"Famous Last Words"

Take it or Leave it Dev Contract (October 2004)

Dear Jim,

Our studio is pretty well known and we have developed many games over the last decade.

In recent years, the business has gotten rougher as publishers consolidate into fewer and fewer entities, meaning less and less competition; and fewer and fewer projects seem to be getting assigned to outside independent studios.

Recently we made a deal to do a small five month handheld game for a mid-level publisher. When the contract came, it was unbelievably one sided – giving all rights to the publisher and leaving us totally exposed.

After reviewing it with our lawyer, we sent back comments. The response from the publisher lawyer: “take it or leave it – we won't negotiate.”

Is this standard?

Dear Coming To:

One-sided contracts are nothing new in the entertainment industry. Recording contracts are notoriously unfair to musical recording artists, screenwriters are the dogs of Hollywood, and development deals have passed enormous risk to developers for many years.

That being said, game development contracts have typically been negotiated item-by-item as developer lawyers have worked to remove the most outrageous provisions and to balance the risks. The issue-by-issue discussion in the IGDA “Contract Walk-Through” can help illustrate the points most likely to be subject to developer negotiation in these deals.

This is the first I've heard of a “take it or leave it” negotiating position, but here's some perspective on how to handle it:

• It may be an attempt to intimidate or brow-beat you – an opening position for negotiation. Talk to the executive who hired you for the project. He or she may be a secret ally. If this deal were to fall through, the executive would face the job of finding a replacement developer (his or her second choice ) and time will be even shorter to complete the project. There is a reason why they wanted you and not your competition.
  
• Remind the lawyer why they came to you in the first place. Is it your technology? Your engine? Your track record? You bring value to the project. You take pride in your skill and in your work. The publisher's response is intended to deliver the message that you do not have power in the relationship. Don't believe it.
  
• Let the publisher lawyer know you are represented by counsel. If the lawyer for the other side has knowledge that you are represented, it is a serious breach of his or her professional ethics to speak directly with you unless he has permission from your lawyer. Developers and their lawyers should work together to negotiate deal points. The developer should work certain issues through their producer or business exec on the publisher side, while the lawyer continues to negotiate with the publisher lawyer. In effect, what may happen is the publisher executive begins to understand what you want is fair and his lawyer won't compromise. He or she begins to feel the deal slipping away, the project completion comes in jeopardy, he or she may be saddled with a second or even third choice developer. The result of this is the publisher executive may bring pressure on the publisher lawyer to compromise to make the deal (typical publisher concerns include, “time is running out;” “we have to get started;” “that's not fair to the developer;” etc.).
  
• Finally, though it may not have much persuasive power with your publisher lawyer, “Lincoln freed the slaves.” No one should work under extreme one-sided and unfair conditions. If the contract is totally unbalanced and one-sided and the result of so-called “negotiation” between two parties with hugely unequal bargaining power, it may not be enforceable. Public policy frowns on so-called contracts of adhesion. Agreements forced on one side by the other when bargaining power of one party is non-existent, may result in an unenforceable agreement. But it would take time and money to litigate to reach that result – a luxury few small developers can spare.

AAA publishers recognize and respect the value their developers bring to software. They understand deals are negotiated between two parties who each bring unique skills and assets to the mix. No game can be a hit without a capable, motivated developer. One-sided contracts do not contribute to that positive workplace necessary to produce a top quality game. Publishers should take a second look at contract practices that are unfair to developers. No developer should willingly enter into an agreement that is unfair to the extreme. In the end, these are destructive both to the developer and the reputation of the publisher.

All that being said, in the end, each developer must decide how important the development opportunity is for his or her studio, and how far he or she is willing to go to make the deal. Developers frequently have to swallow extreme contract terms in order to find work. Each such compromise adds risk to the deal – risk that can leave the developer exposed down the road.