Features

Negotiating Contracts That Protect Your Title and Team

Worldwide Versus Country By Country: Which Is Right For Your Team?

If your team has funded the majority of the game and you are in a strong negotiating position you should investigate the two primary business models available to you and choose the one that fits your goals the best. Should you choose one of the major worldwide publishers or take your title country by country and spread your risk? Each model has its own advantages and disadvantages.

Advantages of A Worldwide Model
A worldwide publisher carries strong brand recognition with consumers. Many gamers make purchasing decisions based on the publisher behind the game. The sports franchises of EA and 989 Sports are classic examples of this trend. Many consumers will buy the newest version of these games every year with little or no regard for previews or reviews. Simply the notoriety of some of the big publishers is an advantage in its own.

Another advantage of the large publishers is the amount of money they can invest in marketing and shelf space. Any company will make certain the public is aware of their products, big companies will invest in television advertising and larger booths at trade shows in order to make sure their games are the topic of conversation.

The acquisition of shelf space is also a major factor with publishers. Most worldwide publishers have large amounts of shelf space reserved for their lines. This prime shelf space in retailers will guarantee that your product is seen by the consumer.

Worldwide publishers also have the financing to support games at much earlier stages. Established teams can approach publishers with a design document and a technology demo and have a good chance the project will be acquired. This provides you with the security of revenue as long as the publisher is happy with the milestones that are presented.

Finally, publishers offer you a simplistic contact base. You have the entire world covered as far as distribution, but you only have to manage one contact. This makes life much simpler for companies as you spend much less time handling royalties and bug reports, marketing and press inquiries and more time doing what developers do best: Making great games.

Disadvantages of a Worldwide Model
One of the prime disadvantages of a worldwide publishing model is the fact that the bigger houses will overlook many territories. Countries like Portugal, Brazil, and South Africa may not seem like much, but added together the advances from these territories can be quite significant. When you grant worldwide publishing rights to a company, be certain they will cover all the territories available to you. We will discuss how to do this a little later.

The evaluation time for a large publisher is another disadvantage. Small publishers can make a decision in a matter of days. Large companies with offices spanning the globe can sometimes take three to six weeks. The titles must be shown to and approved by each territory or a minimum of the primary US and European offices. Within these offices, the game will be shown to and approved by multiple producers, acquisition agents, and project managers. Once approved, the game usually goes to a board that makes the final decision. In the time that it takes some worldwide publishers to "green light" a game, individual contracts can be signed for the majority of the territories of the world with country by country model.

Worldwide publishers handle all of the marketing, PR, shelf space, and manufacturing costs across the globe. By spreading your risk across several smaller companies you can offset some of these costs. Keep in mind that all money spent to promote your title, must be re-couped prior to you receiving a royalty check. In addition to this, any territory that a publisher sub-licenses to will show a significant drop in your royalty rate. Another general rule of thumb is that the higher an advance you ask for, the lower your royalty will be. Keep all of this in mind as you are researching the business model that will best help reach your goals.

There is always a risk of having your title canceled from a worldwide publisher as well. If the publisher releases several titles that do not live up to their expectations, you may find your project canceled as a means of diminishing their own risk. Acquisitions by other publishers are also common and can have the same effects. Your title may not fit the image of the new owners or they may have a competing franchise. If you have a long-term contract with a company, this is something you should be prepared for in the unfortunate event that it happens. In a sense -

Your advances are only as good as your last milestone payment. No matter how secure your contract is, publishers will almost always demand a clause for termination with little or no cause. For this reason it is recommended that the contract states if the project is cancelled for any reason, the publisher must pay the next two milestones. This will give you enough time to locate a new publisher or diminish the chances of cancellation in the first place. Chances are your title is much further in development at this point and securing a new partner will be much less difficult. Many publishers will require that upon signature of a new agreement you must re-pay all of the advances that they have sent you.

You may also see much less mind share from a worldwide publisher than you would from a country-by-country publisher. These companies release many titles in a year and your title may be only one of these. Don't let your project get lost in the shuffle. Make sure you are in constant contact with your producer or the contact at the publisher. This will keep you in the front of their minds at all times.

Simply negotiating a contract with a big publisher will take more time than with a smaller company. Larger publishers have a legal division and a much larger chain of command to work through than country-by-country publishers. Many times these companies will have template contracts with very little room for negotiation at all. It is much easier to start with a publisher's contract when the negotiations begin. Don't waste your own time and money on a contract that will just be discarded by publishers or delay the process as they have their team review each point. Ask for their contract and have your lawyer look it over. This will save you a lot of time and stress in the long run.

