Negotiating Tips for Mobile-Game Developmental Deals

Part One discussed mobile-game players, the industry playing field, content ownership issues and developer credits.

Licensing Celebrities and Brands

Just like its more traditional console and PC counterparts, the mobile-game industry has its fair share of celebrity and brand-name licenses. The correct celebrity association can make or break a game, and even a boring game might gain some level of success just because of its association with a particularly famous person or brand. In 2006, Hands-On Mobile announced a partnership with rock star Tommy Lee to develop entertainment content for cell phones that aimed to capture the former Motley Cre drummer's 'mischief-making' ways in an attempt to excite prospective mobile-game players and entice non-game players to purchase the game when published. Another example of celebrity partnerships: the creative cartoon-music collective Gorillaz teamed up its music brand with RealNetworks to develop a series of mobile-based games. However, playing with the fickle public perception of celebrity popularity is a sword that can cut both ways. The release of a Bode Miller game, widely publicized and perfectly timed to coincide with the conclusion of the 2006 Olympic Games, garnered disappointing results because of Bode's poor performance during the Olympics and the public backlash created by the media hype surrounding his 'bad attitude,' even though he went on to win numerous World Cup races after the Olympics.

Also, it is not only the celebrity who decides whether or not his or her name, image or voice can be used in a mobile game. Quite often, a celebrity's agreement with studios or agents constrains them from off-camera appearances. Similarly, music clips must be cleared from publishers and record labels and not the artist, unless the artist managed to exclude the rights for licensing the music to wireless devices from his recording or publishing agreement. So be prepared for lengthy negotiations with a wide variety of celebrity handlers and work this into both your budget for the game and your development and marketing plans for the final release date.

In addition to individual celebrities, a well-known company brand name can attract consumers to the mobile-game market as well. For instance, Glu Mobile struck a deal with the brand name Fox Sports to create sport simulation games, including Fox Sports Football, Fox Sports Boxing and Fox Sports Hockey. Popular TV shows ' such as Donald Trump's 'The Apprentice,' which RealArcade turned into business-oriented mini-games for Verizon and Cingular customers ' can also be successfully licensed for mobile games. The same goes for pop-culture legends like Spiderman, King Kong and Harry Potter. As with the developer's use of pre-existing software, a company must be sure to clear all licenses for any brand names and celebrity likenesses incorporated in the game. Detailed and extensive warranty indemnification clauses in a contract usually provide such protection for the company as well as the developer.

Product Placement

So far, this article has discussed the various licensing costs a company will need to absorb when publishing a developer's mobile game. In contrast, product placement ' when an advertiser pays a company to incorporate a particular product into the gaming experience ' provides an additional way for a game publisher to make money. In exchange for the payment, advertisers receive particularly precise data on their media buy. Normally, it is difficult to measure the value of a media buy, but with mobile applications and games, exact usage ' such as how many people downloaded the game containing their product, or how many times the game was played ' can be monitored. Leaving the privacy issues aside, advertisers and media buyers can use this exact data to easily predict their profits and estimate the effect of placing their product into a specific game. Before placing a product into a game, careful thought should be given to how the characters in the game will relate to the advertised product. Quite often, the intentions of advertisers clash with lifestyle or convictions of celebrities, characters or even customers. So if Tommy Lee doesn't object to a game in which he smokes Marlboro and drinks Jack Daniels while playing on a Brunswick or AMF pool table, the rightful owners of the Harry Potter character might.

Consideration must also be given to which games and services the mobile carriers are likely to allow to be downloaded over their services. Mobile carriers, who operate the networks that carry mobile-phone signals and sell services directly to customers, are intensely concerned about their customers 'churning' to other carriers. They thus shy away from distributing games that might offend their users or might result in public backlash, which increases the level of government scrutiny applied to their services. In addition, the carriers are intent not to repeat some of the mistakes that were made as the advertising industry developed on the Internet. As a result, carriers jealously guard their users' private information in an attempt to minimize the spread of 'spam,' identity theft or other damaging practices on the mobile networks they operate. These considerations have delayed or killed the launch of many mobile advertising campaigns or game launches heavily reliant on product placement or user-generated information.

The Final Score

The best game development deals always provide the right mix of upfront payments sufficient to fund top-quality development and back-end royalty payouts high enough to make the endeavor worthwhile for everyone involved. Once the deal is done, pay close attention to what happens during the execution and payout phases; use these observations to inform future deals. For example, if you've agreed to an upfront payment for development, but the developer was unable to deliver on the agreed upon timeline and required additional payments to complete the job, consider paying the next advance in smaller increments over time. On the other hand, if your distributor was slow to make royalty payments and kept the money 'in the pipeline' longer than expected, consider getting more money upfront in the next deal, requiring advance payouts on royalties to be paid or requiring payments into an escrow account pending accounting of monies earned.

Although it is impossible to know exactly how well a game will do in the market, there are a great many ways to cover the risk of development investment. The best game-development agreements provide enough flexibility to adjust for circumstances as they occur, precisely because it is impossible for anyone to foresee exactly how things will play out given the large number of variables and market forces that come into play in the game business.

Steven Masur is the managing director of the New York-based MasurLaw, a media and entertainment law firm known for its work with new technologies. E-mail: [email protected]. He would like to thank Ursa Chitrakar, Fulbright Scholar 2006, and Jennifer Williams, Brooklyn Law School 2006, for their significant contributions to this article.

