Contract Details

If you've decided to go with an agent, it will be useful to know some of the typical clauses you'd see in an agent contract.

Agent's Responsibilities

Agents must try to obtain the best possible offers and contracts for your team. They must be required to keep you informed about all such submissions, rejections, and offers of your game to publishers. The agent might also want to review royalty statements from your publisher to ensure that you (and they) are getting the correct amount of royalties. Most agents will also serve as intermediaries throughout the course of the contract, in the case disputes arise between the developer and the publisher; for example, if the publisher is unduly delaying milestone acceptance.

Developer's Responsibilities

The developer's main responsibility is to send anyone interested in purchasing their titles to the agent, so that the agent can manage all dealings effectively. Providing the agent with past business information (e.g., prior contracts) will also help him to better understand the developer's current business situation.

Commission

The agent is paid by commission. The commission is usually set as a percentage of the developer's gross revenues from various sources of income:

• Any regular game development deal you sign with a publisher.

• Subsidiary rights—sequels, add-ons, ports, etc.

• Derivative works—translations to other media, movies, TV, action figures, etc.

• Purchase of your company by another.

Each of these categories might have a different commission rate attached to it, in general somewhere between 5 and 10%. Note that when considering derivative works, you should keep the commission to a minimum: migration of a game's intellectual property to other media might be a rare occurrence, but if it does happen, you'll probably have to hire another agency to represent you in these other media—and therefore pay another commission.

Terminating the Contract

Termination of the contract is typically allowed by either party, with some period of notice to wrap up any existing business. However, several contractual clauses still apply after termination. Specifically, the agent's right to perceive commissions on the developer's earnings will expire a specific amount of time after the contract is terminated. For example, if, within 24 months of terminating a contract with an agent, the studio develops a sequel to a game for which the agent negotiated a contract, the agent will still receive his commission for that sequel.

Agents will also want you to be prohibited from dealing with publishers they put you in touch with and/or negotiated a deal between the two of you. For a publisher they have closed a contract with you, they will typically want the length of one development cycle, to discourage developers from terminating the contract with the agent and immediately closing a deal with one of these publishers (thereby avoiding the agent's commission). They will also want to prohibit you from dealing with any publisher to whom they have presented your work, but not closed a contract; since the relationship is less advanced, the limit on this is typically shorter.

Indemnification

In most contracts of any type, there is typically a clause or clauses that indemnify each party from a wrongdoing by the other side. Simply, if the other party in the contract breaks the law without you knowing about it, you can't be sued for their wrongdoing. This includes being sued and any financial obligations due to a suit.

Competition

Since agents typically represent multiple developers, you might be worried about an agent working with a client who is a direct competitor of yours (e.g., based on the genre of the game you're working on). You should be able to request their list of clients to ensure to your satisfaction that they are appropriately handling any conflicts of interest. However, don't expect more information on other clients than that, since the agent will typically be bound by confidentiality agreements with regard to clients' projects, technology, and other property.

Payment Procedures

The agent might want to take funds the publisher is to pay to you and have them place it in a trust instead. This way, they can deduct their commission before the money gets to you. This practice delays your receipt of payment by a few days. Normally, this is isn't an issue, but in tight situations, this delay could mean the difference between paying your team's salaries on time, paying them a week late, or, in the absolute worst case, even going out of business. For this reason, you might want the representation contract to specify that the publisher will send you the money, and that you will then have a short period of time to pay the agent his commission. In this case, you must also give the agent any records of publisher payments upon request, so he can be sure you're paying him the correct amount.

Non-Game Related Work

If you're a small studio, chances are you might occasionally pay the bills with contract work of various sorts. This might include contracting out your art staff to do graphic design for a magazine, or having programmers consult on a networking company's software development projects. If so, it should be clear in the contract that the agent does not receive income from this type of work (unless, of course, they obtain it for you), and that you are not required to fulfill the responsibilities described previously to the agent with regard to this work.