Video game lawyer and business advisor Jas Purewal takes you through five real(ish) war stories of video game deals, what did/didn't work, what we can learn from them and how to do better deals in the video games industry.
Four Weddings and a Funeral: Five Real(ish) Video Game Deal War Stories
1. Four Weddings and a Funeral:
Real(ish) game deal war stories
Jas Purewal
Reboot Develop 2018
2. Our stories
1. GDC bromance ≠ good deal.
2. Contract > relationship.
3. Promising port hits problems.
4. Keen dev v new pub.
5. Mod to indie juggernaut to
flop in 12mths.
3. 1. Know what you want, early,
and don’t forget it.
2. Pick partners carefully, then
trust but verify.
3. Modern game deals are about
front, middle and back end.
4. Contract defines/enhances
the relationship.
5. Harmonise planning for
success as well as failure.
The TL;DR
4. ABOUT US
4
• Digital entertainment law firm and business
consultancy in London specialising in
games, esports and digital broadcast.
• Full range of legal and business support.
• Industry knowledge. Commitment. Long
term thinking. Real advice. No jargon, no
waffle, no fence sitting.
10. Putting the deal together
• From GDC, CEOs delegated deal, straight to (four different) long-
forms.
• It’s a…
− Co-development?
− Joint venture?
− Prototype agreement?
− Tech partnership?
• Long negotiations on both sides, burn out, disillusionment.
• What was success meant to look like?
10
11. Solution?
• Put the band back together. CEOs got
back in a room together, now with time
and proper support.
• Focussed on interests of each business.
• Started with a brief LOI alignment.
• Modular contract structure.
• Minority equity investments in each other.
11Image credit: Universal
12. Pro tips
• Speed is fine but remember “slow is
smooth, smooth is fast.”
• New product deals usually require
sufficient senior leadership/support.
• LOI/MOU/Term Sheet – use them!
• Flexibility vs thoroughness is a
necessary compromise in most deals.
12Image credit: Fox/Giphy
14. An exciting start…
• Top US entertainment brand and games
publisher agree multi-game partnership.
• Multi-million dollar advance.
• 20 page term sheet, 60 page long-form.
• Publisher compromises to move fast,
includes a break clause as insurance.
• Senior leadership agree to revisit deal
after game 1.
14
OK it WAS NOT Disney,
but you get the ideaImage credit: Disney/LA Times/AP
15. A disappointing middle…
• Game 1 ships, game 2 negotiation starts.
• Brand’s leadership has changed.
• Brand hardliners run negotiation.
• Brand agrees to reopen long-form…then
takes every conceivable advantage.
• After 2 months of that, is there still a deal?
15Image credit: Pexels.com
16. Limping to the finish…
• Publisher threatens to walk away. Brand
calls bluff. Publisher invokes break clause.
• Brand relents.
• Publisher prepares next draft – modest
changes.
• Both parties sign.
• No-one changes contract for game 3.
16Image credit: Brothers in Christ band
17. Pro tips
• The personal relationship and the
contract are key for a good deal.
• Negotiating in the middle of a relationship
should be last resort.
• Always leave yourself a way out.
17Image credit: Fox/Giphy
19. Mo’ money…
• Indie game strikes gold (2m units on
Steam in <12 months).
• Decides to go cross-platform.
• Hires new publisher formed by veterans.
• Indie publisher then outsources port to a
small/cheap porting studio.
19Image credit: Showtime/Giphy
20. Mo’ problems…
• Porting milestones/deliverables start coming late and poorer quality.
• Publisher slows royalty payments, then stops.
• Fan community complains, reviews suffer.
• What can the developer do?
20
22. Answer: most of the above
• Sent payment demand to publisher, explained situation, claimed audit
and interest.
• Contacted porting studio, decided it was solid but communication with
publisher was poor.
• Face to face discussions with publisher, polite but firm.
• Sunsetted publishing deal, hired porting studio direct.
• Public apology to fans and offered free content.
