
A: To receive payment individuals are required to provide valid Tax information (IRS form W-9) before any monies are transferred. Once verified, US citizens are subject to a 30% withholding on any payment as part of their individual Tax obligation on Income. Non-US individuals however, are not, providing they file the appropriate paperwork (W-8BEN) to claim the 30% withholding. The ability to do this varies from Country to Country and is subject to Treaty between the USA and other Nations. Assuming creators are set to receive 25% from every $1.00, for US Citizens this would mean receipt of $0.175c ($0.075c with-held for Tax) not $0.25c. For non-US individuals they would similarly only receive $0.0175 UNLESS the correct paperwork were filed to claim the with-held amount.

Q: Modders earnings are tax-free (II)
A: This will depend on the local jurisdiction of the individual in receipt of monies. Generally speaking in submitting Identity and Tax information to Valve, the applicant is essentially declaring themselves to be SELF-EMPLOYED (in intent rather than specifically designation, i.e they are earning money thought their own efforts rather than someone else) making earnings TAXABLE INCOME regardless of the applicants employment status. US citizens are Taxed at SOURCE (which can be claimed back to varying degrees based on entitlements, over-payments etc.), whereas NON-US persons would be obligated to SELF-DECLARE revenue to an appropriate Tax Authority (HMRC if the creator was a UK Citizen for example). So even if earnings were received in full (as per point "I" above) giving the appearance of being tax-free earnings, they are in fact not, because a burden is due, income being regarded as Taxable and needing to be declared regardless.

Q: Mods should be free
A: As noted above traditionally speaking mods have largely been "free" because there were no viable mechanisms in place to charge money. This is not to say that mod creators have not looked to wanting this, and more important that in their not being able to do so, no revenue was ever generated; it has, but not for the mod creator - revenue is generated by the mods web hosting party through adverts positioned on the download page or their offering 'premium' or 'subscription' based services to either bypass advert display or the provision of some perks available only to paid members of said service. Creators do not receive any of this revenue.

Q: Does receiving money make me a 'professional'
A: In a word, yes, once a person receives money as compensation for their labor or output they should regard their activities as efforts to earn income as a "Self-Employed" or "Sole-Trader" entity (or whatever the local jurisdiction definition is for an individual working for themselves). In the UK for example this might mean the individual being required to declare such income through Self-Assessment, even if they occupied a position as an employee of someone else (exemptions may apply). Within the context of revenue generation, being a "professional" has no bearing on the quality of output and only relates to an individuals respective employment or income status with the relevant Authorities.

Q: Do I have to pay Tax on Valve income
A: Yes. Monies received are considered INCOME so tax is due on the amount received. This is either withheld at purchase, or claimed back and accounted for at year-end. In both instances there are records of all the transactions leading to revenue generation and personally identifiable information confirming the individuals declaration of their Tax (and indirectly employment) status with Valve (and IRS once Valve submit that paperwork to the IRS as part of their year-end accounting).

Q: It's about "free-expression" of ideas
A: It's not. Whether a person elects to receive payment for their output has absolutely no bearing on their ability to freely express their ideas except where they may be impeded by efforts to put food on the table, keeps the lights on etc., no different than any other occupation. That is not to say the pursuit of income may bias creative output towards the production of more populist products, a decision to be made by the individual, and as mentioned has no bearing on a persons ability to freely express their thoughts or ideas beyond having the materials available for that purpose. This is notwithstanding that, to a creator who elects to receive payment for their efforts, ideas are 'work'; to be "Made Real"™, varying degrees of expertise, skill, labor, materials, resource consumption are required that do not exist in a financial vacuum, especially for those operating under their own efforts (self-employed/sole-traders/proprietors).

Q: People will game the system to earn money
A: Whilst this may happen there are a number of deterrent in place to prevent, if not mitigate, the problem. First, Valve has the creators personal and financial details on record so shenanigans in which individuals partake may be punished retroactively through the issuance of payment reversals - this may have significant repercussions depending on the type of account the individual has associated with their Steam account. Second, whilst some individuals may attempt to game the review system, their product being open to users will likely result in their being called out in a way that either alerts individuals to problems with the item(s), or Valve that the seller is engaged in suspicious activities that need to be investigated.

