License versus sale in video game publishing
In the FREE e-book – Key Provisions in Video Game Publishing Agreements, I have given an overview of publishing agreements. In the next few weeks, I’ll elaborate on some of the themes in that book. I’ll also talk more about current trends and issues (the book focuses on overall concepts since trends change).
Today, I’m going to talk about the difference between a sale and a license. If you “sell” something, you transfer ownership of it to someone else and that person gives you cash. In a “license”, by contrast, you might still get cash, but you aren’t transferring ownership.
In a license, you allow the other person certain rights to the property, but you still own the property.
This is a huge difference.
In a game, for example, each of the art assets, music, sounds, code, story, etc. are protected by copyright. This means that each of the creators of those assets has certain exclusive rights to their creation. Assuming the development studio gets all of those rights from the creator (a big assumption for contractors as it requires an explicit assignment in their agreement), the studio will look at how to monetize them as a single unit in the game.
A distributor (like Steam), will require certain rights to enable it to actually sell the game. This would be the ability to issue end user licenses (end users get licenses on Steam, not ownership of the title), the ability to display artwork from the game on the Steam platform, etc.
The rights the publisher demands, however, will vary wildly from agreement to agreement. In the simplest and most publisher-friendly deal, the publisher will require an assignment of all rights. In a much more friendly deal – at the opposite end of the spectrum – the publisher will ask only for the rights to a certain territory, platform or time period. Questions to consider include this sample list from the e-book:
- Sell the game. On what platforms? In what territories? For how long?
- Make or sell DLC and other add-on content.
- Make or sell sequels, prequels or other derivative games.
- Make or sell adaptations of the game in other non-interactive media (books, TV, film, etc.).
- Make or sell physical goods related to the game.
- Produce or sell soundtracks. What about mechanical license administration? Additional exploitation of game music?
- Use materials from the game for marketing.
- Use materials from the game for cross promotions.
- License the game or elements of it to third parties for advertising, promotions or other uses.
- Modify the game before it goes on sale (which could include, for example, adding in-game advertising).
- Prepare alternate versions of the game for different locations and languages.
- Register relevant copyrights or trademarks.