22
23. Pro tips
• Vet who is actually doing your work.
• Litigation, like all threats, has to
credible and have real follow-through.
• Don’t assume you know enough.
23Image credit: Giphy
25. Keen developer vs new publisher
• Experienced PC/console indies form a new mobile studio.
• 6 figure publishing deal from an existing publisher for F2P mobile
game.
• Lots of discussion, but v limited dev negotiation power.
• They sign and get to work.
• Publisher starts moving the goal posts…
25
26. Tech fun
26
“You represent and warrant that You have registered or shall
register through the [Publisher Portal] and as a condition of
this Agreement that You have accepted or shall accept all of
the click-to-accept agreements on the [Publisher Portal]
including the Developer Agreement and SDK Agreement.”
“You agree that you will use any preferred partner software
programs/tools (including engine) notified to you”.
6 months before release, publisher totally replaces its SDK, customer portal
and hosting arrangements…
27. Game financials problematic
27
Developer “will receive sixty percent (60%) of the net Game
revenues if: (1) the Game achieves at least 3,000,000 (two million)
end user downloads (including from Publisher’s Affiliates in Asia)
within 3 months from the initial launches; or (2) if Publisher earns at
least $5,000,000 in net profit during the first 3 months from
commercial release. If not, Developer will receive fifty percent (50%)
of the net Game revenues”.
28. Game financials problematic
28
Developer “will receive sixty percent (60%) of the net Game
revenues if: (1) the Game achieves at least 3,000,000 (two million)
end user downloads (including from Publisher’s Affiliates in Asia)
within 3 months from the initial launches; or (2) if Publisher earns at
least $5,000,000 in net profit during the first 3 months from
commercial release. If not, Developer will receive fifty percent (50%)
of the net Game revenues”.
Confusing, didn’t work that well for mobile and game monetised poorly too…
29. So what happened?
• Devs upset by back-end changes, had
no leverage. Publisher upset by late
release, poor performance.
• Realistically either double or quits.
Doubled down.
• Renegotiated contract, ported to PC and
console, longer-term strategy.
29Image credit: Giphy
30. Pro tips
30
• Sign in haste, repent at leisure.
• Game mid/back end is critical to deal.
• Be careful taking old ideas into new
deals.
Image credit: Giphy
32. The win…
• Explosive new game mod attracts huge
attention.
• A developer hires the mod creator.
• Mod creator rapidly scales a full game.
• Generates large amounts of money quickly.
• Developer agrees equity investment +
publishing deal with major publisher.
32Image credit: Giphy
33. The crash…
• The mod ‘creator’ wasn’t the only
modder…
• Modders sue creator for profit share.
• …While creator sues for a higher profit
share from developer, claims game
ownership (no contract!)
• Publisher sues developer for breach of
contract. Stuck with equity in developer.
• No-one is making the game.
• Developer who built original game that
hosted the mod makes a better version. 33Image credit: Miramax/Giphy
34. Pro tips
34
• No contract = no ownership.
• Mod/fan work can get messy.
• Proper planning prevents poor
performance!
• Litigation always distracts from
business.
Image credit: Giphy
35. 1. Know what you want, early,
and don’t forget it.
2. Pick partners carefully, then
trust but verify.
3. Modern game deals are about
front, middle and back end.
4. Personal relationship+right
contract = good deal
5. Harmonise planning for
success as well as failure.
TL;DR redux
The two successful game company CEOs who made a drunken agreement and then watched their companies have no idea what to do afterwards.
The major entertainment brand that took advantage of its publisher using every contractual opportunity.
The newly successful indie who made some bad choices about who to trust with their game.
The experienced but desperate developer who did a deal with a publisher which was about to go into a huge turnaround.
And the monster new indie game that fell to pieces as quickly as it had grossed millions.
Those who know me know I like to get straight to the point and tell my audience what the takeaways are going to be. Here they are. But the true value of the talk is not just these words on a slide, it’s the stories that go with them that help to show how these principles were – or weren’t implemented and what happened. Legal and business education is good, I’ve always found examples are better.
