Summary

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Summary

Negotiating your publishing contract is an exciting process that should be tempered with caution and a good lawyer. The high degree of financial and execution risk involved in a development project leads to a high level of complexity in the contract.

To start production quickly, it is advisable to execute the contract in two stages: a short form agreement setting out the most important terms, and a long form agreement that contains all of the details. This prevents the developer from starting work "bareback" (without a contract or an advance).

A developer may contribute an original intellectual property and/or a proprietary technology to the game development. In either situation, care and foresight must be exercised in making sure that the developer retains rights where necessary and is adequately compensated for any use or profit stemming from use of its property. A work-for-hire development, in which the publisher licenses the core technology and game rights to a property from third parties, can be a simpler contract because there is no need to account for ownership and control of the intellectual property.

You and your publisher will be wrestling over rights in the four main sources of revenue created by a game: the game itself, the underlying technology, and the merchandise and entertainment licensing rights if you are developing an original IP. Most developers will not have a tremendous amount of leverage when negotiating with a publisher. One mitigating strategy is to attach conditions to grants of rights such as options and reversions.

Three points, among many, to remember:

• Give yourself a reasonable budget and schedule so that you can start or maintain a reputation for delivering on time, on budget, and on spec.

• Build in as many structures as possible to assure timely milestone approvals and payments.

• Don't just fixate on the royalty rate: fixate on the deductions allowed in getting from gross to net sales.

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