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Timely payment. Why not?
by Alexander Brandon on 08/04/11 10:30:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.


Say you want to buy a DVD at Best Buy. You walk in, choose your DVD, walk to the checkout / cashier, pay for it, show the person at the door your reciept, and walk out. Perhaps you've seen the movie before. Perhaps you haven't. Either way you have a product that you may or may not be satisfied with. If you don't like it, keep your reciept and return it.

When a contractor for the games industry provides a service whether it is producing assets or providing consulting, this widely accepted method of purchasing something doesn't apply at all. You can provide a service and get paid in a few days, a few weeks, a few months, or possibly never.

A contract is usually drawn up outlining what is expected of the delivery and the service or assets, and those things are evaluated, typically in milestones. Whether it is an entire game or a single texture, there is no solid process for timely payment once something is accepted.

Funny, isn't it? Funny, scary, and ultimately wrong. When engaging a contractor, just as having a credit card or cash in your pocket, you have the money ready before something actually gets delivered. Once it is in your hands, money is delivered. If you don't like it, get your money back. Plain and simple.

The reason consumers accept this practice is because stores have security systems that go off if you leave without paying. Even in a McDonald's, before they give you the food you have to pay. You could I suppose jump behind the counter, hastily grab a Big Mac and jump out the window or run out the door, but that is called theft. McDonald's then will probably call the police and have you arrested.

The same thing doesn't happen with a big developer or publisher and a contractor, or even a small developer with a big contractor. Assets are delivered, and the contractor waits. And sometimes waits a lot. Where is the security? Where is the legislation that calls that theft?

Having asked this question of colleagues typically even if timely payment is built into a contract, the only way to enforce it is to take the client to court. A costly process that people don't even start thinking about because they can't afford it in the first place. There is in fact legislation in place for timely payment:

There is a federal prompt payment act but it only applies to contractors paid by federal agencies or departments.

Having read earlier today about the unionization of the game industry, I also find it interesting that we are seeing a repeat of a similar trend in the film industry, yet even unions that affect the game industry do not have the power to enforce timely payment.

I write this mainly as a topic of discussion with the hope that something positive can come out of that discussion. Respond with your tales of woe, enlightenment, or indifference!

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Megan Fox
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For contractor payment, a better comparison would be a nice restaurant.

You walk in, you sit down. You're greeted, you place your order, you wait. The order is brought to your table, and you begin eating. No money has traded hands. You find a hair, or realize that the salad is quite disgusting and wilty, whatever - and so you politely let the server know, they take it back, and you get your order replaced. Hopefully, this one is better.

Still no money has traded hands.

In practice, that could well happen multiple times with a dodgy restaurant, and you might even still go back, if that last delivery were really, truly delicious. Though you'd plan for a really long meal. You might even eventually decide that they're incapable of making something edible, and politely pay for whatever you did consume (probably a beverage), and leave. Or you did like it, you finish the meal, and then you pay on your way out.

Contractors don't receive payment before delivery because the asset in question needs to be reviewed for compliance with requirements and expected level of artistry. If you did the McDonalds approach, an indie would invariably end up with a fly-by-night contractor who accepts payment, provides (useless) content, and then disappears into the night beyond all hope of recovery.

Thus, while contracts should ABSOLUTELY spell out payment terms and expected payment delivery date (every single one I write does), they also need to be designed with a review process prior to the payment in which content is submitted and can be rejected some number of times. Once you've stipulated payment terms, you then also need to add a clause that lets either party dissolve the agreement, at which point all contracted asset rights revert to the sole ownership of the contractor, and all unrelated game assets and provided documentation/etc revert to the sole ownership of the contractee.

Rey Samonte
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I believe my current company that I work for pays their contractors a partial payment while their art or code is being reviewed internally. When our internal team finds the work acceptable, we will pay our contractors the rest of what is agreed upon and they surrender all art asset source and code files over.

It works but we still find some situations where we are having a difficult time with the outsourced developer with making changes. A lot of times, they feel like they have delivered something complete but through our QA and review process, things come up that require attention. In these cases, we've had some games take longer to finalize because we spend too much time trying to convince the developer that those changes are neccessary. Or other times, if the struggle is too much, we just pay them what is left, get the game source and assets, and make the changes in-house. The only problem with that is, one, the likelihood of working with that developer is slim and, two, it takes time away from our internal teams from the projects they are working on and that affects the schedule.

Kevin Reilly
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Alexander, first there is nothing stopping you from asking for money upfront as a hedge against slow or non-payment without cause. Publishers may not like it on small contracts, but they tend to agree on larger/longer term projects if you ask for it. Second, it is fairly common to build in review periods for milestones where the publisher agrees to pay for a milestone if it hasn't rejected it after a certain amount of time. Publishers don't like to have milestones "deemed approved", but there is no reason to let them go dark on reviewing milestones. Third, you can state in a contract that the assignment of the IP in the assets is contingent on the publishers payment for it.

BTW - stating a law requires prompt payment doesn't actually guarantee the publisher will pay any faster b/c you still have to sue them in order to enforce the statute (which may not actually govern the terms of the contract).

Robert Boyd
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If you're a contractor then you should make sure that any contracts you sign should be very specific about when you're getting paid. It's as simple as that.

But hey, it could be worse! You could be an indie game developer who works hard on a game and doesn't see a cent until a few months after the game's release.

Achilles de Flandres
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LOL! nice one Boyd :D

Peter Kojesta
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At my outsource company, we give the client access to private web pages/apps that allow them to view their asset the entire time it's in production. They can view and correct any non-conformity before the asset is even delivered.

Once the asset is delivered, the client reviews it further, and either points out bugs that they missed, or gives us the approval.

The good studios pay their bills within NET 15 or NET 30, the bad ones who will quickly find themselves no longer working with us, or with other pro outsource studios (among other legal matters), either run you around endlessly, or don't pay at all.

The best way is either a % up-front, and final payment NET (x) after delivery. The thing company managers should know/understand is that when you perform work without payment up-front, you're extending them credit; backed by their studio and personal reputation.

But I can assure you, the #1 hardest part of being an outsource studio is getting the developer to pay you for the work you performed. Thankfully, we haven't dealt with any bad studios and our clients are prompt and generally a joy to work with.

A lot of places have their own outsource contracts, and it can take a VERY long time to get amendments to these contracts; so it's often not worth the hassle. That said, I think expecting payment for your work in a timely manner isn't outrageous.

Alex Leighton
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I think milestones are a good way to go, that was what I usually did when I was doing web design after high school. So long as progress is being made on schedule, the client pays a certain %. If the contractor decides to fly with the money, the client at least has what he's paid for, and can probably find someone else to pick up the project. On the other side, the contractor hasn't had to work for free if the client decided to scrap the project or become insolvent.

Martain Chandler
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The construction industry often uses escrow services. I wish this idea would take hold in the games industry.