Game publishers often hire game developers to create games for them. A development agreement is a contract that spells out the terms of the development deal. If you get a job working for a developer, your boss cares about the development agreement, but if you’re an entry-level guy, you’ll probably never see this contract. Someday when you’re an old man (in your thirties or so), you might have your own company, and will have to negotiate a development agreement.
“The Whereases” – This is just what I call the stuff on the first page of a development agreement (after the first paragraph, in which the names of the contracting companies and their addresses are spelled out). “Whereas [Publishing Company] is in the business of publishing electronic entertainment, and whereas [Developing Company] is in the business of creating electronic entertainment, the parties therefore enter into an agreement whereby [Developing Company] will create an electronic entertainment product (hereinafter referred to as “The Game”) to be published by [Publishing Company].” Stuff like that.
Terms – This part of the agreement spells out how much the publisher will pay the developer, what timeframe the developer has to develop the game, and if there will be royalties, what the royalty rate is. The obligations of both parties in the relationship are spelled out.
Ownership – It’s important to clarify whether the publisher owns the IP or the developer owns it. Or maybe neither party owns the IP (in the case of a game based on licensed IP, for instance). Maybe the publisher owns the game, a licensor owns the IP, and the developer owns the source code. (Note: if any of these terms are new to you, you can look them up in FAQ 28, The Game Biz Glossary.)
Warranties – The developing company has to swear that it won’t use anybody else’s source code (so the publisher won’t get sued for something the developer did), and the publishing company has to swear that it has the right to ask developer to create this particular game (so the developer won’t get sued for something the publisher did). And there’s language about what will happen if there is a lawsuit.
Termination – The contract spells out various things that might happen to cause the deal to end before the game is fully developed and published. And the contract specifies what will happen if such early termination does occur.
Legal Details – Contracts often end with lots of nitpicky stuff about contracts, about where disagreements would be adjudicated, and other boring stuff. There may be a “Work For Hire” clause, depending on the nature of the work being done and whether it’s a royalty-based project.
Appendices – A lot of the important details about a contract are kind of tacked on at the end. The most important of these (for a development agreement) are:
– The milestones and payment schedule
– The game design document itself is attached as an appendix.
– How the royalties are to be calculated
– Confidentiality agreements signed by every member of the development company
– Ownership of the IP is signed over to the publisher (depending on the deal terms)