Contract Killers: What Developers Should Eliminate From Their Publishing Agreement

[Music] thank you hello and thank you for coming to my Contract Killers talk on the legal ins and outs of video game publishing agreement I'm looking at some key Provisions in publishing contracts and suggesting how developers can snuff out any red flags that could cause issues as you develop and not your game before we get started I'll just give you a little bit about me my name is Tim rapper Davis and I'm a median entertainment and games lawyer and partner at Sheridan's based in London UK I work with developers Publishers and a host of other games industry professionals on a wide range of matters including unsurprisingly video games publishing contract and that's what we're going to look at today in a little bit more detail what I hope to bring to this talk is my

insight in acting for lots of Indie devs and ethical games Publishers in publishing contract negotiations if you have any questions after the session then please feel free to reach out to me on any of the methods I've listed here if you'll forgive me from doing a quick plug before we get started I'm also a passionate mental health Advocate and I'm very fortunate to work as a trustee at safe in our world a video games mental health charity that advocates for better mental health awareness and support for games industry professionals as well as players if you'd like to know more information or if you'd like to make a donation or if you'd like to get in bold then please visit safeanolworld.org for more information so a quick disclaimer before we get started so while I am a qualified lawyer sadly this talk is not legal advice it should be treated as legal education and guidance concerning publishing

contracts it is also not a definitive list of things that you can or should change during a negotiation process well I'll do my best to run through as much as I can in the time we have we still might have enough time to cover everything that goes into a publishing contract and all those things that you might might want to change or that might be nice to have changes done when you do that go through that process we could easily stretch this to another two to three sessions um I suspect that might be a bit boring so we'll just keep it to this one for now however I have written some articles uh that you can find on gamma Sutra also under the contract killer's name so if you want more information or reading after the session then please feel free to look those up I'm also trying to keep this talk a little bit more commercial so we're not going to look at necessarily the boilerplate things or represent warranties that might come into a contract um but if I can give a shout out to my fellow Legal Professional Chris Reed who has given numerous talks at GDC in years past

um I would highly recommend checking out his practical law 101 201 and 301 series that you can find in the vaulting on YouTube um well worth checking out so my goal of this talk I want to give developers confidence heading into a negotiation with the publisher that it is okay to ask for certain things in your contract to be changed my main reason for doing this well publishing contracts are inherently drafted in the Publisher's favor after all they would have been probably engaged a lawyer to draft it for them or it might have been someone internally either the producer business development person that would have drafted it from the publisher so they've been drafting it from the perspective of protecting their business so by default the contract that any publisher gives you is going to be against you and that might even include situations where you as the developer haven't done anything wrong and you're not at fault so this is what I want to rectify

now it's unlikely that you can expect a publisher to sign your game on completely different terms from the contract they've given you and then there's sort of any negotiations are likely to be a symmetrical contract whereby both developer and publisher have equal rights and obligations the publisher is always going to win on that one but the Amazon of any negotiation should be a compromise and it should be a compromise that both sides are happy with so to meet the same we'll be looking at some reasonable and fair changes that developers could could think about making and if there's any Publishers listening I hope there are then these could be fair and reasonable changes that you might reasonably consider accepting foreign factors can affect your publishing terms or your negotiating position now there's probably more than you think um but the most obvious is probably the publisher themselves and that comes down to actually some Publishers won't even negotiate their terms at all whether they're too stubborn lazy or

other reasons and they're the kind of partners that you might want to think about whether it's actually a good business decision for you or your studio or you're going going forward other factors might include the budget you're asking for generally higher budgets will come from larger Publishers larger Publishers tend to be a little bit more wavering in their ability to negotiate or will to negotiate their publishing terms if you if this is your first game then you can definitely expect to be low balled in terms of the commercial legals um and they'll generally be seen that you'll generally be seen as a higher risk Prospect or signing to a Publisher's existing portfolio however projects that are in the latest stage of development will tend to be seen as lower risk as generally the Publishers upfront costs will be lower that usually allows you to be able to negotiate better commercial and legal sales foreign killers that I'm referring to in this talk to me these are terms in most publishing

contracts that that will invariably affect the developer in a negative way especially in the events of a falling out between the parties and even if the developer is not at fault so some of the red flags we're going to look at include what's happening with your game IP and to do this we'll dive into what the difference between an intellectual property assignment and the intellectual property license we'll then look at publishing licenses in a bit more detail and some of the bad license terms to look out for and then we'll look about look at how you can get paid and some of the terms around that and some bad payment terms to look out for so Contract Killer one what is happening to your game IP in particular are you giving this away unwittingly publishing contracts will vary from Publishers to publisher however most of these contracts will have at least one thing in common and that is of course giving the publisher the rights to publish Market distributes and otherwise exploit your game

