·Fintech Accounting
Game Studio Accounting in Estonia: From the 70/30 Split to Investor-Ready Books
A game studio's books are shaped by decisions most other startups never face: is Steam revenue booked gross or net of the 30% platform cut, when is a consumable in-app purchase actually earned, and what happens to a publisher advance that has not yet recouped? For an Estonian OÜ studio, these choices decide reported revenue, gross margin, and how the company looks to a gaming VC at seed and beyond. This post covers platform-store revenue, in-app purchase and virtual-currency recognition, capitalising development costs, VAT on digital game sales, royalty and advance accounting, and the reporting package funded gametech studios should produce.
Is Steam or App Store revenue booked gross or net?
Every platform store takes its cut, historically around 30%, before paying the studio. The accounting question is whether the studio's revenue line shows the full amount players paid (gross, with the platform fee as a cost of revenue) or only the payout received (net). The answer follows from who is the principal in the sale to the player: who controls the product, sets the price, and carries the obligation. The analysis differs between storefronts and even between sales models on the same storefront, and the two treatments produce radically different revenue and gross margin figures from identical cash.
For a funded studio this is a policy decision to make once, document, and apply consistently, because investors compare studios on revenue multiples. A studio booking gross shows higher revenue and a fatter cost line; a studio booking net shows less revenue at higher margin. Neither is wrong when correctly derived, but switching between them, or not knowing which one you use, is a diligence red flag. We define the policy per platform at onboarding and keep the store reports reconciled to the ledger monthly.
How do you recognise in-app purchases and virtual currency?
In-app purchase revenue is earned when the studio delivers what was bought, and that depends on what the item is. A consumable (a power-up, energy, a one-off boost) is earned when consumed. A durable (a character, a permanent weapon skin) benefits the player for as long as they play, so its revenue is typically spread over the estimated player relationship period rather than taken on day one. Getting this wrong front-loads revenue and quietly builds a liability the books never show.
Virtual currency adds a layer: when a player buys gems or coins, the studio has received cash but delivered nothing yet. The purchase price sits as deferred revenue until the currency is spent in-game, and the spend event, not the top-up, drives recognition. This requires player-level data from the game backend feeding the finance stack. Studios that wire this pipeline early get monthly closes that survive an audit; studios that do not end up reverse-engineering two years of telemetry during due diligence.
Should game-development costs be capitalised?
Development spend is the biggest pre-launch cost, and accounting frameworks allow it to be capitalised as an intangible asset once development criteria are met: the project is technically feasible, the studio intends and is able to complete it, and future economic benefit is probable. Costs before that point, prototyping, concept work, discarded builds, are expensed. Capitalised development is then amortised over the game's expected earning life once it launches, and must be written down if the game underperforms.
The strategic trade-off: capitalising smooths the P&L and shows an asset investors can see, but it also creates impairment risk and can flatter profitability in ways sophisticated gaming VCs discount anyway. Many early-stage studios reasonably expense everything and let the burn be visible. What matters is a written policy, consistency between titles, and the ability to show which costs went where. That documentation is precisely what a specialist accountant maintains as a side effect of the monthly close.
What VAT applies to digital game sales?
Digital game sales are electronically supplied services, so VAT follows the customer's location. The good news for most studios: when sales run through a major platform storefront, EU rules generally treat the platform as the deemed supplier to the consumer, and the store collects and remits consumer-country VAT itself. The studio's supply is then to the platform, not to thousands of players. Direct sales from the studio's own site are a different story: consumer-country VAT applies, and the EU One Stop Shop (OSS) lets an Estonian OÜ report it all through one quarterly return.
Estonian domestic sales carry the standard 24% VAT, and B2B transactions, publisher fees, platform invoicing, work-for-hire, follow normal place-of-supply and reverse-charge rules. The practical takeaway: the VAT treatment differs between store revenue, direct sales and publisher income, so the ledger needs to keep these streams separate from day one. Our digital-services VAT practice covers OSS registration and place-of-supply analysis, so the studio ships games instead of studying tax directives.
How do publisher advances and royalties work in the books?
A publisher advance is cash received against future royalties, and until it is recouped it is not income the studio has earned outright: it is recognised in line with what the contract actually pays for, typically as development milestones are delivered or as royalties accrue against the recoupment balance. Booking a full advance as revenue on signing day is one of the fastest ways for a studio to show a spectacular year followed by an inexplicable one, and diligence teams look for exactly that pattern.
Royalty accounting runs on the publisher's or platform's sales reports: revenue accrues in the period the sales happened, not when the statement arrives or the payment lands, so the close depends on collecting statements on a fixed rhythm. Recoupment tracking, which advances are still open, at what share, against which titles, should live in the ledger, not in the founder's head. When a gaming VC asks what portion of revenue is unrecouped advance versus earned royalty, the answer should be a report, not an estimate.
What do gaming VCs expect from a seed+ studio's reporting?
Gaming investors underwrite hits, but between hits they underwrite discipline. At seed and beyond they expect monthly reporting that connects game KPIs to money: revenue by title and by store, gross margin after platform fees, marketing spend against install and payback cohorts, burn and runway, and budget versus actual against the production plan. Because so much studio revenue arrives through intermediaries, the credibility of every number rests on store-report and publisher-statement reconciliations being complete and current.
TechAccounting runs this as a fixed-fee monthly service for gametech studios: platform revenue reconciliation, deferred revenue for IAP and virtual currency, development-cost tracking, OSS VAT where direct sales exist, ESOP payroll via TSD, and an investor pack ready for the board and the data room. Accounting starts at €499 per month, Compliance at €1,500 and Fintech & AML at €3,000 where regulated payment flows are involved, with consultations at €150 per hour. Estonia's 22% corporate tax applies only on distributed profit, 0% while earnings are reinvested in the next title, which is exactly how studios grow.