A development or publishing agreement can look like a lifeline right up until it isn’t.
Studios of every size have signed deals that seemed reasonable at the time, only to find themselves on the wrong end of a termination clause that wiped out their runway, stripped them of rights to work they spent years building or left them legally unable to continue developing the very game they created.
This post walks through termination provisions that pose the greatest risk to studios.
Termination for Convenience
The most dangerous clause in many publishing agreements is also the most common: termination for convenience. This provision allows the publisher to end the agreement at any time, for any reason or no reason at all, typically on some number of days’ notice. Publishers routinely include this clause and studios often accept it without pushback because the deal feels too important to risk losing over so-called “boilerplate.”
The problem is that termination for convenience hands the publisher an exit ramp that costs them very little while potentially costing the studio everything. On termination, the studio may be entitled to nothing beyond what it has already been paid. The team is still employed, the lease (if there is one) is still running, and the next milestone payment is gone.
When negotiating, developers should push to eliminate termination for convenience entirely, or at minimum require a meaningful runway on termination tied to actual development costs and projected remaining milestones. Publishers, especially in this market, should understand that developers are hoping to build sustainable studios. And while publishers may want to retain flexibility to cancel games, they should make those decisions early enough to budget for an offramp for developers.
Reversion Rights (Or Lack Thereof) That Favor the Publisher
When a publishing agreement terminates, the question of who owns what becomes urgent. The core issue is what ownership rights revert and under what conditions.
In the ideal situation for the developer, the developer never assigned any IP to the publisher and retains ownership of everything after termination. Less ideal but common in some scenarios, the publisher may retain some but not all ownership rights. Worst case for the developer: they retain nothing.
A studio that develops a game using its own pre-existing technology, art pipelines, engine modifications or creative frameworks needs to retain those assets after termination regardless of what happened with the specific game. A poorly drafted IP assignment clause may leave those rights with the publisher. Development work is cumulative, and the line between what was created specifically for a publisher’s game and what was developed as a general studio capability is rarely clean. An assignment clause broad enough to capture all creative output during the development period can leave a studio unable to use its own engine improvements or its own pipeline tools in future projects without risking an infringement claim.
Sometimes, even where a publisher may initially claim ownership of IP, a reversion clause will hand the IP back to the developer on termination or on certain kinds of termination. This type of reversion can provide publishers with protection they want from studios shuttering before development is complete while providing developers assurance that if they complete the game or the publisher terminates for convenience, the developers regain some control.
Reversion provisions should clearly identify what the developer retains on termination. Is it the entire game or just background IP, tools, engines, pipelines, and any general-purpose technology developed during the agreement? Any reversion of rights should be automatic on termination, not conditional on the publisher’s approval or the resolution of a payment dispute. And if the publisher retains any license to developed assets after termination, developers should try to ensure that license is well-defined, non-transferable, and ideally tied to a specific use rather than a blanket right to exploit the work indefinitely.
Milestone-Based Termination Triggers
Most agreements with development funding include milestone schedules, and many include provisions allowing the publisher to terminate if milestones are missed or if the delivered work does not meet a defined quality standard. These clauses are not inherently unreasonable. Publishers have a legitimate interest in being able to exit an agreement if development is materially off track.
But, subjective quality standards are a significant risk. A clause that allows the publisher to terminate if deliverables do not meet its “reasonable satisfaction” or other subjective criteria introduces a standard that the publisher can apply almost however it chooses. In practice, this means a publisher experiencing financial difficulty, shifting strategy, or a change in leadership can find a basis for termination in almost any deliverable. The studio then has little recourse unless it can demonstrate that the publisher’s dissatisfaction was objectively unreasonable or bad faith, which is difficult.
For milestone-based termination rights, developers should push to include a requirement of written notice of the specific deficiencies in the milestone deliverables and a defined period to address those deficiencies before termination becomes effective. Thirty days is common; sixty is better. The cure period should apply even to repeated misses, at least up to a reasonable limit, and the publisher’s notice should be specific enough that the studio can actually respond to it. Vague dissatisfaction isn’t helpful for fixing milestones.
Termination Upon Change of Control
Acqui-hires and studio acquisitions happen, and studios may have investors, advisors, or co-founders whose equity stakes could change hands in ways that trigger a change-of-control clause. A publishing or development agreement that allows the counterparty to terminate upon any change of control can also undermine a studio’s value to a potential acquirer.
Read change-in-control clauses closely: Do they require a majority change in ownership? Or any transfer of equity above a threshold? Or a change in the individuals who control day-to-day operations? Some clauses are written broadly enough that a seed funding round or the departure of a founding partner could technically constitute a triggering event.
Clawback and Repayment Obligations on Termination
Some publishing agreements, particularly those structured as advances against royalties, may include provisions requiring the studio to repay some or all of the advance if the agreement is terminated before the game ships. The mechanics vary, but the effect is the same: termination converts what felt like development funding into a debt.
This is particularly dangerous when the repayment obligation is triggered by termination for any reason, including termination by the publisher for convenience. A studio that receives a two-million-dollar advance, spends it building the game, and then has the agreement terminated by the publisher can find itself facing a repayment demand it has no ability to satisfy. The money is gone.
If repayment is only required if the studio materially breaches the agreement and fails to cure, publishers will probably be reluctant to deviate from that position. Studios should push to retain advances following a publisher’s termination for convenience.
Post-Termination Restrictions on Development
Even after an agreement ends, some termination provisions impose ongoing restrictions on what the studio can develop. Non-compete clauses in publishing agreements are less common, but they sometimes exist, and they can be written broadly enough to prevent a studio from working on any game in the same genre or targeting the same audience for a period of time – sometimes years – after termination. For a studio whose entire expertise is in a specific genre or platform, a post-termination non-compete can be functionally equivalent to a shutdown order.
Likewise, if an agreement has a Right of First Refusal or Right of First Negotiation on the studio’s next title and that provision survives termination, getting another deal with another funder can be substantially delayed. When runway is running out, those provisions can be a death knell.
What to Do
The time to address these provisions is before the agreement is signed, not after termination is triggered. Once in a termination scenario, options narrow quickly and leverage to negotiate is gone. The publisher holds the cards, and the studio is operating under financial pressure that limits its ability to fight.
Developers should understand termination triggers and whether the deal as written gives them enough protection to survive if the agreement ends badly.
View all posts by this author