In today's main feature, Gamasutra presents "Game Law," a new monthly column by veteran game lawyer Tom Buscaglia, and dealing important legal aspects of video game development and publishing that can often be overlooked. This first edition takes a look at royalty audits, a provision in most publisher contracts that few developers choose to exercise, but, Buscaglia suggests, many should.
In this excerpt, Buscaglia relates an anedote about the possible rewards of exercising your auditing rights:
"I was on a panel discussion recently at the Microsoft Meltdown in Seattle where we were discussing publisher deals. This was a pre-contract through gold master sort of discussion, and prior to the presentation, I asked that we go past the delivery of the game and include audits in our discussion. I almost forgot about it, but one of the panelists, a top-tier developer, reminded me about this last topic of discussion as we were about to close.
I soon found out why he remembered because numbers like these are hard to forget. At first I was a little surprised to hear him say that his studio always audits every publisher deal. Why? Because when they audited their first major deal they found 6 million dollars (yes...that's $6,000,000.00) in royalties due them that had not been paid. Apparently, the issue there was the manner in which the publisher had been calculating net proceeds rather than the number of unit sales. But, whether it is the methodology or simple accounting of units sold, an audit should reveal any errors.
Sure, there are only a few games that hit numbers like that, and there are only a few developers in the top tier. But mid-level independents that live from one game to the next are even more thinly capitalized, and for many, a few hundred thousand dollars in inadvertently omitted royalties could make the difference between success and survival."
You can now read the full Gamasutra feature on the subject (no registration required, please feel free to link to the article from external websites).