Publisher Contracts

tim-cain business contracts publishers negotiation game-development ip-rights

Abstract

Problem: How should game developers approach contract negotiations with publishers, and what critical clauses should they watch out for?

Approach: Tim Cain draws on his own experience — including self-admitted failures — negotiating publisher contracts at Troika Games (Arcanum, Temple of Elemental Evil) to walk through the key dynamics and dangerous contract clauses.

Findings: Publishers are business partners, not enemies or friends. Developers should negotiate for more than just money — retaining code, art, or IP rights can be enormously valuable. Two contract clauses are especially dangerous: keyman clauses (which create breach risk from employee departures you can't control) and last right of refusal (which scares away competing publishers for sequels). Breach clauses should be objective, not subjective, and termination-without-cause clauses need penalties attached.

Key insight: Always negotiate to keep something beyond money — code, art, or IP — because those assets compound in value across future projects, as Troika proved by reusing Arcanum's engine for Temple of Elemental Evil.

Source: https://www.youtube.com/watch?v=BObrovcTZZw

1. Publishers Are Partners, Not Enemies or Friends

Tim opens with a caveat: he doesn't consider himself a good businessman and admits he "pretty much failed" at the business side. But he believes failure teaches more than success.

His core framing: publishers are business partners. They're not your enemy — they bring localization, marketing, and (historically) physical distribution. They're also not your friend — when they say "can't you just add this feature?" they're trying to minimize cost and maximize product. That's rational behavior; you do it yourself when you shop.

However, publishers bring less to the table than they used to. Physical printing, disc manufacturing, and store distribution are largely gone. Keep this in mind when negotiating.

2. Negotiate for More Than Money

The central lesson: don't just negotiate dollar amounts. Negotiate to retain assets:

  • Code ownership — At Troika, they owned the Arcanum code while Sierra owned the IP and artwork. This turned out to be "extraordinarily useful" when Atari approached them to make a D&D game — they already had an isometric engine with RPG system hooks, which became Temple of Elemental Evil.
  • Art assets — Separate from code, can be retained independently.
  • Intellectual property rights — You might own the IP but grant the publisher rights to the first sequel. These are negotiable splits.

If the publisher is coming to you because of your expertise, existing engine, or experienced staff, they should be paying for that quality and convenience — not just getting the cheapest deal.

3. The Keyman Clause: Avoid at All Costs

A keyman clause lists specific people by name who must work on the project exclusively. If any of those people leave, the publisher can treat it as a breach — meaning the contract is over, they walk away with completed work, and you may owe a penalty.

The problem: you can't control whether employees quit. You can throw money at them, beg them to stay, but if someone wants to leave, they leave. They didn't sign the contract — you did.

Tim's advice:

  • Avoid keyman clauses entirely if possible
  • If the publisher demands them, only accept for owners/founders, never for regular employees
  • Use it as leverage — if they insist on a keyman clause, demand something in return (code ownership, IP rights, etc.)

4. Last Right of Refusal: The Silent Killer

A last right of refusal means the publisher can match any competing offer for a sequel. After you collect offers from other publishers, the original publisher can step in, match the best offer, and automatically win.

The devastating consequence Tim didn't anticipate: other publishers won't even come to the table. Why would a publisher go through an entire negotiation process knowing a third party can swoop in, match their offer, and win automatically? They view it as a waste of time.

So even if you retained the IP, a last right of refusal can make it nearly impossible to find a new publisher for the sequel.

5. Termination vs. Breach: Know the Difference

Contracts usually give publishers the right to terminate at any time (they're the ones paying, after all). This is different from breach:

  • Termination — The publisher walks away. "We keep some stuff, you keep some stuff." No penalties implied.
  • Breach — You did something wrong. There's a penalty, and the publisher can walk away with completed work.

Tim's recommendations:

  • Add penalties for termination without cause — e.g., they must pay the next three milestone payments, or IP rights revert to you
  • Keep breach clauses objective — "Milestone delivered more than 10 days late" is objective. "We didn't like it" or "we think people will find it offensive" is subjective and can be weaponized.
  • Subjective breach clauses combined with keyman clauses are especially dangerous — they give the publisher multiple easy exit ramps at your expense.

6. Get a Good Lawyer

Tim closes by emphasizing: have a lawyer review your contracts. His video covers the big-picture concerns — keyman clauses, last right of refusal, termination vs. breach, IP and code ownership, royalty percentages — but the details matter, and a lawyer who specializes in this area is essential.

7. References