Historically, funding from publishers was by far the main source of finance for UK games studios. Today, it remains important and is still the largest source of finance, even if many studios have become less reliant on publishers than in the past, due in part to the availability of new, alternative sources of finance and the emergence of self-publishing.
What can you expect from a publishing deal?
This really depends on the publisher involved, as there are many different types of publisher (traditional, mobile, online, indie etc.), and many different approaches taken to a publishing deal.
For example, at one end of the spectrum, if a large publisher with operations in a number of territories has approached your studio to develop a game based on IP owned by the publisher, it will likely fully fund the development of the game, usually providing its funding over the course of development upon your studio achieving certain milestones. In return, it will likely require your studio to transfer all IP in the game to the publisher. It may agree to grant your studio a share of the revenues arising from the game sales, but often only after it has recouped its funding in full.
At the other end of the spectrum, if your studio has approached an indie publisher with a proposal to develop a game based on IP owned by your studio which is partly developed and/or partly financed, the publisher may agree to much friendlier terms whereby your studio can retain the IP in the game and should be able to negotiate much more favourable financial and other terms.
Considering terms in publishing deals
In between these two ends of the spectrum, there are many other deal types and variables that you might come across (and market standards change quickly), so it is important to take advice on the terms. The deal that you are able to negotiate will depend on various factors, including the clout of the parties involved, the importance of the project to the publisher, the deal precedents of the publisher, what else the publisher is offering other than finance (see below: What other support can publishers offer?) and how well you and your lawyers negotiate!
There are many key issues and pitfalls to watch out for. Some examples are:
- what rights (if any) should the publisher have in relation to DLC, ports or sequels?
- are the revenue share / royalty definitions (and permitted deductions) market standard, fair and reasonable?
- what protections do you have if the publisher decides to cancel development halfway through the process?
- what rights do you have to end the agreement if the process is not working out as planned?
- what obligations does the publisher have to market the game and to make sure that it is fully exploited?
- how should the video games tax relief be treated?
These are just a few examples and there are many other issues to consider.
At what stage does a publisher become involved?
A publisher may consider becoming involved in your game at an early stage (e.g. before the start of full development) or it may come on board at a much later stage (e.g. when there is an alpha or beta version of the game available). We have seen a recent trend towards indie publishers becoming involved later in the development process, and you should be aware that the timing of when a publishing deal is signed will affect a number of financial and other aspects of the deal.
How much funding does a publisher provide?
The amount of funding that a publisher may offer a studio can vary enormously from a few thousand to many millions of pounds.
Certain publishers will fund the full development, marketing and distribution of a game, others may only fund marketing or distribution. There are also deals where the publisher funds only part of the development and the studio or another financier provides the balance of the funding.
Many publishers are open to considering deals with start-ups as well as proven studios.
Will a publisher require you to transfer to it your intellectual property rights in the game?
It depends on the publisher and the deal you are entering into as to whether the publisher will require you to transfer the game’s IP to the publisher. There are certainly a number of publishers that allow studios to retain the game’s IP.
What other support can publishers offer?
Other than providing finance, publishers may be able to provide your studio with a range of other support and services, for example:
- marketing and PR services
- distribution support
- QA and localisation
- development services
- business development/agency services
The value of these services must be taken into account when evaluating a potential publishing deal. In the best circumstances, a publisher can become a valuable long-term partner for your studio.
Where can I find out more?
Ukie represents all the main publishers in the UK. If you would like to speak to a publisher drop Sam Collins a line.