ALPHA | OPINION
//COMMENT: MOBILE Killing contracts
by Will Luton, Mobile Pie
over without a good reason. Like a big stack of cash. Joint IP ownership, separating technical and creative IP and options clauses, like first refusal rights (same partners seek a deal first), can also be useful bargain chips.
MILESTONES Commonly a payment schedule is dependent on meeting ‘milestones’. Milestones are important achievements in development, such as first-playable, alpha, beta et al. If your company is dependent on this single deal to stay afloat then milestones are your lifeline. Think about what the dependences are on achieving this. If a milestone is on the paying party or an approval process make sure there are strong stipulations that stop it being delayed despite your reasonable actions.
In a creative space where it is more often than not about the money,
negotiating deals is a vital skill for any developer
COMPANIES IN GAMES are rarely truly independent – they must cut deals with others to make things of any importance. Traditionally this means studio-publisher
deals, but with direct access to the market and new partie – like brands – investing in games, things are changing. I’m going to outline a few basics I’ve picked up from negotiating and contracting our deals here at Mobile Pie. Yet I’m not a lawyer, so had my man Jas Purewal of law firm Osborn Clarke sanity check me.
RISK Contracts define rules which balance the risk and reward of a deal. It regulates what either party is putting in – usually money or time – against what the potential benefit is. Sometimes the input and output may be
fixed for one party. For example; a publisher owns an IP and has a fixed design with specified features and content. The developer can estimate with reasonable accuracy their cost, so receive a fixed remuneration with a built-in profit. The IP owner may then receive all of any future profit from the product as they have taken all of the risk. Either party may also bring to the table profile, audience, talent and proprietary technology, which changes the risk for those in the deal.
MOTIVATION The motivation of the dev in the previous example is possible profile raising, but let us assume the project is without credits. The main motivation then becomes the fixed fee.
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The developer gains the most by spending the least on it. This may benefit the publisher as it hits the market sooner, but in reality it probably means a poorer quality product. Quality could be ensured with stringent
acceptance criteria, but this is likely to increase dev costs and result in passionless hoop jumping. An upside is more carrot than stick, giving a developer a share of the royalties and/or bonuses based on its performance.
Whoever retains the intellectual
property and the rights around it controls its destiny beyond the duration of the limits of the contract.
Royalty shares can be from day one or
structured as advances – the development cost is given as a prepayment on royalties. A royalty upfront is like loan but with no obligation should the project fail. The funding party reduces risk by recouping first and the developer has a reason to make the product good.
IP RIGHTS Whoever retains the IP and the rights around it, controls its destiny beyond the duration of the limits of the contract. If you’re bringing the IP to the table, don’t expect to hand it
TERMINATION Termination clauses define how and in what circumstances either party can reject what parts, or even all, of their duties. These can be complex and rarely cookie cutter. Mostly they’ll outline breaches (a failure in someone’s performance) and the process to resolve them before a termination can be carried out. In some cases one party may be able to cancel for a specific or no reason. Think about all possible scenarios and how they’ll affect your company.
REMEDIES, INDEMNITY AND LIABILITY These define what happens if things go sour and may tie to termination clauses. - Remedies - what recourse must be made in the event of a breach. - Indemnity - a requirement to pay and or protect the other party if things go wrong. - Liability - allocation of risk between the parties and the limits of those risks. It’s common to see these protecting the
party writing the contract, but you should try to make them mutual, which is a winnable cause. Non-mutual remedies, indemnity and liabilities is a hard position to fight.
TO CONCLUDE Contracts concerning creative products rely on the motivation of everyone involved, therefore they only work if they are fair and none of the parties feel like they’re being done. If you feel you can’t be fair or are getting shafted, walk away, and if you don’t understand, get a lawyer.
Will Luton is creative director at the award- winning boutique studio Mobile Pie. The studio creates its own IP and works on licenses, with a partner list that includes the BBC, Orange and Hewlett-Packard. Follow Will on Twitter at @will_luton, or visit
www.mobilepie.com
DEVELOP-ONLINE.NET
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