across various platforms and territories now a publisher needs this permission from a developer before they can actually publish your game obviously I think that's probably quite an obvious statement but this is because games are a bundle of intellectual property rights that you as the creator of the Canadian the developer will own so obviously the publisher needs permission from you first before they can just go and publish it similar similar thing would happen if you wanted to use Mario in your game you need to get permission from Nintendo to do that although that's quite unlikely I'd say this permission is normally detailed under the granted right section but it might also be called the operative provision ownership publishing license or something like that in each case this granted right section will give the publisher the right to use the intellectual property rights in your game the publishing contract might deal with this in a couple of ways the first being an exclusive license that's the most common way and this will give the publisher the right to be the

only person allowed to publish your game across various Platforms in various countries around the world and that will even stop you as the developer from self-publishing or from engaging any other party from doing any of those things well first this exclusive license is the publishing license from here on out the other option is an intellectual property assignment and that's effectively where the publisher buys the IP or percentage of it off you it's arguable that the exclusive license approach is better normally because publishing licenses are only temporary so they might last for a few years before the rights revert back to you but the worst case scenario for both the publishing license and an assignment is that you as the developer can't get the rights of your game back that could obviously be a bit of a disaster especially if you're planning on doing future games or future have future plans for the game and the franchise you're making

so let's look at assignments in more detail so how does an assignment work in the context of assigning rights in a video game when people talk about assignments they're really talking about a transfer of ownership so think of it like selling a car the person a the current owner of the car sells the car to person B for money and actually person B is now the new owner of the car a person a can't then use it again but they have been compensated by receiving money in return for video games the transfer and assignment we're talking about is that of all the intellectual property I'm just going to refer to that as IP that goes into the game and any other materials relevant to the game itself so the IP rights and again being pretty much everything you can think about on the front end and back end it might be the things that you can see so the art the animation or here the music but it might also be the things that you can't see such as the code and anything in the back end so in the context of a grant of rights an assignment of Ip in this instance that being the IP that exists in the

video game is where the ownership of that game might be is legally transferred from the developer to the publisher the publisher then has the rights in the game IP and can publish it distribute it create new versions basically do anything at once after that point so how does this work in practice but for a finished game it's fairly straightforward developer assigns its IP rights in the game to the publisher publisher then takes those rights and publishes the game the rights will be legally owned by the publisher so yes the developer will no longer own the IP but it might still be paid a percentage from the sales of the game or they might have received money up front this compensation for a game that's still in development it works pretty much a similar way except that the developer will be deemed to have assigned IP as it delivers certain Milestones or builds to the developer until effectively it's delivered a finished game in which case all of the writers will then be deemed to be assigned over to the publisher so same thing applies publisher ends up

with a finished game it has all the rights into that game and then can do what it wants including publishing it an assignment of Rights especially intellectual property right as we discussed in this way is far more common for work for hire or contracted development so if you're working on your own IP and talking about a publisher in that sense then you probably don't want to assign these rights away and you don't have to assign all of your IP rights some publishing contracts may only require a developer to assign part of it so I picked in the publisher this is common in co-funded or co-development of Agents between a developer and a publisher where both parties are putting in equal amounts of money but co-ownership of Ip can be messy it's not like real property so like houses flats buildings and the like where lines can easily be drawn about who owns what who has access to what even giving away the smallest percentage of your IP can cause problems down the line especially if you don't have the permission from the other party to use

it this will definitely cause a lot of issues or can cause a lot of issues in the event of a dispute especially if you're the developer and you're naturally at a disadvantage when it comes to a bargaining position and if you know as we as we've imagined as we've spoken about the start if the contract has been drafted by the publisher you can bet that in the event of the dispute the publisher is going to come out on top so what does an assignment Clause look like in fact something like this in this case the developer earns 50 of its game IP and assigns the other 50 to the publisher thereafter the game might be is held 50 50 between the parties so if we use two the analogy of two people sharing a house one person gets the upstairs and the other person gets the downstairs so how does this work in practice because if the publisher doesn't have all of the game IP it also will likely need an exclusive license to actually use the developer share of the IP anyway

so we get to a situation where in order to make this work the publisher also needs an exclusive license in order to use the developer's share so some common arguments or reasons suggested by Publishers as to why they need an assignment of your IP it might be 50 it might be more it might be less but the common arguments are we need this to protect our investment in you you know this gives us something tangible that we can show our investors or one more frighteningly that I heard fairly recently was we need this in case you go insolvent so when might an IP assignment or polish assignment be justified and there's nothing wrong with assigning your rights away in theory but if the plan is for the game IP to revert to you at the end of a set period of time or when the publisher isn't breached then you need to make sure that that is in the contract otherwise you might have given your rights to the publisher and you can't get them back

