How do you know you’re getting a good deal from a publisher if you don’t know what a good deal looks like?
Over the years, Raw Fury has built a reputation of being a developer-friendly publisher. Today, the publisher has broken with the game industry’s code of silence, sharing its standard publishing agreement. This gives us the rare opportunity to explain what developers should be looking for when reviewing a potential publishing deal.
There are a few things to say up front that need to be said of all contracts, even if you’ve heard them 100 times before.
- Contracts are typically written to favor the party issuing the document. That means a publisher will build in more protections for themselves than they will for the other party.
- You should always have a lawyer that practices in the territory of the contract’s governing law. In the case of the Raw Fury contract, you’ll want a lawyer licensed to practice in Sweden to review and represent your interests.
- In many cases (though not all), the agreement you’re presented at the start of negotiations is not the end point. You can always ask for terms or language to be changed. You just might not get what you want and, if you do, you may have to sacrifice on other terms.
- While both sides of the negotiation have a shared goal of a negotiated deal, both sides are trying to get the best deal possible. Remember that a negotiation is adversarial (even if it is friendly). You should work to protect your interests as long as you continue to be interested in signing the deal. The publisher will do the same, especially because they are taking a larger portion (sometimes all) of the financial risk.
- You always have the power to walk away. It’s better to part on good terms than get into a relationship you don’t feel good about on day one. You don’t have to accept a publisher’s terms if you don’t like them. Self-publishing (and, by extension, self-funding) is a viable strategy that comes with its own challenges.
- It’s worth saying twice: whoever writes the contract enters negotiation with more power. A publisher is going to protect their investment and cover their risk as much as they possibly can. That doesn’t mean that there aren’t protections for the other party… just that the publisher’s lawyers are going to make the most of being the document author.
Here are our key takeaways:
Funding and Cash Flow
Raw Fury sets up a structure that is easy to understand, so developers can understand not only how much they will receive, but when they will receive it and what additional funds the publisher will leverage to support the game. The minimum marketing guarantee isn’t something that’s frequently discussed, but it’s crucial to achieving your goals.
Remember that your budget may be focused on creating your game, but your publishing agreement should ensure that your partner is doing the lift on marketing and distribution. The Minimum Marketing Guarantee is a commitment from the publisher that they will invest in getting your game awareness and sales conversion.
We also see up front that Raw Fury provides funding at the contract’s effective date (typically when it is exercised or shortly thereafter). The company also doesn’t use a milestone-based disbursement schedule for ongoing development funding. Instead, Raw Fury opts for monthly disbursements that allow development partners to plan their cash flow. This is an enormous benefit, as cash flow planning can be difficult and less predictable when funding is tied exclusively to benchmarked deliverables.
The contract also leaves wiggle room, such that Raw Fury and its developer partners can adjust the additional advance amounts to account for delays or disruptions. This is a partner-friendly approach that ensures the contract won’t need to be entirely renegotiated if more funding is required. The agreement codifies a check-in at six months after the effective date to ensure that the amount of monthly funding and the development timeline are still appropriate. At this point, both parties review and affirm (or adjust) the delivery date. Adjustments are submitted in writing and become part of the “vision,” an aspect of the contract that describes the game, design, and goals.
Since game development is unpredictable, with a variety of internal and external forces acting on the process (Hi, COVID!), it’s understandable that situations might arise that require more time and funding. Raw Fury includes in its agreement that developers should notify the publisher as soon as possible if more time and funding are required. Raw Fury, of course, indicates that increases are at its sole discretion.
The Revenue Share
We see up front that Raw Fury’s revenue share is a fair 50% of net revenue. Net revenue is calculated after a number of operating deductions that include taxes; physical product manufacture, shipping, and customs; royalties and platform fees to storefronts and first-party; retailer price protection and mark-down allowances; currency exchange fees; advertising fees; additional porting and remake fees that are the publisher’s responsibility and do not involve the developer; repayment, and service spend (see below).
It’s not uncommon for publishers to offer 70/30 splits (with the larger portion favoring the publisher, which is taking the larger risk). A 50/50 split is a good offer in most instances in which a publisher is paying for development. You may find a better revenue split in some cases, but remember that a negotiated deal is the sum of its parts. While the revenue share might be better, other terms might not be as favorable.
Payment timing is an important part of cash flow management. In order to receive payment, the publisher must first receive revenue from storefronts and platforms. This can take as little as 30 days, but as many as 75 for some platforms. Once Raw Fury has received gross revenues, it has 30 days to submit a report to developers. At that point, developers submit an invoice back to Raw Fury.
