Famous Last Words July09

Setting the Bar for Milestone Approval (July 2009)

Dear Jim:

The publisher producer for our game recently left his company. The new producer won't approve our newest milestone submission, even though it follows on what we have been delivering up to now. He also wants us to revise milestones that had previously been "conditionally" approved. But when those earlier milestones were approved, there were no comments received for revisions we had to make.

This will seriously make it more difficult for our already overworked team to hit the deadlines. We're working crazy hours already and it is not even crunch time. Moral in the studio is not so good.

Is there anything we can do here?

Milestone Mel

Dear Mel,

Some publishers use "conditional approval" as a way to keep the door open in the event they want future changes to work that was delivered earlier.

As a developer, if you get a conditional approval, it is important to aggressively pursue your publisher to commit on paper to exactly the reason for the conditional approval; then remedy it as fast as possible.

We understand that a publisher may later want to change something that was delivered earlier and approved. But the way to do that is to negotiate a change order with the developer, revise the milestone schedule, increase payments to provide for the additional work, and go from there.

When I have raised this with game publishers at the contract negotiation stage, or later if the issue was not covered in the deal, the response may range from acceptance to outrage and refusal to be paying anything more for, or pushing back delivery of, the project.

Taking the low road approach, expecting the developer to swallow hard, do the extra work, and not get paid for it, is moving publisher indecision or re-decision or mismanagement onto the backs of the developer - it's wrong and unfair.

A collateral issue to consider when negotiating your deal, that could help avoid the problem, is the criteria that must be applied in review and acceptance (or rejection) of milestones.

Developers should always push for objective criteria. There must be a measurable component, fully understood by both sides, for developer to achieve, that will result in publisher approval. The most common criteria is meeting the requirements set forth in the TDD, GDD, and milestone schedule.

Publishers may resist this. But without an objective criteria, a dev agreement is nothing but a fixed price agreement requiring unlimited work, with no standard for acceptance.

An agreement I reviewed recently did an excellent job of covering this issue:

"If the Milestone materially conforms to the Specifications then, before the end of the Approval Period, Publisher shall issue a Notice of Approval (signed by an officer of Publisher in writing), unless the Work Product falls short of the quality standards to be expected of a professional developer of video games for the relevant Platform (recognizing the context of the Work Product as work-in-progress), in which case Publisher may issue a Conditional Notice of Approval. Receipt of a Conditional Notice of Approval shall not be treated as a material breach of this Agreement by Developer."

More common, however, is a variation on the following from a recent publisher contract draft:

"The parties also agree that acceptance or rejection will be entirely at Publisher's sole discretion and that there are no pre-existing criteria for acceptance."

Such language shifts absolute unfettered power to the publisher. It is also factually incorrect. If there were no pre-existing criteria for acceptance, then the milestone descriptions have no meaning.

While the publisher, obviously, must evaluate the deliverables provided by developer, reasonable standards, mutually agreed by the parties, should apply. For example, the above language could be modified to provide:

"The parties agree that acceptance or rejection will be entirely at Publisher's sole discretion; provided that Publisher's discretion will always be consistently and reasonably applied."

A further revision may focus the standard for acceptance back to the contract and related documents:

"Material factors for determining whether any Milestone is accepted, conditionally accepted, or rejected will be whether it conforms in all material respects to the applicable Milestone description set forth in the Milestone Schedule, and is consistent with the requirements of the TDD and GDD. The parties agree that acceptance or rejection will be entirely at Publisher's sole discretion; provided that Publisher's discretion will always be consistently and reasonably applied."

The game publisher may never give up its right to approve milestones. And there will always be subjective determinations in that approval process ("is it fun," "is it good enough," etc.). But by injecting some objective criteria into the agreement, the Developer may be able to shield itself from unfettered, inconsistent, and unpredictable publisher oversight in the milestone approval process.

And by tracking and following through with "conditional" approvals, developers may be able to protect themselves from publisher backtracking that can be harmful to the team and the development process.

©2009 Jim Charne. All rights reserved.