Video game publishing agreement (what terms to specify, how to protect a game, how not to be sold into slavery by accident)

A video game publishing agreement is a contract that establishes the legal relationship between the publisher and the developer of a video game. Most often, the publisher is the company that takes responsibility for the distribution, promotion and commercialisation of a game, while the developer is responsible for creating and providing game content.

The agreement for publishing a video game in fact contains quite various terms of cooperation between the parties, starting with the terms of granting the rights of the video game, restrictions of its use by the publisher, revenue sharing up to the terms of termination of cooperation and liability of the parties.

If you are a developer and you are facing the task of signing a contract with a publisher, we recommend you pay attention to the following important terms:

1. Terms of granting rights to the video game

One of the key parts of a video game publishing agreement is the terms and conditions for granting rights to the video game. In practice, the most common model is the license model (allowing the publisher to use the video game under certain conditions for a limited period). However, in some cases, the publisher may also offer an assignment model (full sale of the video game). When choosing one or the other option, we recommend that you consider your needs: whether you are ready to lose the status of a rights holder and on what terms.

When choosing the more common option, we also recommend that you pay attention to the following points:

  1. In which territory the publisher can use the video game. It may be limited to a certain region (for example, the Republic of Belarus and the Russian Federation), or it may extend worldwide.
  2. For what period exclusive cooperation is offered and the possibility of early termination of such cooperation.
  3. How many rights the publisher is asking for in relation to the video game? Given that, as a rule, cooperation with a publisher is on an exclusive basis, the more rights are specified in the contract, the more the developer is restricted in using his video game in the ways he has contracted.

Accordingly, if the developer would like to retain any territories or rights, such exceptions must be outlined in the contract.

2. Financial Terms and Conditions

As a rule, one can find two general options for revenue sharing between the parties:

  1. Revenue Sharing - % of Gross Revenue. It should be noted that this option is quite rare because in this case the publisher's expenses for commercialisation of the video game are not taken into account. 
  2. Profit Sharing - % of Net revenue (Gross Revenue minus publisher's costs). 

Since both options involve the entire calculation of the developer's share is on the publisher's side, we recommend that you pay attention to these points:

  1. How the developer's share is calculated. Publishers may finance the development of a video game and "inject" a large amount of money into marketing - all these are expenses of the publisher, which he will recover from the incoming revenue. In practice, publishers seek to refund such amounts in the first place, so the developer may not receive his share until they are fully reimbursed, which should be fixed in the contract.
  2. What happens to negative Net Income? In practice, these amounts are transferred to the following periods and summarised between them. If you manage to agree otherwise, this must be stated in the contract.
  3. How the costs of commercialising a video game are formed and whether the developer can control them. The most " strict" option for the developer is an "open" list of costs, which the publisher himself determines at his convenience. If you want to have more control over which cost items can reduce Gross Revenue, you can offer a "closed" list option (i.e. a finite list of costs) or a conditionally "closed" option, where there is a basic list of costs, and anything beyond that is agreed upon in advance with the developer.
  4. Whether the publisher provides reporting. Not only reporting on the performance of the video game, but also on the overall calculation of the developer's share is important under the contract, so the contract must include a procedure for providing financial statements, the ability to raise questions or claims about the calculation, and a procedure for resolving any disagreements that arise.

3. Termination of a video game publishing contract

Often exclusive agreements can be quite long-term. It is therefore important to negotiate and provide in the contract options for early termination of such an agreement. The developer can agree on various options for "withdrawal" from the agreement:

  1. "Withdrawal" from the contract "without cause" but with a certain period of notice. This is the most flexible option for the developer, as in this case no special reason is required to terminate the contract;
  2. "Withdrawal" from the contract due to the occurrence of a certain circumstance. For example, late payment of the developer's share for a certain number of days.

Since it is often technically difficult to stop the use of a video game immediately upon termination of the contract, it is also recommended to specify in the contract the procedure for determining the developer's share, the parties' settlements and after termination of the contract. This may include amounts that relate both to the periods before termination and after termination.

4. Distribution and marketing

One of the most important aspects of a videogame publishing agreement is undoubtedly the specification of the terms and conditions for the publicity of the product, which may include a timetable for the launch of the videogame and future versions, marketing strategies and promotional materials provided by the developer or compiled by the publisher.

In this case, it is important, that if you have specific agreements with the publisher regarding the amount of marketing expenses and certain responsibilities of the publisher, then such agreements should be recorded.

5. Support and updates

The agreement may include the developer's obligation to provide support and regular updates to the game. Support may include bug fixes, development of new elements, ongoing technical support, either on a reimbursable or non-reimbursable basis. 

If technical support obligations are established, it is necessary to specify requirements for technical support, consequences of their non-execution, as well as terms of replacement of members in case of involvement of a certain team in development and technical support, if required by the publisher.

Therefore, when concluding a contract for publishing a video game, it is of course first of all important to choose the most appropriate terms so that they are comfortable for both parties, as well as to determine to what extent one or the other party is willing to assume the terms.