Publishing Agreement Pitfalls: A Practical Guide for Indie Devs

Platforms: which platforms does the licence cover? Even if you’re only actually creating a console version for release, you can still tie-up rights for other platforms (PC, VR, TV etc) that you might want to create later down the line and give to a different publisher (or even self-publish). Also, be as specific as possible – if you’re just giving iOS mobile rights, don’t agree to giving away all “mobile” rights. If it’s just XB1 and PS4, don’t agree to all “consoles”. 

Exclusivity: are the rights you’re giving away exclusive or non-exclusive? In most cases it’ll be the former, which means that no one else can do those things which you’re exclusively granting to the publisher – this includes you yourself! So if you’re making a mobile game but also give away exclusive PC publishing rights to the publisher, you technically can’t self-release a PC version later down the line – you can only do so with that publisher.

Territory: In most cases the publisher will ask for a ‘worldwide’ licence over the game. However, it’s not uncommon for devs to look to carve out certain territories from the scope of a licence (particularly in relation to Asia). This can be valuable to devs for a number of reasons, including where the current publisher doesn’t actually have any experience publishing in those foreign territories. Things are changing a lot in China at the moment from a regulatory perspective making a local partner almost essential for foreign devs releasing their games there. 

Duration: Licences to a publisher should only last for as long as the actual publishing agreement remains in effect (re which there’ll normally be a minimum term which automatically renews until terminated). This should be written clearly and words like ‘perpetual’, ‘indefinite’ etc removed.

Future Works (sequels etc): Does the licence to the publisher only cover this single game, or does it also include future works like spin-offs, sequels, prequels, derivative works, games ‘based on’ the first, DLC, cosmetics, etc? This can be dressed up in a number of ways (often quite confusingly so), so it’s important to read the wording carefully. As with platforms, the important thing is to make sure you’re not unintentionally locking away rights to future projects.

Ancillary Rights / ‘Exploitation’: In addition to game publishing rights, are you giving away any other ‘exploitation’ or ‘ancillary’ rights (which are both fairly nebulous terms but basically mean non-game products such as merchandise, comics, TV, film, books etc). Before giving these away, make sure to ask if the publisher actually plans on (and has experience) producing these non-game products. If they don’t, be cautious before locking up these potentially very valuable rights. 

ROFO / ROFR / ROLR / ROLO: these stand for Right of (i) first offer, (ii) first refusal, (iii) last refusal and (iv) last offer. These terms all mean subtly different things (which can be very important), but the one you’ll come across most often is a right of first offer (ROFO). If you give up your IPR but you negotiate a ROFO, this will normally mean (though it depends on the exact wording in the contract) that if the publisher wants to publisher a sequel/other product based on that game IP, they must first offer the development work to you. The contract will normally say that you’ll then enter negotiations with the publisher for a certain period of time (e.g. 30 days) to try and reach agreement re development terms. If no agreement can be reached, the publisher is free to take the IP elsewhere. In other words, a ROFO isn’t a guarantee that you’ll be involved in future projects or even get a rev share for those, but it normally means that you’ll at least be consulted.

Reversionary Rights: slightly less common nowadays, but a reversionary right normally means that if you give up your IPR but the publisher hasn’t made a sequel within a certain period of time (e.g. 3-5 years), then the IPR ownership reverts back to the original developer. The idea here is to try and prevent the warehousing of IPs.

Revenue Share: What split of revenue do you keep and what does the publisher keep? A question I get asked a lot is “what’s a typical publisher rev share”, but the answer to that is so deal-specific and depends on a huge number of factors - you could be looking at giving up anywhere between 20-70% of your revenue. Be prepared and bargain hard!

Revenue Streams: So, you’ve agreed the rev split in relation to game sales, but what about revenue that is generated from elsewhere, such as DLC, cosmetic IAPs, sequels, t-shirts, books, tv shows, movies etc? Whatever rights you're giving up, it needs to be clear how revenue made from the exploitation of these is handled – sometimes this can all be wrapped up into a single % figure, or different %s can be negotiated for different revenue streams. 

Gross / Net: Once you’ve work out what share you’re keeping, it’s important to discuss what that’s actually a % of. Is that gross revenue or net? If it’s net, how is ‘net’ defined in the agreement – i.e. what ‘deductions’, ‘recoupments’ or expenses are getting taken off by the publisher before your % is calculated? Look at these carefully, ask for ambiguous terms such as “other costs” to be clarified, narrowed or removed as needed.

Payment Periods: When do you actually get paid your rev share? On a monthly or quarterly basis? Within 30 days of you submitting an invoice to publisher? When can you actually submit an invoice – only upon receipt of a royalty report from the publisher? If so, when will the publisher give you royalty reports? Depending on the payment period wording and what costs are being recouped (e.g. dev funding), it’s possible that you might not see any money at all until 3-6 post-release, even if the game sells well! Prepare for this and don’t hinge survivability on receiving royalties on day 1.

