[Jovan Johnson, a California attorney and partner at Johnson & Moo, examines the important legal issues that may arise when you sign your mobile game up with a publisher for distribution, and explains how you can take steps to insulate yourself from negative outcomes.]
You're a developer with a fun game and a publisher is showing interest. You presume this publisher knows the market's pulse and has resources you don't. Signing a publishing agreement seems like a no brainer -- and it is. Or is it? Not so fast! There are a number of things you must understand before moving forward.
What is the Publisher Offering?
The publisher's main goal is to promote your game and sell units. To accomplish this goal, the publisher may provide tips to improve your game. Many developers might have a negative reaction, but this advice should be considered. The publisher may not share your creative aspirations, but it does share your financial aspirations.
The publisher should also generate media coverage and consumer interest in your game. You can probably count on a PR campaign. If marketing dollars are promised, the contract should make clear the amount of money being spent and authorized marketing channels.
The publisher should not promise a particular sales figure because results cannot be guaranteed. Anything beyond a promise to work hard to promote your game would raise red flags for me.
What Do You Give Up?
You and the publisher will split revenue and you also give it control over marketing. Your revenue split will probably cover all variations of your game, including ports and sequels. While I wouldn't normally be comfortable with one of my clients giving the publisher more than 40 percent of the income, there are circumstances where going beyond 40 percent makes sense. Ideally, I like to see the publisher agree to take no more than 25 percent of the income.
Example: I was counsel on a deal that involved a new mobile publisher who proposed splitting revenues 50 / 50 with the developer. The developer was not yet established, and so was comfortable with that split. Luckily, it turns out the publisher planned to spend $40k marketing the game! In that case, a 50 / 50 deal made a lot of sense. Not only did the publisher's ample marketing budget allow the game to be marketed properly, it also provided vital corporate PR for the game studio.
Your revenue split with the publisher is based on net income, which is gross income minus expenses. The app store's 30 percent is an expense that will be included in all net income formulas. What other expenses should be included? Record companies typically recoup all of their expenses before paying recording artists. Mobile game publishers cannot function that way because game studios need operating capital for patches and other updates. Net income must be defined so that your studio has adequate operating cash while accounting for the publisher's need to recover out-of-pocket expenses.
Unless you have leverage, the publisher makes final decisions on media outlets, marketing agency, and maybe even the footage used in the trailer. Regardless of decision-making authority, your contract should state that you own all slogans, images, and trailers created to market your game.