Sign in to follow this  
xraven13

Contract Problems

Recommended Posts

One company contacted us few days ago and they are offering us contract.They would make all graphic and sound for our game,also give us site with graphic,distribute our game (first on internet and then if game would be popular in dvd boxes),give us commercials and interviews with magazines.So only thing we need to do is to program and to finish design of game. But there is a catch.They must be sure of course that we will finish that game so they will not lose time and money on us for nothing.That is why they offering us contract(i didnt seen it yet,it is not made yet) which says that we need to make that game in 6 months or all that we programm and design will belong to them.If they break deal and dont make graphic on time then all what they made till now in this game will belong to us. I was talking on IRC #gamedev about this and people there think they could trick us and in end they will take all rights of game and we will got nothing.What should we do protect our selfs? Do you have some suggestion what should be in contract written for protecting us?? I also wonder what is percentage of money (that will come from selling of game) we should ask?? I know they will invest money and risk,they will give all graphic and sound,commercials and distribute our game.And obviously they wanna get some profit from it. I am hoping you will answer because we really need some professional help. Thank in advance! Cheers :)

Share this post


Link to post
Share on other sites
Hm, sounds a bit dodgy to me. I can understand they want to be sure you will deliver a complete game on time. But the fact that failure to do so will result in the transfer of all the rights? I've never heard of such a construction.

Anyway, you will need to get hold of the contract, even if it's still a draft. You also need to establish what constitutes a 'finished game'. And most importantly, ask advice from a legal professional, such as a lawyer.

Share this post


Link to post
Share on other sites
Quote:
Original post by WanMaster
Hm, sounds a bit dodgy to me. I can understand they want to be sure you will deliver a complete game on time. But the fact that failure to do so will result in the transfer of all the rights? I've never heard of such a construction.

Anyway, you will need to get hold of the contract, even if it's still a draft. You also need to establish what constitutes a 'finished game'. And most importantly, ask advice from a legal professional, such as a lawyer.



That's a really important point. It will be too easy for them to found a bug in your game and then say it's not finish in time and get your game for free !

Share this post


Link to post
Share on other sites
For the legal aspects of this, consult a lawyer, to determine how the contract should be written in order to protect you. No amount of legal advice from a web forum is going to help you there (actually, it's more likely to have a negative impact by misleading you).

For the strategic aspects, be careful about two things:
  1. A game is never finished. However, it is sometimes deliverable (then it can be sold) but development, patches, updates and extensions can still go on years after the game was shipped. Make sure you understand what happens if you want to extend the game later on, and how much support you are expected to provide.
  2. I would ask the publisher for sales estimates (how much units they expect to sell within the first year, on average at at worst) and compute how much the entire project costs me.


For instance, if I had to work for six months, I would charge along the lines of $30k, without tax. If the publisher tells me they expect $100k within the first year on average, and $30k worst-case, then I would ask for 30% profits (because I want the investment to pay off in one year on average) with a minimum of $9k (that's 30% of the worst-case $30k).

Share this post


Link to post
Share on other sites
Let me understand this correctly. You are responsible for the overall project's deadline, but have little control over the art pipeline schedule as you are dependent on a look & feel document that doesn't exist yet and have no formal mechanism that states what's acceptable and what's not to both parties in terms of final art? Ouch...

-cb

Share this post


Link to post
Share on other sites
We need to discuss more about this with that company.They already have contract like this with one other team,but i dont know nothing about them.I guess it will be in contract written deadline for their graphic , because without their graphic we cannot finish game.That is why if they dont do their job in deadline they lose all.But i guess that is not gonna happen,they are not stupid.
I think that in case we dont make game in time, losing all rights is too much...
What other companys do when teams that work for them doesnt finish game in time?
I think we should ask that in that case we lose some percentage of money and that they still allow us to make game.

Game is btw really similar to Legend of Zelda games.Thing is that i dont think they can tell how much pieces they will publish because game is not finished.And because contract will be made on start i dont know how much percentage we could ask from selling.I already told what they are doing.We are programming and designing and thats it.
What is more expensive and important - programming and design or graphic,sound and producing?

Share this post


Link to post
Share on other sites
Quote:
Original post by xraven13
What is more expensive and important - programming and design or graphic,sound and producing?

All of them are important. If any piece is bad, then the whole game is bad. The cost of each one varies by the game.