Q: Creators only get 25%
A: The royalty payment due to sellers using other distribution outlets varies a great deal, for example royalty payments to Amazon, Apple and Google are typically 30% plus fees, once 30% for tax is withheld, leaving the seller with a nominal 40% royalty[1]. GOG has a 70/30 author/service split[2] but may be subject to VAT (at 20%). This also doesn't account for costs attributed to marketing and managing a given project across the Steam Network, which is considerable for Indie developers.

Q: What about selling Mods with dependencies
A: This issue here relates to whether the dependency or any files not part of the mods contents are being distributed along with it. As this is third-party material, permission to distribute WILL BE REQUIRED from the author of the dependency. As an example, if mod "A" depends upon some or all of the content from mod "B" to work, to include and distribute that material the author of mod "B" would need to give their consent (and whether or not they want to be compensated when a sale occurs). Furthermore, customers will need to be INFORMED that mod "A" depends on mod "B"[3].

Q: How do I prevent someone else selling my Mod
A: Once the situation has been confirmed, that person "A" is indeed misappropriating the work person "B", it's up to the latter, person "B", to issue a DMCA Take Down Notice to Valve's DMCA Agent who are then obliged to remove the material described in the Notice until the person being claimed against either issues a DMCA Counter Notice, or they remove the offending material. It's important to understand that it's not possible to prevent others misappropriating material without permission, the system, and Copyright, doesn't work like that - it's 'reactionary' not 'preventative', DMCA is invoked once an infringement has been discovered. For more information on DMCA click here.

Q: Apple gives a 70% cut, not 25%
A: Whilst Apple may issue a 70% split to authors, their doing so is conditional and applies only in certain circumstances that ostensibly relate to the way Tax obligations are managed. Apple and ALL US-based entities are REQUIRED by the IRS to withhold 30% of ALL income for Tax purposes, Apples own fees are c.30%, which leaves the author a nominal 40% split of sales income. If said author is exempt from withholding and applies for that exemption (the exemption MUST be applied for AND claimed), they can claim the 30% withholding, which raises the nominal 40% to 70%[4].

Q: It complicates revenue split for mod teams[/size]
A: Valve, and their Paid Mods service, have no bearing on the way mod teams decide to split their income, a discussion that should be negotiated internally between individual team members. Doing so is a important aspect of taking the next step up the development ladder towards being a "professional" content developer or concern as the receipt of money implies.

Q: Who owns the mod once it's made available
A: In a word Bethesda. In accordance with the Creation Kit EULA, immediately upon distribution of a mod or content the author agrees to waives ANY AND ALL RIGHTS to the content, including being able to assert a "Moral Right" (Authorship) over said Content.
If You distribute or otherwise make available New Materials, You automatically grant to Bethesda Softworks the irrevocable, perpetual, royalty free, sublicensable right and license under all applicable copyrights and intellectual property rights laws to use, reproduce, modify, adapt, perform, display, distribute and otherwise exploit and/or dispose of the New Materials (or any part of the New Materials) in any way Bethesda Softworks, or its respective designee(s), sees fit. You also waive and agree never to assert against Bethesda Softworks or its affiliates, distributors or licensors any moral rights or similar rights, however designated, that You may have in or to any of the New Materials.

[$] unconfirmed at time of writing, Bethesda's cut is being claimed to be 45%, Valve's being 30% (in line with other distribution networks),
[1] the actual revenue split varies depending on the type of items is being purchased and the currency to which final payment is made (this may incur exchange fees for non-US based sellers). Non-US purchases would also be subject to VAT in Europe or other forms of Sales Tax elsewhere.
[2] GOG offers two basic revenue splits, 70/30 standard royalty, and 60/40 for an 'payment advance' split. Note that GOG being part of CD Projekt, a EUROPEAN Company, means that Tax obligations differ - there is no withholding, but VAT is applicable at 20% - so revenue splits may appear much better.
[3] where dependencies are applicable it would be a courtesy to inform potential customers whether such is available freely or for cost.
[4] this does not account for other fees and charges that may be due on the revenue, currency exchange rates, international deposit fees and so on, depending on how the money is managed, which can be especially complicated and costly for Non-US based Entities