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Game Law: So, What's the Dealio?

October 23, 2008 Article Start Previous Page 2 of 3 Next
 

Risk Aversion and a Clever Diversion

Publishers, as businesspeople, focus a great deal of attention on risk avoidance. They sometimes even use it as an excuse to convince developers to accept terms in a deal that are, in reality, unnecessary or overreaching.

In a deal with a developer the easiest way for the publisher to minimize risk is to put as much risk as possible on the developer. So, back-end loaded budgets, long payment procedures and the necessity of the publisher owning the IP is standard "policy" for many publishers. 

Well, as a professional negotiator, I'll tell you what I hear when someone says "it's policy" or "it's the standard deal in the industry." I hear nothing.

If the publisher cannot provide a realistic logic-based justification for an adverse contract provision, make them or don't agree to it. And if the best they can come up with is "reduction of our risk" be extremely skeptical.

I recently ran into a really clever ploy by publishers. In order to overcome the objection to IP assignment for original IP games, instead of demanding the IP ownership in the deal, publishers are now allowing the developers to retain IP ownership until after the game is released.

However, the publisher retains an option to buy out the IP (and in the process the developer's rights to a back-end royalty in the process) if the game performs above a certain level.

What level, you ask? Well, it is inevitably some time before the advance recoup point when back-end royalties would normally kick in if the game is a hit! You really have to admire their guile.

If the game sucks, the developer can keep the IP. But if the game is a hit, the publisher owns it and the developer gets screwed out of any back-end royalties in the process! 

More Developers than Deals

There is certainly a perception that there are more developers and games than there are available deals. There certainly are.

However, that does not apply to the right game at the right time. Each game is in many ways unique and if you are lucky enough to garner the interest of a publisher you can rest assured that they believe that your game will succeed. 

It could be unique gameplay, your team's reputation in the industry or filling the right slot in the publisher's portfolio strategy. But regardless of why they want your game, once you pass that threshold, you no longer have one of the many games in the marketplace, you have the game that the publisher desires.

And, as I already stated, getting the right games to publish is the whole point of the exercise for the publisher in order to insure their ongoing success.

Long-Term Vision

So, what does having a long-term vision for your studio have to do with your negotiations? Initially, the impression the studio makes on the publisher can make a significant impact on the course of the negotiations.

Conveying a coherent vision can instill a sense of competence in the mind of your contact at the publisher -- that the developers are serious-minded about the long term success of their business, not just their current game. This level of respect will usually have a positive impact on the process. 

Also, having a long term vision for the studio can impact the sort of deal that will ultimately be acceptable to the studio.

After all, taking a deal that does not provide sufficient revenue for the studio to survive the development process and stay healthy in the post-release period is important, especially if the long term goal is to build a great studio, not just to make a great game -- which should be the long-term goal of every studio.


Article Start Previous Page 2 of 3 Next

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Comments


JeanMi Vatfair
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The real problem is that the developer is passionate about his job, while the publisher is passionate about money. You rarely become an independant studio with the purpose of making money. The ability to make a living of his passion is too often a sufficient reason to create a studio.

To have a balanced negociation, both should be aiming for the money. The video game studio really needs to have that approach if it wants to survive.

j kelly
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Yes, Jean, that is absolutely correct. I think there was an article on Gamasutra recently that dealt exactly with that issue. Design cannot be law if the design is solely for one game developer to "just make a game that only *I* want to play."



To survive in this business, you have to be damn sure what you are making will be fun for others to play. The rest will fall into place after that!

Lindhart Grant
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I have to disagree with you, JeanMi.



Developers should focus on making great games, publishers should focus on marketing those games. A great game will generate money if the marketing is done properly.

Darius Kazemi
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Lindhart: sure, a great game will generate money. But FOR WHOM?

Lindhart Grant
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Darius:

Yea, there's got to be a little thought about money, especially when negotiating a deal, but that's one of the reasons dev studios have lawyers for, isn't it?

JeanMi Vatfair
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To Lindhart Grant : Don't misunderstand. What I'm trying to say is, studio managers are too often creating their business with passion as their motive. It's really hard to have both passion and eager to grow your business. And managing a studio IS a business.

I'm myself employed by an independent studio, and I know how this badly impacts our salaries.

What I'm afraid of is that the developer is too often treated like a child that only thinks about games. And eventually this unbalance in the negociation is part of the publishing business model.

Lindhart Grant
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ahh, i understand now. thanks for clarifying :)

David Sassen
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A pretty confusing article from the start. You say in "Publisher Financial Advantage":



"And the developer needs the money to make the game and build their studio. What possible leverage can the developer have in a situation like that?"



You then provide your answer to what leverage they have:



"And what does the developer have that the publisher does not?



A game."



I don't think anyone with a fully-functional, sellable game is wringing their hands over negotiating with publishers. If the publisher doesn't have to pay for the development of the game, negotiations are going to be pretty durned easy.

Stephen McDonough
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There's more to it than that David. It's just a succinct way of putting things in perspective. If a publisher is willing to come to the table with a development studio, clearly the developers have something the publishers want. The physical reality might only be a prototype, but the publisher is investing in the ability of the studio to create a marketable game. That's why they're at the table.



It's like any new product. If it's feasible and possible and prospective investors can see profit, they'll want to make a deal. Just because what you have isn't a reality yet doesn't mean the investor should have all the leverage in the bargain. It'll never be a reality without the co-operation between both parties, and if you look at it like that, money is everywhere, the next big thing isn't.

Clark Stacey
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I think David's point is nevertheless sound in the majority of game development contracts, which are work for hire deals based on IP the publisher already owns or controls. I think it's most common for developers to be negotiating as contracted providers of development services, not auteurs dangling the next big thing in front of the publisher.

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Peter Kojesta
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Mr. Dillan,



Perhaps a bit of history to take into consideration: http://en.wikipedia.org/wiki/Gathering_of_Developers





This article scratches the surface of this process in a way that is meaningful to anyone not familiar with it, and I want to extend my thanks to Mr.Buscaglia for writing it.

Jason Bakker
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Thanks for this article - it puts creating an original-IP startup into a perspective that isn't horribly depressing and scary for the developer. On the other hand, you keep expectations for what the developer needs to provide the publisher realistic (ie. pitching a game the publisher actually wants, and being able to ensure to the publisher that you are capable of creating it).



Cheers!


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