whereas the previous example was pretty clear that the developer and publisher would carry in the ip5050 you need to be aware of sneaky assignments like this one on the face of it it seems fairly innocuous I mean after all what's one percent of your game um what's one percent of the game IP however current co-ownership of Ip rules actually give this a lot of power to the publisher in this case um so if you're giving any share of your ipoa you need to make sure that at the end of a contract you get the rights back and that goes doubling in the event that the publisher is in breach there's no way they should be holding on so your game might be in that case foreign so some quick fixes if you receive a publishing contract with an IP assignment ask yourself the following questions am I comfortable with giving away the rights to my game to my publisher the answer might be s if this is your first game and this still gives you sufficient funds to live

pay rent eat food all that good stuff then it might be the right thing to do if the answer is no then does the contract provide for the game IP to come back to you after a certain period of time or where the publisher is in breach if not then that other needs to be fixed or you need to make sure that you're fairly compensated for the fact that you're effectively going to be selling your IP to the publisher understand why understand the reasons why a publisher would want to take ownership or part ownership with your IP and that's why they can't get the same result from having an exclusive license you also need to make sure there's a car about for your proprietary tools Tech and code libraries these might be things that you want to use from Project to project or you might have already used in previous games that you've made an assignment of Ip will can be pretty much a blunt instrument so if you're signing all the intellectual property rights in the game that will also include things that you necessarily might want to use again so you need to carve those out and provide the

publisher with a non-exclusive license to use those that will you that will allow you to lose to use those again for your future projects exclusive licenses are far more common than IP assignments in terms of how a publisher gets the permission from you to publish again this license will normally give the publisher sole permission to publish distributes and otherwise exploit the game across various platforms and countries for a certain period of time in granting this permission you're also going to exclude yourself as the developer from being able to sell the game during this time however if it's done wrong exclusive license can also be equivalent to an IP assignment or an IP transfer and you can easily lock up your rights with the publisher if you're not careful so an example of a publishing license looks like this as you can see in this slide here

sorry previous slide as you can see here you can see it gives the exclusive right during the term throughout the territory throughout the publish an otherwise export the game on the platforms so as you can see from that example a publishing license is normally Limited in the following ways turn that being the length of time during which the publisher can promote and sell the game this would normally be somewhere between five and ten years the territories that being the countries around the world where the publisher can promote and sell your game and the platforms the formats or distribution channels where the publisher can sell your game such as Steam Nintendo switch Playstation Xbox that kind of stuff so this brings us to our second Contract Killer bad license terms but we're going to look at these publishing licenses in a bit more detail yeah so we'll start off by looking at the first two areas that will be called by a publishing license that determines the agreement and the territories caught by

it foreign definition of a publishing license term describing how long the publishing license will last for so as you can see it says five years and that's nice within the standard rage we'd most likely to see um but be aware the second part as highlighted in red here it's actually five years from the last version of the game that's released so if the definition of game includes any DLC add-ons or maybe even ports or different versions of the game then the five years will be reset every time a new version is released so you need to be need to be aware of that so check the publishing term quite carefully as we mentioned earlier the exclusive part of a license is the permission given to the Publishers to do certain things to the exclusion of anyone else and that includes you as the developer so normally these publishing licenses accounted for a set period of time

that being a fair amount of time for the publisher to have a fair track at publishing your game normally between five and ten years but they vary from publisher to publisher so you need to be aware of long license periods for example if a publishing Publisher's license is lasting for 25 years like in the bottom example here but you know or you need to be careful where a publisher takes the rights to your game in perpetuity like the top example you know that's obviously perpetuity meaning forever in that case you need to be prepared not to get your your rights to your game back um and that's even where the Publisher's not doing a good job so how do you fix it well similar simple answer ask for a shorter license period the publisher needs a reasonable amount of time to publish the game and that's it if they need anything longer then ask why and try and get an understanding of how they plan to use your rights going forward you don't really want their rights just sitting on them shelf or they're not

Distributing your game up to 10 years time after that time you probably want those rights back so you can do something with them yourself um and even shorter licenses might be able to run on beyond the initial agreed term and that might happen to an auto renewal mechanism this might work through inaction by either side so for example the license term we saw on the previous page of five years it might just renew for an additional period of one year and that might be if no one has given notice to terminate before the end of that five years the contract will just renew either the front of the Year might be two years might be another five years so it's sort of like your PS Plus or your Amazon subscription if you don't terminate in time before it renews again effectively you have to you have to pay again and you're locked in for another year so how to fix this you need to know how long the license term runs for and how much notice you need to give before the end of the initial term in order to get out of it if that's what

