Games Brief

What happens when you drop your prices?

2012-05-21T16:41:12Z

This is a guest post by David Kalina, cross posted from his own blog at Tiger Style Games

We recently shared our lifetime sales numbers here.

The same day, we dropped price on all of our products. Our strategy was to try and create news and attention by coordinating several newsworthy events simultaneously. Our Waking Mars update had new jetpacks to collect and play with, and enhanced support for the iPad Retina Display. We issued a press release and personally reached out to a number of folks in the press, asking for coverage. We wrote blog posts to attract attention. We dropped the price of the soundtrack on Bandcamp. We dropped the price of both Spider SKUs for the first time in a long time. And we dropped the price of Waking Mars from 4.99 to 2.99 for the first time ever.

It’s been two weeks, so how’d we do?

WAKING MARS SALE ($4.99 -> $2.99)

Here are the 15 days before the sale:

We earned $12946 in revenue during that period. There was a blip in the data on 4/24-25 where we spiked upwards — we believe this was due to a piece on a Yahoo! Games blog called “Plugged In” that featured us nicely (http://games.yahoo.com/blogs/plugged-in/10-must-play-ios-games-182249052.html— 484 comments on that piece indicate to me that people are reading it!). Normally single press events don’t seem to make a tangible difference — but some of the bigger ones do. Even accounting for that spike, we were earning approximately $863 a day for the last 15 days at $4.99.

Here are the 15 days post-sale:

We earned $25733 on sale, selling an additional 12,622 copies. That’s nearly double what we were earning over the previous 15 day window, but the trends are indicating a bottoming out. You can see that we had one amazing day at $6201 earned, and then yesterday, we earned about 1/10 of that ($647). That’s a bit better than the two Mondays pre-sale ($564 and $497) but we’re approaching a state of being revenue neutral, so we’re going to end the sale tonight.

You can see this trend on the charts as well. We got as high as the #18 iPad game, hung out at a nice chart position all week (thanks in large part to another Apple feature) … and then the rank started collapsing, and hasn’t bottomed out quite yet.

Interestingly the iPhone charts show a much gentler bump and then a flatter curve. We didn’t have a banner in the iPhone store, so that’s probably part of it, but I think our game is just not perceived as being “for” the iPhone. Potential consumers see our product and can probably pretty easily imagine playing it on a 3.5 inch screen, and they (correctly) perceive that it’s “for” the iPad. (Of course, it plays great in both places and you should still buy it! My point is more that I think consumers are looking for something a bit more approachable on the iPhone, in most cases)

SPIDER SALE ($2.99 -> $0.99)

As for Spider… we only put it on sale for a week, and the results were not amazing. The HD version — which received a retina update — did pull in approximately an extra $900. For a game that has been earning $30-40 a day, this is certainly welcome, but after the first 3 days, sales numbers were very close to where they started.

The iPhone version fared even worse, actually earning LESS money at $0.99 the weekend following the sale versus the weekends before and after the sale period. We still probably came out ahead $300-400 dollars from the initial spike in attention, but it actually seems to be the case that we are better off at 2.99 for now.

All things considered, this effort was successful — we reached a significant number of new users, (hopefully) increased the perceived value of the product, and pocketed a nice chunk of extra revenue. Long term, it’s harder to predict how much these efforts help. I used to fear that sales would serve to cannibalize your potential user base — how many of the people who just bought Waking Mars at $2.99 would have EVENTUALLY bought it at $4.99? It’s impossible to know. iOS has definitely taught people that, if they wait just a little bit, practically everything goes on sale.

This is one reason we’re more willing to play with our pricing this time around (Spider did not go on sale for over a year after its release). The market expects it, and there are gamers who may love our stuff who, for whatever reason, won’t buy it at $4.99. We’re reaching new players every day, and hopefully we’ll have plenty more reasons to make news in the coming year and keep the product on people’s minds. Staying relevant over a long period of time is, in my opinion, one of the core tricks to success on iOS.

Holding your breath and going Freemium – Future Games of London share some stats

Hostile takeovers come to the Games industry, perhaps for the first time ever

2012-05-22T08:59:41Z

Korean publisher Nexon, listed on the Tokyo Stock Exchange, has built a 33% “hostile” position in Taiwanese firm Gamania, according to GamesIndustry.biz.

Gamania clearly view the stake as hostile:

“The company welcomes any form of investment and cooperation, but insists on maintaining independent control of the company’s management,”

The games industry has typically been seen as immune to hostile takeovers, since so much of the value of a games business is the staff. Conventional wisdom goes that if your primary asset walks out of the door every day, you have to treat them very nicely, and that includes not trying to buy the company against the will of senior management.