The math on this matters! The lag time on payments is likely no LESS than 60 days and could be as much as 120 days. This is standard across publishing contracts. Developer payments are bottlenecked by platform and storefront payments, as well as the necessary process of publisher accounting.
It’s also clear up front that Raw Fury will take on (for a recoupable cost) QA, localization, verification/certification, voice over, providing console dev-kits, porting, travel and lodging for events, and PR. Laying out these numerous ancillary (but necessary) expenses is an important point of clarity, and setting a ceiling cost helps developers understand what their maximum recoup amount will be (barring revisions to the additional payments).
As with many publisher agreements, developers have recourse if they believe a publisher has either had accounting errors or has acted in bad faith. Once each calendar year, a developer can, at its own expense, pay for an audit. If the audit uncovers underpayments of at least 5%, Raw Fury will reimburse audit and legal fees and pay an annual interest rate of 5% on the underpayment amount. Likewise, if the agreement is terminated before publisher funding is fully recovered, Raw Fury has the same rights to audit the developer.
Protecting the Investment
Of course, none of this works if the publisher doesn’t have a sense of how development is progressing. Most publishers operate on a milestone basis (alpha, beta, etc.). In those cases, developers submit a build, it goes through publisher review, and it’s either accepted or rejected. If accepted, the developer receives its next disbursement. This formalizes the review process, because it ties funding to deliverables.
Raw Fury’s decision to operate with monthly disbursements requires adjustment to this process. Instead of milestones, Raw Fury has the right to request a build, report on work completed since last request, a timeline and detail of work left to complete before final delivery, and summary of how publisher funds have been spent. The developer has 14 days to respond, which emphasizes the need for accurate and timely accounting. The last thing a developer wants to do is have to scramble to get the books in order for publisher review.
Note that funding from a publisher is designed exclusively to support development and delivery of the game. It should not (and in the case of Raw Fury’s contract, can not) be used for other activities (like work on a completely separate project).
There are a number of different recoup structures you might see in contracts. Some provide a small amount of funding to the studio during the payback period. Others, like Raw Fury’s agreement, ensure that the publisher receives all net proceeds until the entire amount is paid back. This is calculated based on the principal (funds expended) and markup (15% of principal). The markup only applies to development expenses and not service expenses or marketing.
Why a markup? It’s an alternative to an approach used by some other publishers: including an allocation of some internal costs in the recoup amount. This is often viewed as an opaque slush fund. At least with Raw Fury, you know the exact cost and why: time value of money and insulation against delays.
This is an important cash flow consideration, as there will be a gap between when a game is complete and when developers start seeing revenue from its sales. Thankfully, Raw Fury deducts the total principal amount and service spend (QA, localization, porting, etc.) from the gross revenue. After recoup of both of these categories, developers will start to receive disbursements of 50% of the net revenue.
It’s important to note that there may be a portion of developer royalties held in reserve to cover returns and defective games. This amount will not exceed 10%. While a reserve amount for returns and chargebacks isn’t uncommon, it often goes overlooked when planning cash flow.
If the agreement happens to expire before the game has fully recovered Raw Fury’s expenses, then funds would start to flow from storefronts directly to the developer. In this instance, Raw Fury’s agreement says that 70% of gross revenue from the game and 50% of gross revenue from any derivative work (including sequels or ancillary products) will be paid until the publisher recovers its outlay plus markup.
Developers are often sensitive to intellectual property ownership when working with a publisher. Some publishers demand ownership of the IP, while others are willing to negotiate.
Raw Fury has set its default in favor of the developer. The contract lays out that all intellectual property rights to the game, design, source code, etc. remain with the developer. Further, Raw Fury’s contract protects the developer by stating, “Any rights not
explicitly granted to Publisher hereunder are reserved by Developer.” However, there is protective language for Raw Fury that states, “For the avoidance of doubt Publisher’s existing Intellectual Property Rights shall still be owned by Publisher.”
Raw Fury also protects itself with a clause that directly prohibits a development partner from creating and distributing a game similar (genre, mechanics, look, theme, or feel) to the one covered by the agreement for one year. This is effectively a non-compete that ensures that a developer isn’t cannibalizing its sales (or negatively impacting Raw Fury’s investment) by competing with itself.
Marketing and Public Relations
One of the key reasons developers work with publishers is so an experienced partner can handle public relations, marketing, distribution, and in some cases, first party relations. Clear language helps define these roles, and also drives home why it’s crucial that developers sign with publishers they trust.
