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A practical guide for indie devs on evaluating and negotiating a publishing deal.
The following is a repost of a piece over on my own blog at www.legalgamer.weebly.com. This piece ended up being fairly long, but there's a TL;DR at the end and hopefully some of you find the more detailed sections helpful!
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A publishing deal is potentially one of the most important contracts you’ll ever enter into regarding your game. A good one can see long-term partnerships thrive and successful games brought to life, whereas a bad one can lead to bitter disputes about royalties, deadlines and even game / IP ownership.
I seriously believe that the vast majority of publishers out there aren’t intentionally looking to tie people into bad contracts. What I do think though is that the paperwork formalizing these deals isn’t always given the attention it deserves (by either devs or publishers) at the time when it’s needed the most - i.e. before signing. It’s a dev’s own responsibility to negotiate a good publishing agreement – don’t always just assume that the contract you’ve been given is fair or even 100% reflects what has been discussed verbally.
Publishing deals are more often than not fairly complex and unless you’ve been through the process several times before, there’s little substitute for getting a professional advisor involved (i.e. a lawyer, consultant, business advisor, veteran indie dev etc). However, for those still looking to go it alone, I wanted to put together this guide to help identify some of the things which you should normally think about when negotiating a publishing deal, and the resulting answers put into the contract.
PRE-CONTRACT STUFF
Why do you want a publisher?
Before thinking about partnering with a publisher, it’s important to be clear on what you actually want out of the relationship. To answer that, it’s important to know what publishers typically do. This varies from publisher to publisher (more on this later), but can include:
Finance (potentially for the initial game, completion funding and/or ports);
Distribution (getting physical copies on shelves and good digital store visibility);
PR / Marketing (including attendance at industry events);
Contacts (business, production, social media, online influencers etc);
Manufacturing (actually producing the physical boxed copies of a game);
Development (co-developing ports);
Localisation (translating and adapting your game’s content to other territories);
QA;
Platform Submission;
Age Ratings (which can be complicated if releasing outside EU/NA, particularly In Asia);
Providing dev kits;
Etc.
Do you need a publisher?
Once you’ve decided what you want, the next step is to ask yourself if you actually need a publisher to achieve these things – i.e. is there some alternative means out there which doesn’t involve giving away royalties/rights in your game. For example, are there any alternative funding options available (e.g. crowdfunding, the UK Games Fund, the Wellcome Trust, loans from friends/other devs)? Do you actually need a distribution partner if you’re only creating a digital-only Steam/console game? Which countries are you actually releasing in – do you need expertise in territories like Asia (which are notoriously difficult / impossible to pursue alone)? Do you need a publisher’s skill set for marketing and PR or are there any social media / PR agencies that could work equally as well? Could you even do some of these things yourself?
That last point is an important one. While it’s certainly possible to do some of these things yourself, remember that this is going to take time. A lot of time. Time which is keeping you from actually working on your game. And remember, a good publisher will have done this all multiple times before which should minimize mistakes and hopefully keep things as efficient as possible. Releasing a game solo is incredibly hard work – always think carefully about whether or not you can realistically achieve everything (including the business / admin stuff) that needs to be done.
If so, which publisher?
If you’ve decided to look for a publisher, the next step is finding the right publisher for you and your game. Publishers come in all shapes, sizes and personalities and finding the right one can take a fair amount of work. First off, you’ll want to make sure that the publishers (yes, plural – keep your options open) you’re actually targeting are known for offering the things you’ve decided you need – e.g. does that publisher actually offer completion funding? Do they actually have partners and connections in the foreign territories you want to reach? Do they have experience in the formats (physical/digital) on the platforms (consoles, PC etc) that you want to launch on? What have their previous marketing efforts looked like – were you impressed? Does their existing catalogue of titles and general reputation match up with the type of game you’re making?
You can find a huge amount of information about publishers online, whether through the publishers’ own websites, dev blogs, post-mortems on Gamasutra, generally Googling etc. Also, don’t be afraid to reach out to previous devs who have worked with that publisher in the past – particularly those whose games may not have been the biggest sellers or that had troubled development cycles (those devs will give you a better insight into what the publisher is like when things aren’t necessarily going perfectly).
CONTRACT FUN
Once you’ve piqued the interest of a couple of publishers, it’s time to start getting into the details of the deal on the table. When it comes to publishing agreements, four of the most important areas to think about are: (1) Intellectual Property Rights; (2) Financials; (3) Milestones; and (4) Termination Rights and Consequences.
(1) INTELLECTUAL PROPERTY RIGHTS
“If a game is your baby, the intellectual property is its soul” – this great Gama piece.
I love this quote because it perfectly encapsulates the importance of intellectual property rights (IPR) in a game. Whoever owns the IPRs basically has control over what is (and what isn’t) done with that game (but keep reading for exceptions to this!). As a result, IPR ownership should be one of the things at the front of your mind when negotiating a publishing deal.
