The arcade game industry operates on specific financial agreements between game developers (licensors) and arcade operators (licensees). The licensing and royalty structures are crucial for both parties to generate revenue. The most prevalent model is a revenue-sharing agreement, where the arcade operator pays the developer a percentage of the income generated by the game. This percentage typically ranges from 20% to 50%, often negotiated based on the game's anticipated popularity and the operator's location traffic.

An alternative to revenue share is a flat fee or lease agreement. Here, the operator pays a fixed, recurring fee to the developer for the right to host the cabinet for a set period. This model provides predictable costs for the operator and stable income for the developer, though it lacks the upside potential of a hit game.

A third, less common structure is a hybrid model, combining a lower guaranteed flat fee with a smaller percentage of the revenue above a certain threshold. This balances risk for both parties.

The specific terms, including the percentage, fee amount, contract duration, and maintenance responsibilities, are detailed in a formal licensing agreement. Ultimately, the chosen structure depends on the game's appeal, the developer's leverage, and the operator's business strategy, with the goal of ensuring mutual profitability.