you want to do another example of an auto renewal might be like the example here the contract extends for one year terms where the game is still generating revenues above a certain threshold and that enables the publisher to continue benefiting from selling the game to even though the initial term has ended and it's you know how you'd expect those Smash Hit games to still be or how a publisher would can make sure that an evergreen game or game that's an absolute Smash Hit how they can ensure that they can keep publishing it even long after the initial term I've ended in theory this might be a nice compromise since you know the game itself that you've created and the Publisher's marketing actions should have helped generate it revenues long after the game has been released however you need to be aware of setting the threshold too low like the example shown here 10 000 Euros might be too low a bar to set When taking into account the Publisher's cut in this case it might be better for the developer to self-publish their own game

at this point so you might want to ask them ask for the rights back let's look at how far a publishing license can reach most Publishers will ask for worldwide rights to publish your game that's so they can sell it in as many countries as possible so you normally need to check the definition of territory in the agreement to see exactly what this is and exactly what they're taking and this is a genuine example of a publishing control I've seen recently how they Define territory and I just quite like the ambition that they show here that they might need the rights to cover parts of space in the future and there's nothing wrong with the publisher wanting to publish the game in as many countries or planets as possible you know as a developer you want the game to get in the hands of as many players as possible around the globe however you should ask the publisher how they plan you know what is in their marketing plan and to confirm where they come and selling the game and how they're going to do it

it is unlikely that the publisher has a presence in every territory around the world around around the globe so they're going to be using third parties in different territories to help them do it so you should know how they planted how they plan to do this and who they plan to use if possible ask for case studies based on the developers in their portfolio if they don't have plans to publish your game in any of the territories for example China then don't necessarily need to give those rights away it's better you find another partner for those rights that might be a different publisher I might be doing it yourself rather than have those rights ways away on the Publisher's Shelf so Contract Killer number three still looking at bad licensed terms but this time we'll look at the platforms and porting so as we've seen with terminatory the publisher is going to want to take rights on as many platforms as possible

they'll want the license to be as long as possible and to cover as many countries as possible too as you can see from this example the publisher is asking for rights to pretty much all platforms and that also includes a capsule so that they can put the game out on any Next Generation platforms that arise in the next 10 years so yeah that's it's pretty Broad the rationale that Publishers will give for this is that they want to control the marketing across all territories and platforms and they're and thereby control the quality however if the publisher is taking rights for all platforms you should check whether you have to deliver a version of the game for all of the platforms too so first off check what are you being

paid to develop if you're only developing the steam version of the game and you're that's the only version you're going to deliver to the publisher then you need to include that in the contract otherwise you might be on the hook to develop Contour version as well a key thing to check might be including in PC versions PC might also include windows but it might also include Linux and Mac OS if you don't have the ability to develop a Linux and Mac OS then you might want to exclude that and you might want to specify that PC means Windows PC only if the contract is clear as to what platforms you're delivering then you should ask who's going to be developing the other platform versions they don't have plans to develop these right now then ask why they need the rights right now if the publisher is only providing these funding for the steam or PC version as we mentioned then you shouldn't necessarily have to lock up the rights for console mobile or other non-funded platforms with that publisher unless they've shown you that they do have specific plans to create rodents

for those games and those platforms and that they're going to cover the cost of doing so okay rather than locking up those rights to the start a more developer friendly approach might be to give the publisher a first option to publish on those platforms or to fund the publishing and develop from the development and Publishing of those of those ports or console versions that means they don't get the rights initially to make them but they get first dibs in case they want to fund them or develop them down the line or in the event that you want to find an alternative funder or third-party partner to fund and development so that's a fair and reasonable approach for both items the publisher gets a fair chance to fund those ports at a later date because anybody who wants to have seen how well the game is sold on the initial platform that they're funding you but it also allows the you as the developer to explore other options and the event that the publisher doesn't actually pick those pick that option up and they aren't interested in publishing the game on those consoles

if it's agreed that the game will be ported then check who's doing the porting do you have the in-house expertise to develop the console versions if so then you might want the first option to develop them and be paid for doing so rather than the publisher doing this in-house or engaging another third party to to do that development if you don't have those expertise then the publisher might develop these in-house or they might engage a third party but check the contract check the contract to make sure that it provides something about the quality of the development of those ports as the developer you're going to be providing various warranties and representations and legal promises about the quality of the game that you're delivering to the publisher so if the publisher or its third party partner is going to be porting the game they should be providing those same legal promises to you about the quality of the pause now they'll want to carve out the quality of the source materials and

source code that you provide them but everything else that goes into the port is going to be their responsibility therefore they should be responsible for guaranteeing its quality so most publishing contracts won't include that as standard so be sure to ask a publisher to include that or add it in yourself the worst case is the publisher always third-party partner develops buggy ports they don't review review very well and effectively tank sales across all of the other platforms it's not your fault and it's unlikely that you can do anything about it and it's unlikely you can get out to contract um because you haven't those Provisions won't be added in a standard and that's something genuine that I've seen when the developers come to me too late that's really sad to see next Contract Killer number four still bad license terms and hopefully this shows you how much there is to think about when it actually comes to looking at the publishing license and what it covers in reality a publishing license is likely to extend beyond just your gain

