How It Starts

In order to convince a publisher to fund a project, a developer must prove not only that the game has commercial merit, but also that the developer has what it takes to deliver the game on time and in acceptable form. The developer prepares a comprehensive demo of the game that adequately displays the environments, characters, technology of the game, and game playability. In addition to the demo, a project document or "game bible" that sets out in detail all the elements of the game is also presented. These elements include the back story, characters, level shots, graphics and design elements, and any other content necessary to the game, especially those that are in addition to the ones included in the demo.

The Letter of Intent

Once the publisher (or publishers) decides to try to sign your game, the negotiation of the basic terms begins. If negotiations are successful, they might result in the execution of a letter of intent. This is a temporary agreement outlining only the most basic terms (e.g., advance, royalty structure, and delivery date) and stating that the parties intend to negotiate a full-length contract in good faith.

At this point, the publisher will probably prepare and deliver their "standard" developer agreement. Don't let the term "standard" fool you. Many of this fill-in-the-blanks contract's terms are negotiable, depending on the relative bargaining power of the parties. While you might be inclined to just sign the contract and get on with what you love to do, which is make your game, some patience and tenacity can have a substantial positive impact on the final terms of the agreement.

The Importance of the Contract

Game development contracts range in length from 8 to 30 pages. These are important documents and should not be treated lightly. Ultimately, the quality of your developer contract is essential to the success of the project and the long-term viability of your entire career as a developer. Therefore, the negotiation of the contract's terms should be treated with the same care you treat your code or artwork. Even if your team has an agent that has been assisting you in negotiating the terms of the contract, entering into an agreement like this without having a qualified attorney review and assist in the negotiation of the details can result in serious problems later.

As we discuss in detail later in this article, development agreements cover a broad range of issues. In addition to the milestones and payments, the development agreement describes the submission and approval process in detail, and, more important, specifies any transfer of ownership of the elements that comprise the game. For example, publishers require most new developers to relinquish all of the intellectual property in the game to the publisher. In this context, "intellectual property" usually includes the game code, game name, concept, images, characters, backgrounds, textures, and all other marketable assets that go into the game. It might also include any tools created by the developer in the process of making the game. When and how this property transfer occurs should be well delineated and set out in detail in the contract.

Of course, in some cases much of the intellectual property used in the game might already be owned by the publisher or licensed to the publisher by a third party. For example, games derived from movies, expansion packs, or second or third releases of games already published might already be owned or licensed by the publisher. In these cases, the development agreement will instead delineate the scope of the developer's right to exploit the property. In addition, if any third-party software such as game engines, software development kits, or middleware is involved in the development of the game, the contract terms will spell out who is responsible for acquiring the rights to this software, as well as who retains the right to use them during the development period and upon completion of the game.

Finally, just like any other business contract, development contracts contain numerous general provisions that lay out in detail what will occur if any specific contingency occurs. These contract provisions deal with more mundane issues such as who is responsible for quality assurance and testing, localization of the game, publicity and marketing, rights to proceeds from ancillary products such as dolls and lunch boxes, areas of distribution, insurance requirements, confidentiality and non-disclosure agreements, non-solicitation agreements, notices, assignments, waivers, and even what will occur if one or the other of the parties files for bankruptcy or is forced into bankruptcy. And of course, the contract will specify where and how any disputes that might arise will be resolved.