As for your contract, you absolutely need to talk with a lawyer about it.

There are countless ways for a company to take advantage of you with a contract. Little words like "material", "only", "all" and seemingly simple phrases like "time is of the essence" or "best effort", can turn a friendly contract into a horrible one.

Just as important in a contract is what is NOT said. Silence in a contract does not equate to ambiguity. If you didn't include a detail (such as payment, or assignments, or protections) then it does not exist.

There are many people who naively enter a contract thinking they will get a lot of money or value from the contract, but they end up with nothing or even owing a fortune to the people they thought were trying to help them.

Negotiating a contract without a lawyer is a really stupid idea.

Share this post


Link to post
Share on other sites
> I think that in case we dont make game in time,

It's way too risky to have this sort of all-or-nothing business arrangements. Can't you cut down the contract into milestones with deliverables, an acceptance process, and payment for each? It's not uncommon to assign a milestone at the first playable level, or when the engine can accomplish all the required game features & effects, for example.

> We are programming and designing and thats it.

You should have some minimal say in the art pipeline. The publisher may not like it, but it's much easier and less time-consuming to tune the artwork around the engine's limitation and performance enveloppe than the other way around.

-cb

[Edited by - cbenoi1 on October 14, 2008 2:52:05 PM]

Share this post


Link to post
Share on other sites
I am gonna make plan for each thing that needs to be done,so we will see how much we need to work per day.Btw how come that Legend of Zelda games are made per 2 years , is there so much work around it?
It is sure we will ask that we dont lose all if something happens and we dont finish game,probably that milestone system..too bad i think we dont have money to have a lawyer :(
We will try to avoid those words in contract that are not clear and have many meanings + each detail about all need to written in contract us well.
I guess they will ask us that everything in design document needs to be done.Could it be in contract that for example 90% of stuff in design document is ok? What is usually written in contracts like that? Can anyone give me example? What need to be written in contract that it clearly tells what is project suceed and what is project fail...
p.s. sorry for bad english :)

Share this post


Link to post
Share on other sites
>> WanMaster: ask advice from a legal professional, such as a lawyer.
>> ToohrVyk: For the legal aspects of this, consult a lawyer
>> frob: As for your contract, you absolutely need to talk with a lawyer about it.
>> frob: Negotiating a contract without a lawyer is a really stupid idea


> too bad i think we dont have money to have a lawyer :(

Well, I don't know what else to add then. Sorry.

-cb

Share this post


Link to post
Share on other sites
Quote:
Original post by xraven13
too bad i think we dont have money to have a lawyer :(
Then you cannot afford to be in business, period.

I hope you succeed, I really do.

That's why I urge you, and I'm sure others do too, to get competent legal council. So many small companies claim they can't afford it, and then they become blazing fireballs that burn themselves into oblivion.

Entering into that kind of contract without a lawyer and hoping everything works is akin to jumping out of an aircraft and hoping you can fly. You might surprise us all and be a bird, or maybe there will be some divine intervention or luck or some event we cannot foresee that prevents it, but typically it ends with a really big *splat*.

If you go through with this, please report back here to provide some lessons to everybody else.

Share this post


Link to post
Share on other sites
Well it really depends are they have good intention with us or bad intention..we will try to use all advice you people gave here,thanks for helping,and i hope we will suceed..we are indie team and that company have seen our design and got interested in it and that is how this started..all the time graphic was real problem to us and now finnaly someone can seriously do it...


[Edited by - xraven13 on October 14, 2008 4:57:46 PM]

Share this post


Link to post
Share on other sites
Quote:
Original post by xraven13
btw could public notary help us?

No.

My advice (which I already gave you when you PM'd me) is that you shouldn't do any business with this company.

Professional help costs money. This company is asking far too much (more than money - they want your whole game). They're trying to take advantage of a 19-year-old kid. Don't sign anything with them without a game lawyer's good advice. You can find game lawyers on Obscure.co.uk.

It costs money to be in the world of business, and I don't think you're ready for this much business. You're going to learn a lot either way you go, but is it worth it? That's for you to decide.

Share this post


Link to post
Share on other sites
Well people that work in that company are students too and their leader is on same college as me and some other people from our team.They are not big company and have only few games.But i guess that doesnt change anything right.They say that if we wanna do game we must trust each other :D

Share this post


Link to post
Share on other sites
Quote:
Original post by xraven13
Well people that work in that company are students too and their leader is on same college as me and some other people from our team.

