Game Development Contract Laid Bare

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In 2005, Call of Duty: Finest Hour (PS2, Xbox, GCN) developer Spark Unlimited sued publisher Activision for breach of contract, fraud and misrepresentation, and breach of an implied contract, alleging that Activision was cutting short Spark's development agreement counter to its contract. Activision counter-sued for fraud, breach of contract, misappropriation of trade secrets, trade-mark infringement, false designation of origin, and false advertising; the legal matter is still pending.

As part of the proceedings, the full development contract between Spark and Activision was publicly disclosed, and Gamasutra has published it online in its entirety along with very useful commentary from game industry attorneys Tom Buscaglia, Chris Bennett, and Dave Spratley. As a legal document, it's dense reading, but the running analysis makes it much easier to digest. The contract is an interesting--and rare--look at how the publisher/developer relationship is weighted, and what kind of rights are granted (or not) to each.

Not surprisingly, the termination clauses allow Activision to terminate the agreement for any reason or for no reason ("for convenience"). If Activision terminates for convenience, Activision must pay a cancellation fee, but gets to keep the IP. This is typical in game development agreements, although some developers are able to negotiate the right to complete the game with a new publisher after termination for convenience, provided that the developer reimburses the first publisher over a period of time for the amounts the developer received from the first publisher.

Also not surprisingly, the termination for cause provisions don't entitle Spark to a cancellation fee. That's why developers usually want a clause in the agreement to say that their late delivery is not a material breach of the contract if the lateness was caused by the publisher (see our comments on section 6). Typical delays are late feedback on milestones, requiring additional work thatÂ’s outside the scope of the design documents, failing to provide assets and licenses required to develop the game, and failing to pay advances on time.

As for easy highlights, Page 12 contains the breakdown on the game's development budget, which is $8.5 million in terms of what was allocated for Spark's role, as well as some notes as to how Activision will interpret the laid out development schedule. "I recommend anyone serious about working with a major publisher like Activision or in making AAA titles take a close look at these notes because there is a wealth of information in them," commented Buscaglia. The following page contains an outline of what defines a game design document and a technical design document, at least in the context of a project such as this. Finally, the last page lays out the major development-related expenditures spread out on a monthly basis.

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From The Chatty
  • reply
    January 12, 2007 3:28 PM

    sheesh, as if making a game wasn't hard enough, to deal with this legal BS on top of it has got to suck..

    • reply
      January 12, 2007 3:34 PM

      Read the commentary. Basically, publishers are at no risk and can do pretty much anything they want without paying any royalties.

      Publishers are pretty brutal on independant developers.

      • reply
        January 12, 2007 3:40 PM

        Yeah, ATVI even co-owns Spark's tools. It's one step away from being a first-party agreement, with none of the risk of ownership on ATVI's part.

      • reply
        January 12, 2007 4:42 PM

        Well, not "no" risk - they do pay advances, which, it the product never gets released or tanks, is money down the toilet for them. Not trying to defend the publishers at all, just saying that they do have some risk.

        • reply
          January 12, 2007 5:52 PM

          The advances, as I've known them, are given out over milestones. So the risk is much less that the total you've read about in this article. I highly doubt the 8.5 mil was upfront.

          • reply
            January 12, 2007 6:19 PM

            No, the 8.5 million was not up front. In fact, the contract specifies that, as of the contract signing, Spark had already (but only) received $600,000. This page specifies the milestone/advance payment schedule:

            http://gamasutra.com/features/20070112/spark_12.shtml

            The contract also specifies that these advances are non-refundable, so once they are paid to the developer, the publisher can't get them back (assuming the developer is not in breach of the contract).

            My point is simply that these kinds of things are not "no risk" for the publisher.

            Just so you know, I used to work for a developer, and we were often trying to come up with ways to circumvent the whole publisher thing, so I am definitely not "on their side."

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