for example many publishing licenses include rights over merchandise such as the game's soundtrack but it will also include other things as well so it might include rights to publish future games like sequels or prequels for example game set in the same universe but it might also include just the next game you make full stop foreign so if a publishing license is exclusive and that prevents you from doing certain things then your publisher should be able to justify exactly how they want to use the rights they're taking so there's some additional some additional things to check through in respect of a publishing license scope are as follows C equals prequels and spin-offs does the publishing license extend to other games that you might develop in the future like these does the publisher even have a plan to publish these in the future like in now or in the future if not then why lock them up

if a publisher does want to lock down future games or things that a game might turn into a franchise then there's a couple couple of developer friendly ways to actually to go about this the first stop is a writer first refusal or First Option it might be called so to recap that it doesn't give the publisher the right straight away to develop these future games but it does give them the first in line to or first opportunity to fund them and publish them if they want at a later date they might also especially for some larger Publishers they might want an option to acquire the game IP so scrapping the exclusive license to go into the assignment we talked about earlier they might want to do that so that they can control the franchise and create virtue future games you know then they might see a real value in doing that so similarly to the right first refusal the the options likely to be framed as a way of ensuring that the publisher is first in line should you decide to sell the IP or work with someone else to do

something with it alternatively it might just be a way that the developer has a right to negotiate you negotiate with you about buying the IP during the term of the contract and neither that writer first refusal or the option to buy your IP should continue or last belong last beyond the term of the publishing agreement so include and also include a time limit on the period of negotiations in respect of the right first diffusion on the option as well that's going to keep both sides honest and it prevents negotiations dragging on indefinitely that are another way of locking it rights and preventing you actually doing what you want to do you should also check if the contract includes other restrictions that might prevent you from developing or releasing future projects either indefinitely Or for a limited time anything that stops you from doing something on an ongoing basis should be reduced or cut down to a defined period

so you know those restrictions are going to end at some point the Restriction shown here is aimed at protecting the Publisher's investment in you and is to prevent you from releasing a similar game you just need to check the scope of this restriction all these sorts of restrictions that you might find in your contract in this case it's pretty broad you know includes not making a game in the same genre so these restrictions are only to preserve the Publisher's sales of the game and that is in your interest too but if the restrictions are too broad then you should ask them to be changed check what the publishing license also actually attaches to Does it include other rides like merchandise the soundtrack or film TV rights in some cases the definition of game might also refer to merchandise or ancillary products or something similar these might be subject to the same exclusive publishing license and as we as I've drove to death already in this

talk exclusive also means that you can't do anything with them in some cases you might be fine with these rights being in the Publisher's hands however in each case you should know what the publisher plans to do with that and do they actually have any plans to use them also if you've already signed deals merch deals with companies prior to signing with the publisher then your exclusive license with the publisher might also cut across that and it might put you in breach of the other deals you might have already signed so you might need to carve those out or carve it out with the publisher or just give the publisher non-exclusive right so that you don't you haven't you haven't um you haven't harmed their right they still have some rights to use it but you make sure you're on the breach of any other contracts you've signed another option that we we often see now is that especially Indie developers might Grant rights to the composer of the game's soundtrack so that they can release the game or benefit from a

revenue share from sales of the game soundtrack or allow the composer to sell the game's soundtrack or distribute it by their own channels whether that's on Spotify bandcamp SoundCloud or something similar so if you do have those terms already agreed then you again you need to make sure that you don't cut across them with the publisher just make sure that the publisher is aware it's highly likely that you can come to some arrangement whereby both sides are happy and also check whether the scope of ancillary products includes film and TV rights that relate to the game does the publisher have any plans to use these if not then just ask to remove them the publisher can also ask for a right always ask for a writer first refusal like we just talked about so if you do plan to use them in the future or if they want to use them in the future they can always come back and ask and you come back and negotiate for them foreign license terms let's turn our attention to how you actually get paid

so the primary reason for most developers wanting publisher support is access to funding that might be cash during development so that you can actually help finish your game also you know helps pay the rent helps you eat and live and we'll refer to these development payments that you receive prior to the launch of your game there's front-end payments but obviously Publishers also have a great marketing reach so they might also be providing with Revenue payments as well that being revenues generated from the sales of your game and look all these back-end payments so for this section we'll look at those back payment terms that might affect how you get paid during development so what are front-end payments so as I've just alluded to these front-end payments are made by publisher to you during development they usually come in the form of development fees development advances but you might also see them referred to as guarantees or MGS something like that so for Simplicity I'm just going to refer to them as front-end payments that