Royalty Reports: Make sure you get these and that you understand them. A royalty report should at least detail how many units were sold on which platforms, in which regions and give you a breakdown of gross revenue, deductions/recoupments and the division of net rev share between dev and publisher. If you don’t understand something here, don’t be afraid to ask.

Audit Rights: Having an audit right gives you the ability to send in a professional firm of auditors to check the publisher’s books/accounts to make sure it has been paying you the correct royalties. It’s normally only used as a last resort, but having the power written into the contract can be advantageous if things unfortunately start to go wrong. 

exactly what has to be delivered at each milestone: what actually constitutes an alpha, beta, first playable, submission build etc? What level of bugs is acceptable at each stage? What game features/assets should be present – multiplayer, save systems, full UI, voiceover etc? Although it’s less common nowadays to set these things out in massive detail, it’s still in the devs interest to do so as this reduces scope for arguments in the future – particularly re what features the final game will actually include. You should also look to include a “material change” clause, which basically means if the scope of the game drastically changes at any point, that time frames/milestones/payments etc should be renegotiated.

when you get paid for each milestone: milestone payments could be tied to static dates (e.g. 15 March) or to ‘acceptance’ by the publisher of a milestone’s ‘deliverable’ (i.e. the game build). It’s important to make sure that these payment time frames actually work for you from a cash flow perspective – if you need advance funding (i.e. on signing) in order to hire staff/buy equipment and software, make sure your first payment isn’t all the way at acceptance of the first milestone - otherwise you won’t have enough to get started. Also, re timings in general, always remember to build yourself in some leeway – staff get sick, things go wrong or take longer than expected, ideas get scrapped and added in etc.

what the publisher’s submission / acceptance procedure is: for those milestones where payment is tied to ‘acceptance’ of a deliverable, what does ‘acceptance’ actually mean? What does the general submission / acceptance process look like? When can a publisher reject a milestone – lack of a particular feature / too many bugs (this is why it’s good to go into as much detail re what’s due at each stage)? How long does the publisher have to review each deliverable? Does this time eat into your next milestone?

what happens if there’s rejection: If the publisher rejects a deliverable, what happens next? Does the publisher have to give detailed reasons for the rejection? How long/how many chances does the dev get to remedy these problems? There should also be a clause in the agreement saying that if the publisher causes delay (by e.g. taking a long time in reviewing deliverables) then the remaining milestones are extended by the amount of delay incurred.  

Always think carefully about what you want from a publisher, whether you actually need a publisher and, if so, which publisher is right for you.

Four of the most important areas to think about when negotiating a publishing agreement are (a) Intellectual Property, (b) Financials, (c) Milestones and (d) Termination Rights and Consequences.

IPR ownership is important. If you’re keeping your IP, don’t accidentally lose control of this through widely drafted licences. If you’re giving up your IP, try and negotiate some involvement over future exploitations (ROFOs etc).

For the financials, make sure there’s clarity over what and when you’re actually getting paid.

Be as detailed as possible when it comes to setting out the milestones and acceptance procedure, particularly regarding what’s due at each milestone, when you actually get paid, when the publisher can reject and what happens then.

Think carefully about not only when either party can terminate the agreement, but what the consequences of termination actually are.

There’s always a whole bunch of legal stuff in a contract which is just as important as the commercial terms (particularly in the event something goes wrong in the future). 

Read your contract! There’s never any excuse for not doing this.

Understand it. This one’s a little harder because some contracts are more clearly written than others, but if you’re ever unsure of what something means, ask the publisher or a friend or family member to help explain this. With contracts, the devil truly is in the detail.

Get it in writing. Not in emails, skype, IM or anything else – if you’ve requested a change/clarification, make sure this ends up in the contract you eventually sign.

Give yourself enough time. Always leave enough time for proper review and negotiation of a publishing agreement – this can range anywhere from a couple of weeks to several months.

Separate needs from wants. You’ll never get everything you want in the contract, so it’s important to focus on what’s important to you and being prepared to compromise on other points.

Work together. Negotiating a deal is a 2-way street – keep things civil, realistic, listen to the publisher’s side of things and balance that with what you’re asking for.

Tunnel Vision. Don’t tunnel vision on any particular point and always read and understand the deal/contract as a whole.

Be prepared to walk away. This isn’t always easy to do, but giving yourself enough options so that you actually have the power to say no is really important.

Get help. Whether this is from friends, family, other devs, consultants, advisors or lawyers – don’t be embarrassed to look for external help; any cost associated with this will be marginal in comparison to what you could be putting on the line with a bad contract.