Ask Mary-Margaret #5: "Licensing issues"

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Ask Mary-Margaret #5: "Licensing issues"
By Mary-Margaret lpser, Ellen Guon Beeman, and Robin McShaffry
Gamasutra
June 29, 2000
URL: http://www.gamasutra.com/features/20000629/askmm_01.htm

This month's column focuses on different kinds of licensing issues: licensing an engine for development, licensing the right to use another game company's intellectual property to publish add-on modules, and licensing non-game intellectual properties for use in game development.

"I run a small game company that's working on a RPG. We need to license a 3D engine, and are familiar with several of the engines from major players but don't know where to find out info about engines from smaller companies." - Engine-Seeking in Encino

To start, you should search the Internet with multiple search engines, and using multiple ways of stating what you want. I did a search for "3D Game Development Engine" on AltaVista and came up with some pretty interesting hits. And you should also start with the major players: NDL's NetImmerse, Wild Tangent's (formerly Eclipse's) Genesis3D, and obviously the Quake Engine, the Unreal Engine, and the LithTech engine by Monolith. Also mentioned on a recent web search: CrystalSpace at http://crystal.linuxgames.com/, Twilight 3D at http://www.twilight3d.com/, and Vortex 3D at http://vortex.planetgeforce.com/.

I also found what looks like a great resource at the 3D Engine forum at http://www.f10.parsimony.net/forum15628/index.htm. The best 3D engines site http://www.cs.tu-berlin.de/~ki/engines.html was down the last time I took a look. If you search for "3D Engines" on the web you'll see links everywhere to this. It is an excellent resource; I hope they didn't go dark permanently.

In order to get the perspective of actually working with a licensed engine, I consulted with Mike McShaffry, who is the Director of Product Development for Glass Eye Entertainment: "Generally, you'll pay more money for better, more complete, engines and world building tools. You'll pay more for source code than object code, certainly. You'll also pay more for future upgrades or high priority technical support from the licensing company. You may even pay royalties if the engine is particularly popular. The range is anywhere from free to many hundreds of thousands of dollars plus royalties."

"Smaller technology companies will license engines that are less well known (good because they aren't overused) but perhaps leave you hanging if you need technical support while you are trying to make a milestone drop to your publisher. Ask them if they are creating a game of their own - if they are they may be overextending themselves, especially if the engine has never been in a published game before."

"The only way you can change an engine you license is if you license the source code. Generally, you will then have the freedom to change it any way you like. The trade off is you will not be able to easily incorporate upgrades or bug fixes if you have extensively modified the original engine."

"One other thing to think about - a publisher will likely see your technology risks minimized by licensing a well known engine, or perhaps one of their in house engines. The evil catch 22 is, very few technology providers will be willing to let you use the engine without paying a significant portion of the licensing fee up front. They do this for a good reason - it costs them money to support their developers and they want to eliminate anyone who isn't funded well enough to go the distance."

"So what is a small company to do, who wants to get a demo together of the next great RPG? This might surprise you, but I suggest concentrating on the game and do the demo in a sprite engine. A 3D engine can lead an inexperienced team down a horribly long, expensive, and unrewarding trail. Ultima IX was delayed nearly 2.5 years while the team tried to solve some extremely difficult problems. Eventually, the problems were solved in hardware, not software. In the end, a sprite engine will cut technology costs and complexity in half, and make no discernable difference in the quality of the game. Put another way, a sprite engine didn't hurt Diablo, did it?"

(Many thanks to Mike McShaffry for his terrific help with this question!)

"My team and I have spent two years building several add-on modules for a well-known strategy game, using the game's built-in editor. We think it's better than anything the publisher has done before, but apparently the sales of the previous add-ons were disappointing, and the publisher isn't very interested in publishing our product directly. But there's a possibility we can get a license from them so a third-party publisher could publish it. How should we proceed with this? - Freelancing in Florida

What you're dealing with here are two separate problems. One is convincing the publisher that they should license your add-on and allow it to be released into the marketplace as a commercial product, with the resulting risks to value of the game franchise should it not be successful. The second is finding a company to publish your module as a commercial product.

Your biggest problem is that people constantly release modules like this for free download on the Internet. So you're not just competing against other commercial developers, but everyone who has the spare time to build something similar in a level editor. Your module is going to have to be pretty spectacular to compete against free downloads.

It's possible that a smaller publisher might be interested in working with you to secure the license and then publish the product, or a rackware company (the folks who sell $5 games at CompUSA). I would suggest that you target folks like that as your potential publisher. A large company that directly competes with this publisher's A-list titles is not going to have any interest in something like this. You should contact the primary publisher and get specific terms for a licensing deal, so that when you approach a third-party publisher, you have all the necessary information on hand. But I don't think you should be overly optimistic about this.... you've got a lot of obstacles between you and a publishing deal.