But has that changed? The new world of games is less about that creative spark of brilliance and more about measurable, tangible value. It’s about audience size, distribution networks, metrics-led design and so on. It is less about the raw talent of the team. (In fact, I’m not sure that games development was ever as unmanageably creative as some people have said, but the transition to network gaming has made the change even starker).

So if more gaming companies go public, can we expect to see more hostile takeovers? Only if companies don’t put in special provisions to ensure they retain control at the expense of outside shareholders (like Mark Pincus did at Zynga), I guess.

How to stifle Innovation, the Microsoft Way

2012-05-21T11:38:53Z

From the TIGA Guide to Self-Publishing:

How to Submit A Game [for XBLA]

Once you have fleshed out your game concept, contact the XBLA team via email with a pitch regarding your game and company
If the team is interested, they will contact you and ask you to fill out the official Concept Submission Form
You will then formally submit your game concept and will asked to include a wide selection of information[which might include]:
- concept art
- screen shot mock-ups
- design documents
- early builds
If it passes this stage, the concept will be reviewed and evaluated.
The XBLA team will research your credentials, too
If you get the go ahead,you will be given the relevant developer tools and documentation and be allowed tobuy an Xbox development kit
At this stage, you develop your game, covering all the costs yourself, working with an Arcade producer that is assigned to you
The producer will set targetsand will help with design, Gamerscore and achievements.
As you get close to the end of development, the game is tested (at your expense).
You must also localise the gameand acquire the relevant ratings.
After a period of debugging and verification, the game goes through the Xbox 360 certification process, and when it is digitally signed off, it will appear on the XBLA service.

(The bold emphasis is all mine). Can you imagine a process more designed to prevent innovation? To ensure that every step, there is the opportunity for someone to say “that’s the not the way we do things around here”? To ensure that only the usual suspects make games?

I hear that the sales on the platform have been disappointing (with the notable exception of Minecraft). With rules designed to keep new ideas out, is it any surprise?

Zynga’s share price collapses as status as "Facebook proxy" disappears

2012-05-18T16:08:01Z

Zynga’s shares have fallen by 11.4% in the fast few minutes since Facebook started trading in the US. I’m kicking myself for not seeing this coming.

Back when I was an equity analyst, we used to talk about certain stocks being “proxies” for bets on other things. For example, regional newspapers were proxies for the classified advertising market. TV broadcasters for the display advertising market. Some stocks could be a proxy for the financial health of a country, or as a proxy for a privately held company.

That is where Zynga came in. If you were a public-market investor who believed that Facebook was a good investment, but were forbidden from investing in unlisted securities, what could you do it?

You could invest in Zynga as a “proxy” for investment in Facebook. It’s not the same thing, but it allows people who wanted some exposure to the fast-growing social network to get exposure at one remove. But what happens when the underlying asset (in this case Facebook), comes to market?

The proxy loses its alllure, and some investors sell out of the investor to fund an investment in the underlying asset.

Within minutes of the IPO, Zynga’s shares have collapsed. We’ll see if it rallies, but this may be demand for Zynga’s shares being sucked up by the Facebook IPO.

I should have seen it coming.

The three things I want to ensure a healthy UK games industry

2012-05-17T11:58:33Z

This is a lightly edited transcript of a talk I gave at the Westminster eForum on the future of games last month.

Thank you and obviously well done to TIGA and UKIE for the tax breaks.

I’m here to talk about business models, I want to talk about three things: I want to talk about change, I want to talk about adaptability, and I want to talk about resistance.

Change

I think we all know that the games industry, like all media industries, is changing at an unprecedented rate. The emergence of digital distribution is causing massive damage across the industry as studios fail, retailers go into administration, and publishers fail to adapt.

I think this is great news for the games industry, great news for innovation and great news for our long‐term future.

The games industry is not like the music industry or the film industry. We’re a young industry. I recently turned 40, which makes me exactly as old as the games industry. In 1972, the year that I was born, Pong was created. It first appeared in a bar in the US with five simple instructions: “avoid missing ball for highscore” (they thought high score should be one word). It changed the nature of entertainment. Two of my fellow speakers at the eForum, Ian Livingstone and David Braben, are even older than the industry. They were important figures in my childhood as entrepreneurs and creators, simultaneously, and they both continue to be vital to the industry today.

That’s the bit that matters. Our industry is so young that the people running the top of the industry were entrepreneurs. They don’t do things because that’s the way that their fathers did it, or their father’s fathers did it; they had to learn and experiment in the early days of the industry.

Adaptability

As an industry we’re not afraid of new technology. There’s nobody in the games industry who doesn’t, in some form, love technology. Otherwise, we would be doing book publishing or music making.