Part One discussed mobile-game players, the industry playing field, content ownership issues and developer credits.

Licensing Celebrities and Brands

Just like its more traditional console and PC counterparts, the mobile-game industry has its fair share of celebrity and brand-name licenses. The correct celebrity association can make or break a game, and even a boring game might gain some level of success just because of its association with a particularly famous person or brand. In 2006, Hands-On Mobile announced a partnership with rock star Tommy Lee to develop entertainment content for cell phones that aimed to capture the former Motley Cre drummer's 'mischief-making' ways in an attempt to excite prospective mobile-game players and entice non-game players to purchase the game when published. Another example of celebrity partnerships: the creative cartoon-music collective Gorillaz teamed up its music brand with RealNetworks to develop a series of mobile-based games. However, playing with the fickle public perception of celebrity popularity is a sword that can cut both ways. The release of a Bode Miller game, widely publicized and perfectly timed to coincide with the conclusion of the 2006 Olympic Games, garnered disappointing results because of Bode's poor performance during the Olympics and the public backlash created by the media hype surrounding his 'bad attitude,' even though he went on to win numerous World Cup races after the Olympics.

Also, it is not only the celebrity who decides whether or not his or her name, image or voice can be used in a mobile game. Quite often, a celebrity's agreement with studios or agents constrains them from off-camera appearances. Similarly, music clips must be cleared from publishers and record labels and not the artist, unless the artist managed to exclude the rights for licensing the music to wireless devices from his recording or publishing agreement. So be prepared for lengthy negotiations with a wide variety of celebrity handlers and work this into both your budget for the game and your development and marketing plans for the final release date.

In addition to individual celebrities, a well-known company brand name can attract consumers to the mobile-game market as well. For instance, Glu Mobile struck a deal with the brand name Fox Sports to create sport simulation games, including Fox Sports Football, Fox Sports Boxing and Fox Sports Hockey. Popular TV shows ' such as Donald Trump's 'The Apprentice,' which RealArcade turned into business-oriented mini-games for Verizon and Cingular customers ' can also be successfully licensed for mobile games. The same goes for pop-culture legends like Spiderman, King Kong and Harry Potter. As with the developer's use of pre-existing software, a company must be sure to clear all licenses for any brand names and celebrity likenesses incorporated in the game. Detailed and extensive warranty indemnification clauses in a contract usually provide such protection for the company as well as the developer.

Product Placement

So far, this article has discussed the various licensing costs a company will need to absorb when publishing a developer's mobile game. In contrast, product placement ' when an advertiser pays a company to incorporate a particular product into the gaming experience ' provides an additional way for a game publisher to make money. In exchange for the payment, advertisers receive particularly precise data on their media buy. Normally, it is difficult to measure the value of a media buy, but with mobile applications and games, exact usage ' such as how many people downloaded the game containing their product, or how many times the game was played ' can be monitored. Leaving the privacy issues aside, advertisers and media buyers can use this exact data to easily predict their profits and estimate the effect of placing their product into a specific game. Before placing a product into a game, careful thought should be given to how the characters in the game will relate to the advertised product. Quite often, the intentions of advertisers clash with lifestyle or convictions of celebrities, characters or even customers. So if Tommy Lee doesn't object to a game in which he smokes Marlboro and drinks Jack Daniels while playing on a Brunswick or AMF pool table, the rightful owners of the Harry Potter character might.

Consideration must also be given to which games and services the mobile carriers are likely to allow to be downloaded over their services. Mobile carriers, who operate the networks that carry mobile-phone signals and sell services directly to customers, are intensely concerned about their customers 'churning' to other carriers. They thus shy away from distributing games that might offend their users or might result in public backlash, which increases the level of government scrutiny applied to their services. In addition, the carriers are intent not to repeat some of the mistakes that were made as the advertising industry developed on the Internet. As a result, carriers jealously guard their users' private information in an attempt to minimize the spread of 'spam,' identity theft or other damaging practices on the mobile networks they operate. These considerations have delayed or killed the launch of many mobile advertising campaigns or game launches heavily reliant on product placement or user-generated information.

The Final Score

The best game development deals always provide the right mix of upfront payments sufficient to fund top-quality development and back-end royalty payouts high enough to make the endeavor worthwhile for everyone involved. Once the deal is done, pay close attention to what happens during the execution and payout phases; use these observations to inform future deals. For example, if you've agreed to an upfront payment for development, but the developer was unable to deliver on the agreed upon timeline and required additional payments to complete the job, consider paying the next advance in smaller increments over time. On the other hand, if your distributor was slow to make royalty payments and kept the money 'in the pipeline' longer than expected, consider getting more money upfront in the next deal, requiring advance payouts on royalties to be paid or requiring payments into an escrow account pending accounting of monies earned.

Although it is impossible to know exactly how well a game will do in the market, there are a great many ways to cover the risk of development investment. The best game-development agreements provide enough flexibility to adjust for circumstances as they occur, precisely because it is impossible for anyone to foresee exactly how things will play out given the large number of variables and market forces that come into play in the game business.

Steven Masur is the managing director of the New York-based MasurLaw, a media and entertainment law firm known for its work with new technologies. E-mail: [email protected]. He would like to thank Ursa Chitrakar, Fulbright Scholar 2006, and Jennifer Williams, Brooklyn Law School 2006, for their significant contributions to this article.