My default position when advising clients is that devs should retain full IPR ownership in the game that is created. However, there are no hard and fast rules here. If you’re faced with retaining IPR ownership but not being able to secure funding on the one hand, but giving up IPR ownership and securing a substantial development budget, a fair rev share across all income streams from a proven publisher, it’s at least worth being open to the deal on the table. A lot comes down to your own personal circumstances (e.g. do you need this deal to keep the studio afloat), how important this game is to you (maybe it’s not one you see becoming your primary franchise) and importantly, what other rights you get/give away in the rest of the publishing agreement.
Even if you retain IPR ownership, what should you look out for?
Even if you retain IPR ownership in the game, there are still a number of ways you could accidentally give away more than you intend to, which can drastically limit your control over your own game! And that’s because even though you own your game, you’ll need to grant the publisher a ‘licence’ over this in order to legally permit the publisher to do all the good things they’re meant to do. Problems can arise though when the conditions of that licence are ambiguous or overly wide – the precise wording of a licence is very important and single words can make all the difference (no exaggeration!). When it comes to looking at licences, some of the things you should look out for include:
Platforms: which platforms does the licence cover? Even if you’re only actually creating a console version for release, you can still tie-up rights for other platforms (PC, VR, TV etc) that you might want to create later down the line and give to a different publisher (or even self-publish). Also, be as specific as possible – if you’re just giving iOS mobile rights, don’t agree to giving away all “mobile” rights. If it’s just XB1 and PS4, don’t agree to all “consoles”.
Exclusivity: are the rights you’re giving away exclusive or non-exclusive? In most cases it’ll be the former, which means that no one else can do those things which you’re exclusively granting to the publisher – this includes you yourself! So if you’re making a mobile game but also give away exclusive PC publishing rights to the publisher, you technically can’t self-release a PC version later down the line – you can only do so with that publisher.
Territory: In most cases the publisher will ask for a ‘worldwide’ licence over the game. However, it’s not uncommon for devs to look to carve out certain territories from the scope of a licence (particularly in relation to Asia). This can be valuable to devs for a number of reasons, including where the current publisher doesn’t actually have any experience publishing in those foreign territories. Things are changing a lot in China at the moment from a regulatory perspective making a local partner almost essential for foreign devs releasing their games there.
Duration: Licences to a publisher should only last for as long as the actual publishing agreement remains in effect (re which there’ll normally be a minimum term which automatically renews until terminated). This should be written clearly and words like ‘perpetual’, ‘indefinite’ etc removed.
Future Works (sequels etc): Does the licence to the publisher only cover this single game, or does it also include future works like spin-offs, sequels, prequels, derivative works, games ‘based on’ the first, DLC, cosmetics, etc? This can be dressed up in a number of ways (often quite confusingly so), so it’s important to read the wording carefully. As with platforms, the important thing is to make sure you’re not unintentionally locking away rights to future projects.
Ancillary Rights / ‘Exploitation’: In addition to game publishing rights, are you giving away any other ‘exploitation’ or ‘ancillary’ rights (which are both fairly nebulous terms but basically mean non-game products such as merchandise, comics, TV, film, books etc). Before giving these away, make sure to ask if the publisher actually plans on (and has experience) producing these non-game products. If they don’t, be cautious before locking up these potentially very valuable rights.
The moral of this section is to make sure you’re 100% clear with what rights you’re giving away. If you’re unclear what something means, think something is drafted too widely or is simply wrong, always question this and get the contract tidied up.
If you give up IPR ownership, is there anything you can do to improve your position?
If you decide to part ways with the IPR ownership, there are still a number of things you can look to negotiate which could give you some level of involvement in future projects in the franchise. For example:
ROFO / ROFR / ROLR / ROLO: these stand for Right of (i) first offer, (ii) first refusal, (iii) last refusal and (iv) last offer. These terms all mean subtly different things (which can be very important), but the one you’ll come across most often is a right of first offer (ROFO). If you give up your IPR but you negotiate a ROFO, this will normally mean (though it depends on the exact wording in the contract) that if the publisher wants to publisher a sequel/other product based on that game IP, they must first offer the development work to you. The contract will normally say that you’ll then enter negotiations with the publisher for a certain period of time (e.g. 30 days) to try and reach agreement re development terms. If no agreement can be reached, the publisher is free to take the IP elsewhere. In other words, a ROFO isn’t a guarantee that you’ll be involved in future projects or even get a rev share for those, but it normally means that you’ll at least be consulted.
Reversionary Rights: slightly less common nowadays, but a reversionary right normally means that if you give up your IPR but the publisher hasn’t made a sequel within a certain period of time (e.g. 3-5 years), then the IPR ownership reverts back to the original developer. The idea here is to try and prevent the warehousing of IPs.