being fees you received prior to the release of your game now it's unusual for a publisher just to hand over cash to you without any sort of control in place so as such front-end payments are going to be tied to a couple of things that will be your obligation to develop and deliver certain builds or milestones and they will almost certainly be tied to the Publisher's approval of those builds or Milestones that you've delivered so you're only going to receive a front-end payment in respect to that build build and Milestone once you've actually delivered it and once the publisher has signed off on it so how is this dealt within the contract so most publishing contracts will have terms outlining the delivery evaluation feedback mechanism and requirements for example your delivery of a particular Milestone or build is going to be tied to dates in the contract most likely linked or listed in Milestone schedule or delivery schedule or something similar

there should then be a mechanic that provides for the publisher to review that Milestone or build and they'll either approve it and that will trigger payment or they'll reject it whereupon the developer you will have to implement fixes and then resubmit the bill to the publisher work on that whole process begins again but what happens if you don't get a publisher approval well there might be valid reasons why publisher has rejected a milestone for example it doesn't comply with the agreed specification or the build requirements that have been set out in the Milestone schedule however what if issues are there that aren't your fault um an absolute publishing agreement classic is not accounting for delays that are caused by the publisher and that's that would be or can be caused especially where there's no timing specified for the publisher to perform certain actions such as reviewing the build that you've just delivered this can be a major issue especially if

the publisher publishes delay in carrying out their obligations is going to affect your ability to get paid it's also grossly unfair because you can see the knock-on effect you deliver a build you're waiting for the publisher to sign off on it they don't sign off you don't get the money you then can't finish the next build because you haven't had the money to develop it and then you've enriched the contract for not delivering that next build so again that's going to then put you in breach of contract and it's not your fault and how is that fair so how can this be solved So to avoid delays that aren't your fault you can put time limits on the publisher to perform certain tasks in particular there are obligations around evaluation approval of builds and Milestones but this is completely normal practice and Publishers are generally amenable to having a reasonable amount of time to review each milestone um normally 10 working days um but if a mechanism like this isn't in the contract then be sure to add it in

but what happens if you still haven't received a response after that time limit is up well it's also a common practice for a developer to ask for automatic approval if the developer hasn't given its approval or rejection within the agreed time limit that will be approval for the purposes of payment only I might add but it's usually a fair compromise because it means that you can get paid and you can invoice for the next Milestone and start working on that but it also allows the publisher for you to also allows the publisher to ask you to make changes or fixes to that build in the event that it's broken all those bugs that need fixing Publishers should also not be rejecting Milestones or bills that meet the agreed specification or delivery schedule that is they shouldn't just be arbitrarily rejecting builds so if it isn't already including your contract then you need to be sure to add in a requirement on them to provide reasonably detailed feedback where there

is any rejection the whole point of the evaluation and review process is so that the development of the game stays on track and the publisher will guide that development in the event that it goes off course so any feedback or rejection that they give needs to be sufficient or should be sufficient for you for you to be able to make the necessary changes to the build in order for it to comply with the agreed specification delivery schedule the publisher shouldn't also change the agreed scope or specification of any deliverables once that's been fixed so it's good practice for the parties to agree with specification and Milestone deliverables at the start before anything is before anything happens you might also have a more agile process whereby the next Builders agree between the parties once you've delivered the next Milestone that's also fine but make sure that the negotiation process is fair and they are adding any other they aren't adding any unreasonable features

that require more time money or resources for you to actually Implement so check if you've got the creative control and vision of the game that you have control over that if a publisher wants to make changes to the agreed specification or delivery schedule then this should naturally require your approval as of all of them any changes that require more time money or resource that bringing that being you need to bring more people onto the project to help should be seen as outside of the agreed specification that's not to say you and the publisher can't agree those changes at a later date if you want but you should be ensure that you're paid for any extra work or deliverables and that would normally require an amendment to the contract to adjust the agreed spec and reflect the amount the flat the fact that you're going to get paid a bit more in order to do it to avoid this scope creep you want to make sure that the contract should include a change mechanism in order to avoid that and that scope creep term is normally associated with freelancer work for higher Arrangements but it can also

play a part in publishing agreements too but you need to check the timings in cash flow and how long it is going to take you to get paid one of the final points of this section is to understand how long the publisher is actually going to how long it takes for the publisher to actually send you the money and then how long it's actually going to be until it hits your bank account so always check the payment terms of any contract the payment zone is the length of time that the publisher takes to make a payment in particular you need to check with this make sure that this doesn't leave you in a bad cash flow position an example of a standard payment term might be 30 days from Publisher's approval of a milestone so that means once the Milestone has been approved then you still have to wait 30 days for the money to take your bank account if we take a step back as well and if you factor in the fact that a publisher might have 10 working days to approve a milestone or review a milestone then there might be additional time added on into until you actually get the money from the publisher especially if there's