OK, well, your definition of a "company" differs from mine.
You need to negotiate a better deal than the one he's offering you.

Share this post


Link to post
Share on other sites
From a transactional standpoint that is a HORRIBLE deal. Any condition subsequent that requires you to turn your entire product over if you don't meet an arbitrary time condition borders on unconscionable.

In Plain English: The deal sucks. You should NEVER agree to turn over your IP unless you're getting a royalty and advance for it. If they're concerned about time schedules, they should set up milestone payments-- payment conditioned on delivery, or vice versa.

If they insist on doing it this way, don't do business with them. Short and simple. There are plenty of artists and web designers out there-- there's only ONE game like yours (we hope), so use that as leverage.

Share this post


Link to post
Share on other sites
"we need to trust each other".

NO, not at all. business is business is business. This guy sounds like he is probably very intelligent, and is trying to get the world for free, you should be very leary, particularly since the guy is still in school himself, the business is based on younger inexperienced people, etc. These people, as bright as they are, most likely do not know many of the ins and outs of business.

Another thing that threw me. You mentioned they have a contract like this with somebody else, but you don't know them. Have you seen any of their previous work? This is very important. They could be hoping that your game will , in essence, sell itself, which rarely ever, if at all, happends. Check to make sure the company has gotten their games on shelves, or interviewed in magazines. These are things that usualy require CONTACTS, and students attending college usualy do not have interpersonal relationships with that many people in the business.

Richard.

Share this post


Link to post
Share on other sites
Ok..
they have games that was sold and i am sure in that.One of their games was on some big competetion on second place,first was Bioshock.They haved interviews in magazines etc...they have also on our college special gamedev group where people can learn about game industry ,programming ,designing and making graphic.

I asked them can they show me contract that they have with other team,so i will report if they do :)
i also sent them new conditions - contract with milestones instead of losing all if we dont suceed...

btw is it possible to make game similar to Legend of Zelda 2D games in 6 months with 4 programmers that can offer 4 hours per day and 1 designer/leader that can work 4-5 hours per day (weekdays - 6-8 hours)..
btw we are not starting right now:
-in design we need to complete all quests descriptions
-in programming - player can jump,run,shoot,fly,enter doors,kill monsters that attack him,there is level editor near complete,he can talk with npcs that remembers behaviour of players and many other things..
lot of things will be done in next two weeks , for example pyshic that is similar to one in chimpmunk but adjusted to our game..


Thanks for all helping!! You people really have great advices :)

[Edited by - xraven13 on October 15, 2008 4:40:46 PM]

Share this post


Link to post
Share on other sites
no one yet answered me two things bellow,i guess it is hard to say but i guess you people have experience in it,i really dont know where else i could ask..and we really need those informations so that we get reasonable contract...

1.) how big percentage of profit we can ask? i need minimum percentage so that is still rational and also maximum percentage that we can ask on start (if we ask low they will give even lower)

2.) is it possible to make game complex as Legend of Zelda : A Link from the Past in 6 months? take in consideration that we are not starting now and also take in consideration that we never before made big game and we are not professional programmers (but we are gonna be in near future ,we hope)


i asked them can they give us contract with milestones instead contract that tells that we lose all if we dont finish project in time and they accepted..they say that they have contract like that with other team but if we want other conditions that it is ok and we will negotiate about it ...

Share this post


Link to post
Share on other sites
> 1.) how big percentage of profit we can ask?

This is one of those "it depends". There are no template, guidelines, or standard for those kind of things.

You are being paid two different ways here. One is via the NRE (Non-Recurring Engineering) fee you get from developing the game in the first place. The other source is extra royalties from sales of a product; you don't have control over that process. Consider putting an emphasis on doing the game a profitable endeavor, with the possibility of added royalties as icing on the profit cake. In other words, resist the temptation to make the game for free in the hope of making loads of cash in royalties; odds are, you won't.

I can guess your next question already: how much should I ask for the NRE fee then? Answer: so what's your cost structure for this project?