A publisher’s job is to ensure that games get in front of an audience in the most effective way possible. In Raw Fury’s agreement, the publisher carves a moat around marketing such that the developer relinquishes control of these activities. “Publisher has the exclusive right to market the Game and Developer entrusts and grants to Publisher the right to determine, in its sole discretion, the manner and method of marketing and distribution of the Game, including, but not limited to, total and maximum marketing expenditures, advertising and promotion, packaging, channels of distribution and the suggested retail price of the Game,” the agreement states.
It’s not unheard of for a publisher to drive the entire marketing effort and leave the development partner out of the conversation. Raw Fury, however, does leave room in the contract for developer input and concerns.
“Publisher shall, in good faith and to the extent reasonable, involve Developer in any plans in connection with determining the manner and method of marketing and distribution of the Game,” the contract states. “Publisher shall, to the extent possible, accommodate any reasonable concerns or requests from Developer raised during said involvement, if Publisher believes they improve marketing and distribution of the Game and if accommodating said concerns or requests falls within the Minimum Marketing Guarantee.”
The agreement also protects the developer with language that guarantees release of the game within three months of gold master delivery. However, both parties may agree to waive this due to new platform release, heavy competition during the otherwise contractually obligated release window, or simply to align with a more advantageous date (such as releasing a horror game in October).
Despite marketing being driven by the publisher, developer involvement is crucial. The Raw Fury agreement (like many publishing contracts) has language that obligates development partners to assist with the promotion effort. This might include live (or digital) event appearances, developer Q&As, outreach with press, podcasts, and social media. Raw Fury also ensures that developers will create assets for marketing functions (screenshots and video).
What Happens if It All Goes Bad?
Any good contract prepares for the end of the relationship in a way that is clear and decisive. The Raw Fury publishing agreement does just that. It’s important to look at any publishing agreement to understand what happens if you or your publishing partner violate the terms. The financial penalties can be onerous and may bankrupt your company.
The Raw Fury contract includes standard non-disclosure clauses and affirms that each party has the authority to sign the agreement. It also firmly ensures that the developer won’t use open-source materials that would, in turn, require part or all of the game’s source code, derivative works, or compiled product to be distributed or otherwise made available at no charge. Open source can be tricky, because it often comes with these obligations (thwarting the core necessity of commercialization).
The Raw Fury contract also has a non-discrimination and anti-harassment clause, which protects both parties. Violation of this clause puts the offending party in breach of contract and would trigger termination clauses.
Should the developer breach the contract, Raw Fury can withhold royalties and payments until it is remedied (if possible). If the developer is unable to do so within 30 days, the agreement may be terminated. If Raw Fury were to terminate the contract for breach, the developer must immediately repay and advances and other funding. And, in order to recover their rights to publish the game, the developer would need to buy Raw Fury’s interest. Alternatively, the developer could abandon the game, ceding all rights to Raw Fury, which could in turn hire another studio to finish development.
Should Raw Fury breach the agreement, the developer has the right to terminate. In this case, all rights would revert back to the developer. Raw Fury would still be entitled to repayment, but only 50% of gross revenues until any advances and other funding are recouped.
Should the developer fail to deliver the game on time, Raw Fury has the right to contract another developer to finish the work. Those costs would be assigned to the developer and added to the recoup amount.
The agreement may also be terminated by mutual decision. In that instance, Raw Fury has the right to publish the game for 12 additional months, before those duties and privileges revert back to the developer.
The Future of the Relationship
While Raw Fury leaves intellectual property with developers, the publisher does protect its investment with a right of first refusal on sequels, add-ons, and DLC. This aspect of the agreement does include ports to other platforms.
However, Raw Fury does provide an exit clause, should a developer choose. In lieu of first right of refusal, a developer may choose to grant Raw Fury a fixed, perpetual 5% royalty based on gross revenues. This 5% applies to any funding received, including advances, royalties, licensing fees, and DLC.
While this clause exists to protect Raw Fury from edge case situations, it’s important that developers understand their obligations regarding right of first refusal. It’s possible that violation of this clause could disrupt (or lead to termination of) a contract between the developer and new publisher.
The Start of the Conversation
The game industry protects its knowledge in vaults behind corporate legal teams and heavy non-disclosure agreements. Raw Fury’s decision to share its publishing agreement means we can start having the conversation publicly about what to look for in a publishing agreement. We can’t compare contract terms without a baseline. We can’t identify whether revenue share and recoup processes are fair without having a frame of reference.
Raw Fury has given us the tools to begin having the conversation. Now we look to other publishers to bring their offers to the table.
Updated: December 22, 2020