been a round of reviews or fixes so make sure this doesn't leave you in a bad cash flow position if the Publisher's payment terms are too long then ask if they'll change them you shouldn't put yourself in a bad financial position and most Publishers are happy to move Milestones around to make sure that you aren't left in the Lurch and make sure you do have money to Live While You're making the game it's your contract killer number six so still looking at bad payment terms but this time on the back end that being money that the publisher pays to you once the game's released so back-end payments are usually in the form of a revenue share but you might also see it called royalties profit share or distributed earnings or something something similar essentially as a percentage of the revenues that the publisher has received from selling your game but back-end payment should factor in any money that the publisher has

received in respective or revenues attributable to your game so not just sales of the game itself um especially if the publishing license includes more than just game sales um it should include money that the Publishers received from other sources as well such as cash from exclusivity deals so for example if they've signed a deal with for the epic game store or Xbox Xbox game pass for example if your game includes this functionality then it should also include in-game purchases or in-game advertising um if merchandise is called by the publishing license then you'd also expect revenues from Merchants merch sales to be including this definition too and don't forget if they've got the film on TV rights you should make sure that you're paid if they ever use them or utilize them the back-end payment is going to come to you after the Publishers made certain deductions so it's unlikely to be a percentage based on the gross revenues that the game has generated that being the total amount of money based on number of sales multiplied by the actual

sale price of the game far more likely is that any back-end Revenue shares can be calculated as a percentage of net revenues that's the amount that's left over once the publisher has made certain deductions from gross revenue so how much does your publisher cost and what deductions are they making Publishers are not doing business with you for free and like most businesses they will want to make a profit and a publishing agreement gives you an indication of how they're going to make that profit from you and your game so to guarantee a return on their investment most Publishers will aim to recover their stunt costs incurred in publishing a game before paying any back end payments so the amount of timing of back-end payments is likely depend on the value of those Publishers costs as such you need to know exactly what the publisher is going to be charging you so you can ensure that they're paying you correctly so to do this you need to check the definition of permitted deductions or

net receipts and net revenues to determine what the Publisher's costs are so publishing contracts will deal with this in and the Publishers costs in different ways a common example is to have a list of permitted deductions or agreed of cooperable costs that the publisher can deduct from gross sales revenue an alternative approach is to have a definition of net revenues or net receipts um that being the amount of money left over once the Polish has deducted its costs and in that definition there should be a list of deductions that they're taking in either case it's not unreasonable for you to ascertain exactly what the Publisher's costs are and you know you should be asking you know for evidence that they've incurred them and exactly what exactly what they've been spending if a publisher is providing you with front-end payments or advances then they'll normally has to recoup those first as well detail whether the publishing costs such as marketing localization or QA depending on what services they're doing for you however if a publisher is looking to

recoup any internal costs particularly relating to marketing porting or QA Services then you should query the value of those internal publishing costs can be easily inflated and they might not not actually represent good value to you as the developer for example it's reasonable for a developer to ask for a Publisher's recoverable marketing cost to be limited to third-party costs only that being the cost that the Publishers have incurred engaging an external PR marketing firm to help give the game an extra marketing push before launch yeah Publishers should also be able to evidence you know it's incurring of any of these publishing costs so as to see evidence of invoices of third-party suppliers so that you can verify that against the statements or information that the publisher is providing to you and as a matter of course most publishing contracts will include audit provisions and that will allow you to check the Publisher's accounts and sales records to make sure that you've been paid correctly

if a term like this isn't including your contract then make sure to add it in it is fair and reasonable to make sure that you get paid so having an ordinary audit provision on this is seen as customary thank you check your payment terms again um as with front-end payments the publisher will usually set out the time scales for paying the back end payments as well so again you need to be sure what these are and change them if you think it's going to cause you cash flow issues so in particular in respect of the timing of back-end payments you should check the following and this might not also be the timing but also the detail that you're getting as well so first off is the publisher providing you with a royalty statement so if they are you it's unreasonable it's not unreasonable to ask for them to use due to provide information or a statement based on revenues on a monthly or quarterly basis so they might provide a statement showing a breakdown of game sales or cross-platform or territory or

any other information that you might reasonably ask for so if that detail isn't in the contract then you can always ask for it to be another day and some publishing some Publishers will have example royalty statements that they use and they might provide those to you before you sign the contract so you have an idea of what this looks like if you're getting a royalty statement then that's all well and good but check that the publisher is check whether the publisher provides you with the statement first before it pays you or if it pays you at the same time because if they're providing the statement to you first then that might inadvertently extend the amount of time until you actually receive the money in your bank account so check that time period in the contract and then check how long it takes for them to pay you after you've received that statement and then you need to calculate how long it's actually going to take for them to actually receive the cash in your bank for example some Publishers payment zones might be 45 days from the end of the month in which they've received revenues so you can imagine if they've received revenues on the first of the

