Don’t leave money on the (legal) table

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When you’re contracting with someone else, think wider than your product’s immediate revenue stream potential. That’s what I want to write about in this post. We see too many contracts where the product owner is partnering up with another guy without thinking as far as he/she could about what the value they’re giving away. Let’s say that it’s a games developer partnering with a publisher, or a software developer signing a distribution agreement with a distributor. They could be leaving money on the table by not thinking wider (and being sharper in the contract, which is what it all comes down to).

Below are some examples of what I’m talking about. (Note: as standard on this blog, I use the games industry as my starting point, but really these tips apply to any tech of software product where a third party gets involved).

 
Porting and sequel rights. These are the standard rights which the other guy will normally think about and ask for. You’re unlikely to keep them therefore- but worth asking all the same. Btw, when I say ‘sequel’ I use it generically to mean prequels, spin-offs, follow-ups etc, but in the contract it’s worth being precise (actually this can help you – if they just ask for ‘sequels’ it may mean you keep everything else).
Got audio or music in your game? Retain the rights in them, or at least discuss them as assets in their own right. No-one is making loads of money for in-game music, but it is bring exploited more and more often separately to the game. Proof of my point: I’m listening to the Mass Effect 3 soundtrack on Spotify as I type this (ok, admittedly I switched to it and away from an Arcade Fire album to make this point, but it’s still a good point!) Besides, exploiting your in-game music is probably as much about satisfying customer demand and encouraging customer loyalty as it is about turning a penny or two. I genuinely think every successful game should put their music up online (speaking of which, hey Bethesda, will you kindly put the Skyrim soundtrack on iTunes or Spotify already?)
 
Merchandising. For God’s sake, keep merchandising rights if you possibly can. Merchandising is growing all the time in the games industry – we’re a long way way from being as good as film or tv, but we’re learning fast. I saw at first hand recently – I went to Gamescom, a big games trade show in Germany, this year and I reckon about 20% of the expo floorspace was devoted to merchandising (that’s impressive- so impressive in fact that I spent all my Euros :/). It’s not just console games that can make money from merchandising either – just look at Rovio or Halfbrick, two successful mobile studios making money from merchandising. And here’s the beauty of this tip: I’d wager many contractual partners would be willing to consider giving you at least some merchandising rights, because the monetization route is so remote. OK, that also means that just having the rights won’t get you any money on its own because success and actual work is required to make merchandising happen, but what’s the harm in having the rights just in case?
 
Sponsorship. Another easy win, since most games don’t have any form of sponsorship. It does happen though. One of my clients has just made a very healthy amount of money, paid upfront, for allowing a major corporation to sponsor its mobile game post-release (despite having signed up with a publisher). So why not keep the rights?
 
Content licensing- by which I mean in particular you keeping the right to license out bits of the game, like characters or even certain mechanics. I heard anecdotally that one indie developer recently made a good amount of money by licensing a major character in its game to appear in another game, even though that character they were licensing out belonged to a game they’d signed away to a publisher (they’d kept the rights in the character, you see).
 
Geographical rights. This can work two ways. You can let the other guy ask for  distribution/exploitation rights in only some parts of the world (normally because the contract wording is deficient)- which means in principle you can take the same rights everywhere else.  That doesn’t happen too often though, because the contract will probably refer to the rights ‘worldwide’ (or if you’re dealing with a pompous lawyer or someone from the music industry, the rights ‘throughout the universe’). More often, you can have a go at carving out some geographical rights for yourself. Let’s say for example that you’re dealing with a partner with no real Asian presence, whereas you think you can make Asia work. Why not ask them to carve Asia out (which they might do in return for say some kind of Asian revenue-share)? 
 
I could keep going (actually, I might revisit and add to this post as and when other ideas come up) but, like I said, the general idea is to avoid leaving money on the table by thinking creatively about how your product could make money.
 
One closing thought: the deadliest enemy of this approach is the lawyer’s love of catch-all wording. For example, if the other guy specifies he gets ‘all revenue from all exploitation’ of the product, you’re sunk. So the key is to avoid that kind of general language, to really home in on what you want AND to make it part of the negotiation. If nothing else, pointing to out to the other guy all the value he’s getting is worth something. Hopefully though, it’ll be all your value, you can make a heapo money, and then come buy me a beer.

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15 Responses to “Don’t leave money on the (legal) table”

  1. Josh Cavaleri

    Great article Jas – I totally agree with your note about geographic rights, this is just a little off-topic thought I’d like to share.

    While I wouldn’t like to think of myself as a pompous lawyer, I did find it interesting to read the list of recordings that have made their way across space on the Voyager spacecraft (including sounds like Chuck Berry’s Johnny B. Good). The lawyer in me couldn’t help but think about the rights needed to use these recordings in space – I wonder which collection society is responsible for public performances at the edge of the galaxy?

    From a gamer perspective, although astronauting around would be fun, I would definitely want to bring along my VITA to have a bit of fun during the less entertaining times. If my space journey is a long one, I’d also like to think that I could have access to the PSN to buy and download the latest and greatest games! All-in-all I’m just saying that, in the unlikely event I become an astronaut, I want the PSN to have the necessary rights for me to enjoy some new games while jetpacking around the solar system – we wouldn’t want these astronauts resorting to piracy would we?.

    Thanks Jas, keep up the good work.

    Cheers from Aus, Josh

    Reply
  2. Alex Booth

    Talking about audio rights, just look how a lot of the music licenses have run out in GTA 4 recently. They had to patch the game to remove music without telling the players (who wouldn’t have updated knowing that the patch would actually remove content). I bet their was a lot of unhappy people that day the patch was released!

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