In the future, if at all possible, I'd recommend doing your speculative work on original project prototypes so there's no risk of the intellectual property copyright holder denying you the ability to make money off your hard creative work. The fact that you've invested two years of effort in a product that may not be salable is a heart-breaking situation. I hope this works out
well for you!

"Should I license an intellectual property for my game, and what are the benefits and pitfalls involved? How should I evaluate the value of the license, and what should I ask for in the licensing deal?" - Maximizing Profits in Marin

This is a short question that's not easy to answer! Several of our industry friends weighed in on the value of a license and under what circumstances it's appropriate, and the kind of deal points you'll need for a successful licensing development.

Louis Castle of Westwood Studios had this to say on the subject: "I don't believe any game or license is well served by 'attaching' the license to a game. I think a game must be developed around the property you are licensing. Before deciding what to license I would encourage anyone to find a reason to bring a license to a new medium like a computer. If you have no reason, chances are you should not use the license. The type of game should have as much to do with a license as the license has to do with the game. The game should expand upon the experience of the property and increase its value, not hang on the IP popularity."

Chris Downend of Infogrames summarizes his view in two words: "Player appeal. If the licensed property is appealing to players, then it helps the game. The depth and breadth of the appeal determines the value along with its appropriateness for the game. For instance, Shaquille O'Neil is a huge asset to a basketball game; he is less valuable to a fighting game. Shaq also illustrates another factor: a licensed property is frequently uninteresting by itself. Putting Shaq in a basketball game without an NBA license to teams and other players makes a weak product."

Another factor is the competitive landscape, and again, Shaq and basketball is a good example. If you are inventing a game from scratch with a rich story and inventive new play mechanics, then a licensed property is of much less value. But if you are making a basketball game where you are competing against multiple products from other publishers, then you need every edge you can get to stand out in the crowd."

Erik Bethke of Watchfire Games believes that "if the material is a game (D&D, Shadowrun, Star Fleet Battles, Vampire, etc.), it is wise to license the material. The reasons are two-fold: the game system and the mechanics are laid out, and you have a hardcore fan base that will be automatically interested in your game and will contact editors, create websites, fill up your forums with interesting suggestions, etc. On the other hand, (licensing) a recent movie license is pretty useless. The only counter example of this is Golden Eye for N64, that was just plain a good game. The gameplay sold itself. You will simply have to make a great game that stands on its own. I would avoid paying the license fee altogether and just make the game (it is hard enough to make money!)

Once you've made the decision to license a property, then the actual deal becomes incredibly important. Mike McShaffry and Ellen had this to say about deal points:

What you have to do is really evaluate whether the license will increase your sales. Your deal must reflect the reality of the financial situation. Does the financial arrangement equally benefit both parties? Does the licensor gain non-financial benefit from the use of their license in this game, and is that reflected in the licensing deal?
What kind of design restrictions will the licensor place upon you? Particularly if this is a flagship property, they're going to want to make sure that you use their property in a way that doesn't risk any damage to their property. Will this inhibit your game design?
What kind of review or sign-off privileges will the licensor have, and how quickly will they respond? Thirty days is normal, but that is long time to wait when you're trying to ship a product! What happens if the licensor fails to respond within the designated timeframe? Ellen worked on one children's title that had to be cancelled because the licensor couldn't respond in a timely fashion, or basically at all.
Can the licensor or developer pull out of the deal in mid-production? Is there a fall-back position for your product if that should occur?
Who is the primary contact at the licensor, and how will they support your product and the agreement? Does this person genuinely have the clout to make decisions and get approvals finalized? What happens if this person leaves the company?
How much help in the form of access to people, existing material, and other resources will you be allowed to have? How quickly will you be given access to this material after you request it? Ellen had one challenging experience working on a film-based title where the licensor wouldn't tell her if two of the animal characters had spoken lines in the movie!
Do you know exactly how you are going to use the licensed property, and can you stick to that plan throughout the development cycle? (Licensors REALLY hate surprises.)
Will you have the option to continue to use the license in subsequent versions of the product? Generally you want to lock them in to the agreement for as long as possible, while the licensor will want the right to renegotiate frequently.
Before your first meeting with the licensor, are you appropriately prepared? You should have some concept sketches and clear design docs in hand before the initial contact, and technology demonstrations or previous products to show, as appropriate.

(Many, many thanks to Erik Bethke, Louis Castle, Chris Downend, and Mike McShaffry for their help with this question!)

Mary Margaret is one of the leading recruiters in the game business, with successful placements ranging from entry level to Vice Presidents, and is the founder of Mary-Margaret.Com.

Ellen Guon Beeman designed and/or produced over thirty titles for top game companies including Microsoft and Electronic Arts, prior to joining Mary-Margaret.Com as a recruiter.

Robin McShaffry became a recruiter with Mary-Margaret.Com after years of working in marketing and creative services at Origin.

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