Advantages Of A Country By Country Model
Country by country publishers will offer much higher royalty rates than worldwide publishers will. You will be dealing directly with the publishers in these territories, many times the same partners that the large publishers use!!! For these reasons, the margins are higher and you can receive a larger portion of the pie. You do not see your percentages depleted as the checks filter through multiple companies. When the retailers pay these publishers, you receive a check immediately.

The marketing campaigns of these companies are much more focused as well. They only handle sales in their native country and they know how to reach the gamers in their territory effectively. When dealing with different publishers in each market, you will see the variety of campaigns that they use. Many worldwide publishers will use one blanket strategy and you will not see the benefits of this localized marketing.

You will also have a much larger pool of partners to choose from with a country-by-country model. If you can reach beta stage with your title, you can have as many as five times the available partners to choose from. There are roughly thirty to forty companies in the world that can safely fund a title from concept on a worldwide model. With a country-by-country model you can have as many as twenty partners in a given country to choose from. This increases your chances for a bidding war and also allows you to select the publisher that you are most comfortable with.

Deals happen quicker with country-by-country publishers. This was addressed earlier when it was detailed how much time it takes many worldwide publishers to make a decision on a game. Many country-by-country publishers only need to show the game to their evaluation staff, and then have the heads of the company quickly review it. Offers can arrive within two days of some of these companies receiving packages. The contracts are also much easier to negotiate. If you are using an agency, chances are high that your agent has seen this company's contract before and they can help you speed this process up. Even if you are handling the sales of the game yourself you will find that country-by-country publisher contracts are much more forgiving and sometimes half the size of a worldwide publisher contract.

Country by country publishers will also provide you with much better mind share than most worldwide publishers. They release only a fraction of the games a year that the big companies release, so the title means as much to them as it does to you. You will be able to receive instant feedback on the marketing and work with them to correct any problems or execute new sales strategies. With their interests closely aligned to your own you can be certain that your title is being handled properly.

Disadvantages Of A Country-By-Country Model
The primary downside of selling your title country by country is that you must have your title near completion. These companies incur much more risk per title than the worldwide publishers. As a result they want to be certain of what they are buying. On occasion the game can be sold at demo stage, but the demo must be quite complete and very good.

The advances you see from a country-by-country model are smaller, but the shear number of advances you will receive counters this fact. The risk here for developers is making sure that a significant number of publishers pick the title up. As you are not requesting development funding, the chances of a high seven-figure deal are slim. But they are not unheard of. This situation is not the norm, but it certainly helps when all your costs are covered from one territory and you still have ten or fifteen more to sell into.

There is a smaller chance of landing a publisher with the name recognition you desire in this model as well. The country-by-country publishers may be well known in their own territory, but they may not carry the weight you desire for your next negotiation in the worldwide market. The ability to say "Our last title was carried by X publisher" is a huge benefit when negotiating contracts down the road. The country-by-country model may provide you with a deal with a division of one of the worldwide publishers, but you will most likely end up with a company that few outside of that market recognize.

Using this model also makes it difficult to place titles in the US and the UK. Where other countries around the world have as many as 20 companies how handle single territory deals, the US and the UK have very few. Most of the worldwide publishers are based in these countries and they prefer worldwide rights or nothing. There are still several options in the US and UK, but you will find the search much more difficult here if Europe and Asia are already spoken for by a variety of different publishers.

There is a significantly larger time investment in this model as well. Much more time will be devoted to selling the title country by country. It is possible to send your title to as many as two hundred to three hundred publishers on this model as opposed to the thirty to forty worldwide publishers. Once you add the follow up calls and negotiations into this, there is a large amount of time that could be spent coding or developing art resources. Your company may not have the resources to handle this time investment. Moreover, you may not have these contacts in the first place. This is a significant factor to consider.

Once the deals are signed in each of your target countries, you will have to manage that many more PR requests, localization kits, royalty reports, and payments. With a worldwide publisher you will have one liaison to work with in this capacity, with a country-by-country model you will have one from each company. Either a full time employee in the office or an agency can alleviate this concern as well as time investment mentioned above.

Summary

Creating a great game and negotiating a contract that ensures you make money are two keys to success in game development. Know the kind of deal you are looking for and in which areas you should negotiate most aggressively. If you use the information in this paper to create a plan for your negotiations, you will have an excellent head start in structuring a contract that will maximize your revenue and protect your company and it's property.

______________________________________________________

[Back To] Let's Make a Deal

join | contact us | advertise | write | my profile
news | features | companies | jobs | resumes | education | product guide | projects | store



Copyright © 2003 CMP Media LLC

privacy policy | terms of service