Summary: IPR ownership is an incredibly important topic and my default position is that the devs should retain this. However, hopefully the above demonstrates that while IPR ownership is important, there are a number of ways in which you can (i) unintentionally lose control of your IP even if you own it, and (ii) gain some future involvement with the IP, even if you give up actual ownership. In other words, it’s important not to tunnel-vision on the idea of IP ownership alone, since everything else in the contract can have a major impact on how that IP ownership actually works in practice – always read the contract as a whole.
(2) FINANCIALS
The financial terms are the next that should be given your close attention. Things you’ll want to think about here include:
Revenue Share: What split of revenue do you keep and what does the publisher keep? A question I get asked a lot is “what’s a typical publisher rev share”, but the answer to that is so deal-specific and depends on a huge number of factors - you could be looking at giving up anywhere between 20-70% of your revenue. Be prepared and bargain hard!
Revenue Streams: So, you’ve agreed the rev split in relation to game sales, but what about revenue that is generated from elsewhere, such as DLC, cosmetic IAPs, sequels, t-shirts, books, tv shows, movies etc? Whatever rights you're giving up, it needs to be clear how revenue made from the exploitation of these is handled – sometimes this can all be wrapped up into a single % figure, or different %s can be negotiated for different revenue streams.
Gross / Net: Once you’ve work out what share you’re keeping, it’s important to discuss what that’s actually a % of. Is that gross revenue or net? If it’s net, how is ‘net’ defined in the agreement – i.e. what ‘deductions’, ‘recoupments’ or expenses are getting taken off by the publisher before your % is calculated? Look at these carefully, ask for ambiguous terms such as “other costs” to be clarified, narrowed or removed as needed.
Payment Periods: When do you actually get paid your rev share? On a monthly or quarterly basis? Within 30 days of you submitting an invoice to publisher? When can you actually submit an invoice – only upon receipt of a royalty report from the publisher? If so, when will the publisher give you royalty reports? Depending on the payment period wording and what costs are being recouped (e.g. dev funding), it’s possible that you might not see any money at all until 3-6 post-release, even if the game sells well! Prepare for this and don’t hinge survivability on receiving royalties on day 1.
Royalty Reports: Make sure you get these and that you understand them. A royalty report should at least detail how many units were sold on which platforms, in which regions and give you a breakdown of gross revenue, deductions/recoupments and the division of net rev share between dev and publisher. If you don’t understand something here, don’t be afraid to ask.
Audit Rights: Having an audit right gives you the ability to send in a professional firm of auditors to check the publisher’s books/accounts to make sure it has been paying you the correct royalties. It’s normally only used as a last resort, but having the power written into the contract can be advantageous if things unfortunately start to go wrong.
(3) MILESTONES
The Milestones set out the development and funding timeline for a game and are normally found tucked away in the back of a publishing agreement in its ‘schedules’. Checking details here is crucial to make sure this section clearly sets out:
exactly what has to be delivered at each milestone: what actually constitutes an alpha, beta, first playable, submission build etc? What level of bugs is acceptable at each stage? What game features/assets should be present – multiplayer, save systems, full UI, voiceover etc? Although it’s less common nowadays to set these things out in massive detail, it’s still in the devs interest to do so as this reduces scope for arguments in the future – particularly re what features the final game will actually include. You should also look to include a “material change” clause, which basically means if the scope of the game drastically changes at any point, that time frames/milestones/payments etc should be renegotiated.
when you get paid for each milestone: milestone payments could be tied to static dates (e.g. 15 March) or to ‘acceptance’ by the publisher of a milestone’s ‘deliverable’ (i.e. the game build). It’s important to make sure that these payment time frames actually work for you from a cash flow perspective – if you need advance funding (i.e. on signing) in order to hire staff/buy equipment and software, make sure your first payment isn’t all the way at acceptance of the first milestone - otherwise you won’t have enough to get started. Also, re timings in general, always remember to build yourself in some leeway – staff get sick, things go wrong or take longer than expected, ideas get scrapped and added in etc.
what the publisher’s submission / acceptance procedure is: for those milestones where payment is tied to ‘acceptance’ of a deliverable, what does ‘acceptance’ actually mean? What does the general submission / acceptance process look like? When can a publisher reject a milestone – lack of a particular feature / too many bugs (this is why it’s good to go into as much detail re what’s due at each stage)? How long does the publisher have to review each deliverable? Does this time eat into your next milestone?
what happens if there’s rejection: If the publisher rejects a deliverable, what happens next? Does the publisher have to give detailed reasons for the rejection? How long/how many chances does the dev get to remedy these problems? There should also be a clause in the agreement saying that if the publisher causes delay (by e.g. taking a long time in reviewing deliverables) then the remaining milestones are extended by the amount of delay incurred.
