Chris & Dave:
The 12-month time restriction is short. It’s understandable that
Activision doesn’t want to dig up years of records for an audit;
however, Activision must keep those records for several years anyway
(for tax purposes). Audits are expensive, so most developers can’t do
them every year. One compromise would be to allow the developer to
audit previous years if an audit of the current year discloses a
discrepancy of more than 5%.
Tom: If
the audit reveals more than a 5% shortfall in payments to the
developer, Activision pays for the audit (12.2). Royalty statements
are deemed accepted if not objected to within 12 months (12.3). Any
CPA engaged for an audit can not be compensated on any sort of
contingent or other value added basis (12.4). The Audit accountant is
required to sign a statement affirming that he is not being compensated
on a contingent basis and also agreeing to provide copies of all his
reports and work sheets to Activision, regardless of the result
(12.5). So, in the unlikely event that an overpayment occurred, Spark
could actually take a hit as a result of exercising its audit rights.
Chris & Dave:
Section 12.5 contains an interesting typo. It refers to “Infinity”,
which is presumably Infinity Ward, the developer Activision acquired in
2003. This suggests that the Spark agreement was based (at least in
part) on Infinity Ward’s 2002 development agreement with Activision.
Tom: Marketing
and Distribution. Activision is responsible for all marketing and
promotional aspects of the Game (13.1) and agreed to a minimum of
$2,000,000 commitment to marketing and promotional costs related to the
initial Game (13.2). Spark was required to cooperate with the
marketing and promotional efforts by conferring with Activision, doing
interviews and press tours, doing photographs and artwork under
Activision's direction, promoting the Games online, All media contact
with Spark are required to be cleared through Activision (13.3).
Activision retained sole discretion regarding the pricing of the Games
(13.4). Spark was required, as part of the required milestone
deliverables, to provide various screen shots, graphic images,
character sketches, illustrations of weapons, vehicles, buildings and
environments, and a hi-rez magazine cover art (13.5). Of course,
Activision makes no warranty that the Game will be successfully
marketed or that its marketing efforts on this Game will be on par with
its other titles (13.6).
Chris & Dave:
Activision claimed there were significant delays and additional costs
in developing the game, which would have made the game much more
expensive to successfully market. Accordingly, Activision found it
difficult to justify spending more on marketing.
Tom: Credits
and Notices. Activision agreed to give Spark appropriate credit for the
Games by placing the Spark logo on the box and in advertising and
promotional materials, except television (14.1).
Chris & Dave:
The credit clause is good from Spark’s perspective. It’s more
comprehensive than you’ll often see. This would have been important to
Spark as a new company because Spark did not have a well-known brand at
the time the deal was struck. Of course, a lawsuit can do the trick
too!
Tom: Spark also was to
receive 100 free copies or each Game or one for each individual in the
Development team identified in the credits and Spark could buy
additional units at cost, but could not under any circumstances sell
them (14.2). Spark was also allowed to use the title, Trademarks and
artwork in its portfolio and for promotional purposes on its web site
(14.3).