Four Weddings and a Funeral because…well, I’m British and it adds up to 5, which is how many stories I like to tell.
But there’s another film that’s relevant here…can anyone guess what it is for a bonus point? Fargo. Because these stories I’m going to tell you are true in the Fargo sense – i.e. semi-fictionalised and you can’t tell what’s is/isn’t
I was going to do a lawyer caveat…
40k people arrive in San Francisco. Ofc all the suits like us hang around the bars. Two mid sized games business CEOs (one tech service provider and one developer) go to the W and have a serious business discussion which results in some brilliant ideas for a new product they will co-develop. It’s going to break boundaries and make millions! Then they wake up. Have another 40 meetings each. Go home. Tell their biz devs and lawyers to put the deal together.
No-one knows what the deal is. Nothing was written down. Only the CEOs were present and they’re not paying attention anymore. The companies don’t know each other.
Explain briefly why each form of structure didn’t work.
CEOs had the genesis of the project, they should have kept working at it until either it became real or became nothing.
There was something here. Tech providers often need content to evangelise, market, and progress their products. Content can benefit from technical innovation in a busy market.
Big success given the indie publisher No More Robots (in which I’m an investor) suggests average new Steam game grosses <$10k and SteamSpy suggested 0.5% make 50% of Steam revenue.
Payment demand letter, then litigation. Raises pressure (good/bad). Could harden positions, lose relationship, expensive.
Audit: audit clause was v poor (give examples). Even if it was better, you’d have to pay the money and enforce.
Go public: no business ever wins in the court of public opinion – eventually it’ll bite you in the ass.
Talk to partners: what if the dev has got it wrong? Or at least if it doesn’t know the full story?
Vet who is doing your work. Porting. Outsourcing. Influencers. Ad inventory.
In the last story we had experienced folks setting up a publisher. Here, they’re setting up an indie studio.
The publishing agreement referenced several standard T&Cs and developer had to accept them (whether read or not). EULA, PP, SDK agreement, Portal terms. Then just before release the publisher decided to overhaul all its back-end tech, sent a notice to the dev requiring ripping out and starting again. Dev had little choice, legally or practically – the game didn’t work without it. Thank God it didn’t try to change the engine.
So many problems about how this works in practice. Is it 3m or 2m end user downloads? Was end user downloads even appropriate as the sole metric? How would timing work in practice? If it’s 3m downloads from launch in Japan, China, ROW then when do you start counting the 8 weeks? What if there is no JP/PRC launch? What does net profit mean? Can publisher recoup advance, UA/marketing, other publishing, tax and consumer returns? Industry norms v contract wording.
Core clauses: what do I have to do? What am I paid? What do I own? How can I leave? These ones above all must give you what you need and at least make sense.
So often deals are done based on the commercials/financials and without thinking about the technical aspects, early.
Mobile F2P deals and GaaS deals are totally different to PC/console deals. E.g. assessing financials by download numbers alone – be careful about that.
Core clauses: what do I have to do? What am I paid? What do I own? How can I leave? These ones above all must give you what you need and at least make sense.
So often deals are done based on the commercials/financials and without thinking about the technical aspects, early.
Mobile F2P deals and GaaS deals are totally different to PC/console deals. E.g. assessing financials by download numbers alone – be careful about that.
(1) GDC bros. Hollywood brand. ‘A deal becomes the deal’. Deal negotiation gets complicated, confused. (2) Know why working, pros/cons. Trust but verify. Milestones. Audit. Site-visit. Mod game. (3) Mobile/online/GaaS – think of deal from multiple angles, but esp tech back-end. Often overlooked. (4) The Hollywood brand. Relationship + contract = symbiotic. “Lock in drawer”. (5) What does success look like? Often unnecessarily difficult to express that in deal. Equally planning for failure is not disbelief in the project.
