"Famous Last Words"

Hoping for the Best Planning for the Worst (October 2008)

Dear Jim:

We've delivered two milestones but are still waiting for payment. We're having difficulty getting our producer on the phone. Any advice?

No name or location please

Dear No Name:

There is nothing more frustrating than an unresponsive publisher.

Keep trying to reach the producer, or the executive producer, or anyone else in a position of authority – up to the president.

Check your contract to be sure you fully understand the review and approval, or non-approval, process – including time periods for those steps. Before you take any actions, make sure the publisher has truly missed its dates.

Just as you have the obligation to deliver as promised in the milestone schedule, the publisher has the affirmative obligation to review, accept or reject, and then pay for milestones, all within the calendar periods set out in the dev agreement. Failure of the publisher to do so is breach. In a development contract, both sides are always on the clock.

If the publisher has been non-responsive, has not reviewed milestones, provided comments, or paid as required under your agreement, talk to your lawyer about sending a notice of default. Many contracts provide that the publisher is not in breach unless it has received notice, and failed to cure, within a set number of days. This makes it important to get notice out as soon as possible after publisher has missed its dates.

It is possible that the publisher is in turmoil (producers leave or are reassigned, sadly, without notice to developers!). But that is not an excuse for a publisher to ignore or fail to meet its obligations.

Your project may be sailing along under the radar – with no one in a position of authority at the publisher being aware of the problems. A notice has the benefit of sending a loud signal to a “higher up” that something is not right. It can cast a light on the problem at the publisher, with a higher-up, who appreciates the consequences of the default, and of not getting your product on time!

Be sure and keep a notebook containing all written correspondence, and summaries of each meeting and telephone communication with your publisher. Send follow-up emails summarizing decisions reached in phone or in-person meetings. When the time comes to state your case, whether to the executive producer, or (hopefully not) the court, showing you are organized, and have not been at fault, will help you to either get the project back on track, or recover damages for the publisher's default (we hope it does not get that far!).

It is always very important to flag possible difficulties as early as possible. Even before you accept the project! Check references for your publishers. Are they well known? Are they players in the business? What do their other developers have to say? If they are not active in the business, do they really understand what is involved in being a publisher? Do they have the financial resources, personnel, ability, and vision to see it through?

With the current economic downturn, this is more important than ever. If you have any question at all about the wherewithal of your publisher, it is extremely important to structure the deal financially so that you have a reserve in the event of publisher default or delay. Get more money up front. Be sure you fully understand the cash flow of your deal. Never let yourself get under water.

If you find the publisher is not responsive, even if it is a short delay, make it known. Don't overlook or make excuses for non-performance of your publisher. Otherwise, you can find yourself with large receivables, short of cash, maybe struggling to make payroll, and no good alternative except to bring an action in court.