royalty must be paid at the time of manufacturing, as opposed to royalty payments in almost all other industries, where royalties are paid upon actual sales of the product—and, importantly, are not payable for games that did not sell to a consumer. So, if a game publisher orders one million copies of its game, but half of them do not sell, the publisher has already paid the full console manufacturer royalty on one million copies of the game, and has to eat that cost.

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