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Five Golden Rules for negotiating Games Work-For-Hire with a Publisher.

By Simon Bailey, Founder of The Business of Indie Games

Tip 1: Get yourself a royalty as well as the dev fee.

Explain to the publisher that you want to have the incentive to make an excellent game for them. Let them know that you are trying to establish a stable and profitable business out of your studio and that your royalties make all the difference. For an original title you can expect up to 30% - 50% NOR (rare) in royalties. For a publisher owned brand, anywhere between 5% and 15% net of receipts.

Tip 2: Make sure the definition of net of receipts is very clear in the contract.

A publisher will sometimes put through any expenses that they can before paying you a royalty. A good lawyer will make sure that the letter of receipt definition is fair and equitable for all. Typically a fair NET of receipts definition should only contain the development costs and the marketing budget as recoupable. For a boxed product there is inventory cost to come out also.

Tip 3: If at all possible, don’t agree to ‘cross collateralised’ royalties. 

This means a publisher can recoup their development costs against other work or titles that you make for them in addition to your main game. If one game flops, money will be clawed back from your other, better performing titles, reducing your royalty for those titles.

So, try to make sure that you receive your share of each title and your royalties are not used to cover any losses a publisher incurs on other games that you make for them.

Tip 4: Have a change control mechanism.

To guard against feature and scope creep, insert a clause in the contract for negotiated and agreed changes to the design and development of the game. In the first place, make sure your milestone definitions are as clear as possible to avoid misunderstandings on both sides of the deal.

Inevitably there will be some discussion about scope or that is intended to improve the game. This can sometimes lead to disagreements, with regards to, levels of polish or what should or shouldn’t be included in the price of making the game. Some items you may just have to swallow in fairness, where the definitions are not clear.

Other items can be clearly shown as additional and these should be paid for. Publishers are not naive and always have an additional budget for change control and the unforeseen. You may also be able to make extra money with regards to features, polish and additional scope, if you suggest good ideas to improve the game. If a publisher likes it, they will pay.

Tip 5: Don’t be a Prima-Donna!

When undertaking work for hire, you will be working with a publisher for many months, perhaps years on a large console project. It’s a team effort. Remember to negotiate fairly and to keep a calm, level head.

Be flexible, take responsibility for the game but, without being stubborn, be firm with your publishing partner to keep their responsibilities too.

Making and releasing games with a good partner can be a lot of fun and a great accomplishment. If everyone gets behind the project, it may shine through in sales.

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