Five key publishing contract pitfalls for indies to avoid

In his GDC 2023 Indie Summit talk today titled How Publishing Agreements Go Wrong (and how to fix them), attorney Kellen Voyer (of Voyer Law) laid out five common problem areas for indie developers to watch out for in publishing contracts, with specific advice on avoiding pitfalls. Using real-world examples (with names redacted!) Voyer offered advice on five key clauses in common contracts: license, royalty, marketing, DLC and add ons, and Intellectual Property.

"The license grants rights in the game and related content to the publisher," said Voyer. "That related content could be merchandise rights, it could be film, television, etc. These licenses can be both exclusive, as in no one other than the publisher can use whatever you've licensed. And that can be non-exclusive, meaning that you as a developer and others can use whatever you've license." Voyer noted an overly broad example and advised that developers should be careful with the scope.

"Make sure that's a license just to the game and, not to things like characters [or universes], because you want to make sure that you're not inadvertently scooping up sequels and other things, and to narrow down what is exclusive to the game."

Royalties and marketing agreements were next, and Voyer was sure to clarify the basic terms here before diving into practical advice for indies. Voyer noted developers should be careful to check on specific terms related to recoupable costs: and to ensure that publishers aren't "double dipping" by including some of their own internal marketing or QA costs in the agrement, or taking an additional pecentage out as a platform holder. He also suggested insisting on an audit right, so every item on the proverbial receipt can be correctly checked.

For marketing purposes, Voyer suggested specific language in writing for marketing spend and for both parties to agree to a speficic marketing plan, to avoid headaches or any potential issues.

How should indies negotiate for DLC in their publishing contracts?

In one of the most interesting parts of the talk, Voyer went in on what can go wrong if plans for DLC and add-on content aren't very clearly laid out in the publishing agreement.

"Have a specific payment obligation for DLC: if the publisher is committing to DLC at the time of signing, have that written into the agreement," Voyer said.

"If you as a developer are going to bear the cost of DLC entirely, try to negotiate for a different royalty for such DLC, because I think that royalty should reflect a greater risk. [The risk] is assumed by you as a developer. You've already assumed a ton of risk making the game without getting paid much, and now you have to make the DLC for free. I think there should be a higher relative royalty there to reflect that greater risk. Ultimately, you don't want to be in a position where you have to make DLC but no money's coming in."

Finally, Voyer was bullish on IP.

"Publishers should never own the game IP," he said definitively. "The developer has worked really hard to build that universe, to build that game, and should always own it."

"So game IP should always be owned by the developer. Otherwise, you lose control of the game forever. And also, as a developer, you lose control of IP derivatives [like] film, TV, comics, and merchandise."

He also noted that some contracts are written in such a way that the developer and publisher "split" the rights to the IP, but in reality, in North America, the law works in such a way that the publisher will have ownership:

"But if you're North American, IP 50 percent actually means 100 percent... Each 50 percent owner can exercise the same rights as if it's 100 percent owner," he explained. "As a result, the publisher could exercise these rights as if a full owner: they could create other games, DLC, etc, without an obligation to compensate the developer."

"So if you imagine 50 percent being 100 percent and you give them rights to it, unless you restrict that heavily in the publishing agreement (which is really difficult), that publisher could go off and do whatever it wanted with it, or they could terminate the publishing agreement, in which case is nothing constraining them at all and they could do whatever they wanted."