month you aren't going to receive that money until 75 days later my final point and it's a big one and it concerns where the publisher deducts or recoups this cost from and by that me I mean how is the publisher actually recovering its costs the most common approach taking my Publishers is for them to recover their stunt costs at 100 from gross revenues so once they've broken hit that break-even point and they've recovered all of their advances in publishing costs paid to you then the revenue share split and the back and payment share split will will happen and that's when they'll start paying royalties to you however not all publishing contracts are created equal so this is something you definitely want to check in the contract and in some worst cases and there's plenty of examples of Publishers that still do this the publisher might look to recover their costs including the advances they pay to you from your share of royalties only

so this is grossly unfair for several reasons but namely that wanna ignores all the investment that you've put into the game before signing with the publisher the publisher makes profit from day one it's naturally going to take you much longer to receive any back-end payments because the Publishers are covering all of their costs from a smaller pool of revenues and you know last but not least but that could also mean that you lead to cash flow issues especially if you're relying on these backlamp payments to stay afloat so while turning down money is hard you probably should seriously consider if a publishing deal is structured in this way and that's if they will change it to the model that we've said first well it still might not be ideal that a publisher recovers all of its costs first especially if you've incurred significant Sweat Equity or incurred significant cost prior to signing with the publisher it still means that at least once the Publishers hit break even you know you're going to get paid so Contract Killer set number seven so

to finish off I want to look at some of the timing issues that might affect your ability to carry out your obligations under the contract so we've already looked at delays that might be caused by a publisher during the evaluation and review of milestones and the impact of that delay can have on you in your ability to receive front-end payments so now we're just looking a little bit more generally about what you can do so that you're not liable for publisher delays so plain and simple you should not be liable for publisher to laser failures this should also extend to any third parties or people or individuals or outsources that the publisher requires you to work with such as porting houses for example so a publishing contract is there you know to protect the publishing the publisher more than anything but that doesn't mean that you need to be penalized for the developer being delayed or for if any of their part parties or their partners that they're working with aren't very good or

a delay or course failures so this is unlikely to be covered in the contractor standards so you should add it in and if there's any Publishers this thing then this is a change that you should definitely consider adding so that it's fair and reasonable and that is just ensuring that there's something in the contract that says if there's any if there's any delays caused by the publisher and it's not the developer's fault the developer's obligations just get extended on a day-to-day basis until that delay is rectified it just means that the developer can pause its obligations um and it doesn't have to fear that it's going to be a breach of contract for late delivery or performance now Publishers aren't always at fault for developer being late and carrying out its obligations in a publishing contract the obligations for development you know ultimately fall on the developer so you know but late delivery happens Publishers know it happens um and missing a milestone would normally be considered a material breach but material breaches usually come with a cure period during which time the

party have fall can fix any wrongs so check the contract to ensure that the contract actually does include a cure period because it isn't unreasonable to have one especially for like for late Milestone delivery you'll normally find or see if the contract has an EQ period by checking the termination section now a cure period doesn't give you a free pass to deliver builds late that's a Surefire way to burn Bridges with your publisher but it is reasonable for you to have time to fix in areas or late delivery and finally check if timing is of the essence for delivery of any builds or milestones and be careful where a contract states that delivery of Milestones are of the essence it's a rather innocuous phrase but actually it allows the publisher to terminate the agreement for your breach in the event of late delivery and cure periods won't matter will apply on that so it's a very powerful to write and not really appropriate

so how do you fix it well step one just ask for it to be amended so that Miss milestone's a material but they're not of the essence this allows you to benefit from The Cure periods we've just discussed so where a publisher won't amend this Clause then the way around it is just to deliver something on or before the set Milestone delivery date it doesn't need to be a complete build and it might not pass the evaluation process but it will avoid the publisher from being able to terminate for late delivery so if there are any Publishers in this thing um just consider removing time of the essence requirements out of your contract any developer with a good lawyer is going to know how to get around it and that concludes my talk so thanks again for coming um to Contract Killers on talking about the legal ins and outs of publishing agreements um the talk should be available again by the GDC site and you can find the written articles on my contract killer series available on drama Sutra to read for free so please check those out

I hope you found this session useful and have more confidence going into your negotiations with the publisher then it's okay to change certain things in your contract if you have any questions or follow-ups or want to ask me anything then please feel free to contact me on email address or Twitter here or any of the contact details I provided earlier thanks again [Music] thank you