> is it possible {...}. we never before made big game and
> we are not professional programmers

Given your expressed lack of experience and that of your team, I'd say VERY unlikely. Do you have a complete game design plan? Do you have a schedule everyone believes in? Does your team have a history of meeting schedules? You will increased your odds of succes by having a solid plan in place and have everyone committed to it. Consider this project as an opportunity to nail down the whole development process correctly, to evaluate and optimize your cost structure, and get relationships in place to be able to get another project in the future.

-cb

Share this post


Link to post
Share on other sites
Quote:
Original post by xraven13
1.) how big percentage of profit we can ask? i need minimum percentage so that is still rational and also maximum percentage that we can ask on start (if we ask low they will give even lower)
I already answered this one. In an ideal world, you wouldn't be risk-averse so you would ask for the same percentage every time. In the real world, the percentage must depend on the expected amount of sales, in order to hedge yourselves against the risk of selling nothing.

Quote:
2.) is it possible to make game complex as Legend of Zelda : A Link from the Past in 6 months? take in consideration that we are not starting now and also take in consideration that we never before made big game and we are not professional programmers (but we are gonna be in near future ,we hope)
It's not impossible, but it would be quite surprising.

Quote:
i asked them can they give us contract with milestones instead contract that tells that we lose all if we dont finish project in time and they accepted..they say that they have contract like that with other team but if we want other conditions that it is ok and we will negotiate about it ...
I wonder if your contract could be exploited the following way by your team: say you're a team of six people. You create company "Engine" (who has no programmers) and company "Game" (who has all six programmers). The "Game" company then delegates five programmers and a half to the "Engine" company, so that they write an engine for that company. That company then licenses the engine for free to the "Game" company, where the remaining half-programmer writes the game based on that engine.

Should the game be late, the "Game" company must, according to contract, transfer all the game code it owns to the publisher. However, the "Engine" company, which has never signed the contract, gets to keep its entire engine code (if the "Engine" company had been Valve, and the engine had been Source, the publisher could not have asked to own the Source engine).

Share this post


Link to post
Share on other sites
Quote:
Original post by ToohrVyk
Quote:
Original post by xraven13
1.) how big percentage of profit we can ask? i need minimum percentage so that is still rational and also maximum percentage that we can ask on start (if we ask low they will give even lower)


I already answered this one. In an ideal world, you wouldn't be risk-averse so you would ask for the same percentage every time. In the real world, the percentage must depend on the expected amount of sales, in order to hedge yourselves against the risk of selling nothing.



stuff is that even if we know much game will be sold (and we dont) i wouldnt know how big percentage we can ask..is it 10%,15%,20% etc..some people told me we can ask 50% , others told 20% etc...
and again if they tell me that they will sell that big amount and give as some percent it can happen they lied and it will have much bigger amount of sell...
that is why we need ( i guess) make that depending on amount of sales our percentage become bigger or lower ( i am not sure )..
Give me some numbers , percentages for different amounts of sales and with different prices ,so that i have something to negotiate..they will first sell game on internet and if it will be sold good then in dvd boxes...first in countrys next to us and then if will be sold good in europe and rest of the world..

Share this post


Link to post
Share on other sites
This is your profit equation:

Profit = (NRE - CS) + (N x R% x P).

where NRE is how much you are asking to make the game, CS is your cost structure (i.e. how much it's gonna cost you to complete the game), N is the amount of units sold by the publisher, R% is the royalty rate and P is the retail price per unit.

Since you don't know P, you can bundle R% and P together so you have a royalty value in dollars R$. Hence you get:

Profit = (NRE - CS) + (N x R$).

You can easily plug this into a spreadsheet and runs some numbers to see where you stand.


> Give me some numbers , percentages for different amounts
> of sales and with different prices ,so that i have something
> to negotiate

Instead of one single royalty rate, you can spread the royalty rate across the sales volume. I'm making this up here just to give you an idea: 50% on the first 1000 units, 25% for the next units all the way to 5000, 10% from 5000 to 25000 units, and 5% for anything beyond 25000 units. Your cut is bigger on low volumes and that of your publisher is smaller. It's the reverse on higher volumes; your publisher gets a bigger cut than you. That's a strong incentive for the publisher to sell a lot of copies because they get a better cut per unit.

Again, if you make some profit by making the game (that's the '(NRE - CS)' part of the equation) then whatever you make on the royalty part of the equation is a bonus.

-cb

[Edited by - cbenoi1 on October 16, 2008 6:16:10 PM]

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

Sign in to follow this