(4) TERMINATION RIGHTS AND CONSEQUENCES
Although it sounds negative to be thinking about termination rights/consequences at the start of a hopefully very positive working relationship, don’t let that stop you from being forward thinking. After all, one of the main purposes of contracts is to set out what happens when things go wrong.
In the majority of publishing agreements, termination rights will be weighted in favour of the publisher, particularly where it is providing development funding (which makes sense since the publisher assumes a lot of the up-front risk in investing in you/the game). That said, there are some termination rights which a developer should always look for, such as for serious breaches by publisher (e.g. payment defaults, misuse of your IP etc) and if the publisher goes into liquidation.
Make sure to read the publisher’s termination rights carefully as well as your own – does the publisher have additional termination rights prior to the commercial release of the game? Does the publisher have any ‘termination for convenience’ rights (i.e. it can terminate at any time for any - or no - reason)? Can the publisher terminate if you fail to submit a milestone on time or if it rejects a deliverable multiple times?
But it’s not just when either party can terminate that’s important – a good publishing agreement should set out clearly what happens in the event of termination. Things to think about there include:
Can you take the IP to another publisher/keep working on it yourself?
Do you have to repay any of the development funding to date?
If you’re part way through a milestone when the agreement terminates, do you get paid that milestone (in part or in full)?
If you originally gave up the IP, does this revert back to you in the event of termination?
Does the publisher continue to receive royalties for any period after termination?
Does any of the above vary depending on which party terminates the agreement?
There are no hard and fast rules here and a lot of these points will be open to negotiation – don’t be shy to negotiate and remember that now is the time to be thinking about these things, not later. And in my experience that’s one of the main reasons for getting a professional advisor involved in negotiating a publishing deal – they’re there to point out the tricky questions which can easily slip your mind while everything else is going on and to fight your corner as hard as possible.
THAT’S IT?
Not yet! Most contracts are softly divided into two halves – one that deals with the ‘commercial’ terms (like those above) and one that deals with all of the legal stuff like confidentiality, 'indemnities', 'liabilities', 'warranties and representations', governing law and jurisdiction etc, which will most likely be written in fairly hefty legalese. Unfortunately there’s no simple way around having these reviewed by someone who’s familiar with the terminology. But both parts are equally important and the legals should be given as much attention as the commercial parts of a deal. After all, in the event that something goes seriously wrong, it’s often the legals that will dictate how risk/liability is divided between the parties.
TL;DR
Always think carefully about what you want from a publisher, whether you actually need a publisher and, if so, which publisher is right for you.
Four of the most important areas to think about when negotiating a publishing agreement are (a) Intellectual Property, (b) Financials, (c) Milestones and (d) Termination Rights and Consequences.
IPR ownership is important. If you’re keeping your IP, don’t accidentally lose control of this through widely drafted licences. If you’re giving up your IP, try and negotiate some involvement over future exploitations (ROFOs etc).
For the financials, make sure there’s clarity over what and when you’re actually getting paid.
Be as detailed as possible when it comes to setting out the milestones and acceptance procedure, particularly regarding what’s due at each milestone, when you actually get paid, when the publisher can reject and what happens then.
Think carefully about not only when either party can terminate the agreement, but what the consequences of termination actually are.
There’s always a whole bunch of legal stuff in a contract which is just as important as the commercial terms (particularly in the event something goes wrong in the future).
TIPS
Read your contract! There’s never any excuse for not doing this.
Understand it. This one’s a little harder because some contracts are more clearly written than others, but if you’re ever unsure of what something means, ask the publisher or a friend or family member to help explain this. With contracts, the devil truly is in the detail.
Get it in writing. Not in emails, skype, IM or anything else – if you’ve requested a change/clarification, make sure this ends up in the contract you eventually sign.
Give yourself enough time. Always leave enough time for proper review and negotiation of a publishing agreement – this can range anywhere from a couple of weeks to several months.
Separate needs from wants. You’ll never get everything you want in the contract, so it’s important to focus on what’s important to you and being prepared to compromise on other points.
Work together. Negotiating a deal is a 2-way street – keep things civil, realistic, listen to the publisher’s side of things and balance that with what you’re asking for.
Tunnel Vision. Don’t tunnel vision on any particular point and always read and understand the deal/contract as a whole.
Be prepared to walk away. This isn’t always easy to do, but giving yourself enough options so that you actually have the power to say no is really important.
Get help. Whether this is from friends, family, other devs, consultants, advisors or lawyers – don’t be embarrassed to look for external help; any cost associated with this will be marginal in comparison to what you could be putting on the line with a bad contract.
Boring Disclaimer: Please remember, I’m not your lawyer (unless I actually am, in which case hi!). Either way, this is not legal advice – legal issues are very fact specific. If you’d like to learn more you can reach me at @LegalGamerUK. Thanks for reading! =)
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