We embrace technology. We are not afraid of new platforms. We create them in the case of consoles, or we become the dominant entertainment form on them, like on Facebook, the iPhone, browsers.

We experiment with new business models. Companies like Playfish out of the UK, bought by EA, on Facebook, companies like Mind Candy which makes Moshi Monsters, Jagex which makes Runescape, each has found new ways to reach new customers using new technologies, while the other creative industries have been too scared to tread there.

We love change – or, at least, most of us do, but some people still remain in denial. They think people will always want shiny discs. They hope they will retire before this transition really hits them so they don’t have to deal with it. They hope the industry will remain a pay-up-front boxed product industry for ever, because it’s easier for them, not because it’s better for creativity and not because it’s better for the consumer.

I think the recent administration of Game highlights just quite how unlikely those people are to be right, but they remain in denial.Today, at the Westminster eForum, I urge policy makers and game makers not to listen to the deniers. I want them, and I want you, to embrace a world where the assumption is that content will be freely available, but you can still make enough money, more than enough money to pay for that content. You will pay for it through new business models, through using the power of the internet to find the fans who love what you do, and enable them to spend tens, hundreds, even thousands of dollars for stuff which they truly value.

We are already seeing that working on the iPhone. Last year nine games made more than $20 million on the App Store. It’s still small numbers. We are not there yet, we are at the early days. Of those nine games, seven of them were free.

Resistance

How would I like people to do that? There are three things I want to highlight.

I would like you to think about crowd funding, which I think may be one of the easiest ways of bridging the early stage financing gap. I would like to look at how we can allow consumers to vote with their wallets for products they want created in advance and – this would be a big change – enable them to benefit from the upside if they create a wildfire hit.

I want tax breaks to be targeted to support innovation, creativity and entrepreneurship, not to put money into the pockets of overseas shareholders.

And I would like the copyright regime to continue to be revisited. We need to embrace the change that has already happened, driven by the internet and other technological and social changes that are already here, rather than deny them and pretend that they haven’t happened.

I don’t think there’s ever been a better time to be a game maker in the UK, but please don’t let the big entrenched dinosaurs ruin it for the rest of us.

A debate on free-to-play

2012-05-16T13:05:07Z

This post takes a special format: Cliff Harris of Positech Games and I exchange views on free-to-play gaming, and then share the conversation with you. Let me know if you think the format works, and don’t forget to join the conversation below!

Cliff Harris, Positech Games
Nicholas,

FreeToPlay is not the future of games, or at least I hope it isn’t. The entire business model is built upon cynicism, mainly the idea that players will think they can play game A for free, as opposed to game B which costs $30. We both know that someone, somewhere has to pay for the game’s development, and for that idea to work out, you either need to hook some ‘whales’ who pay out a fortune and subsidise everyone else, or you have to constantly nag all of the players to pay for in-game items.

Either way, the business model will lead to design compromises that do not exist in any other artistic medium. A writer or movie director can compose a piece of entertainment safe in the knowledge that the customer has bought into the idea of the entire work. Imagine the impact if the audience were asked every chapter or scene to pay a few pennies to access the next part of the story.

We wouldn’t tolerate free-plus-microtransactions in other media, why should we tolerate it in gaming? Free to play is nothing more than the new version of a very old idea, the free demo. The difference is that with a free demo, the understanding is you then make an honest pitch for the player to purchase the game at the end of the demo. The F2P model seems to rely on interrupting the player mid-game to constantly pester them for a few pennies.

How is this a better business model?

Nicholas Lovell, GAMESbrief

Cliff,

You start by making the mistake of thinking that all users love your work equally.

The idea that all users should pay the same price for a piece of entertainment, however little or much they enjoy it, is a bizarre concept born out of the limitations of physical media. In the old days, when there were no bits and distribution was exclusively by atoms, content creators had no choice but to fix the price. It was the only way to sell an entertainment product via retail stores. The consequence was that a superfan who loved that game would get hours of incredibly cheap value. A user who found after a few hours of play that it wasn’t for them was, in effect, subsidising the heavy players.

Free to play changes all of that. It lowers barriers to entry, which means people can play and enjoy the game while they work out if they want to spend money on it. It enables people to play the game for ever, for free. As long as the player is playing, the creator has the chance to say “hey, you’re enjoying my game. Here are ways that you could enjoy it for more, by spending some money with me.”

It’s more honest (because it allows players spend according to their level of engagement with the game), it is cheaper (because you build a title for continued play, you don’t have to spend all of the development and marketing budget prior to launch) and it is more profitable (because you let those who don’t want to pay play for free, while allowing those who love the title to spend much more than the initial price).

What’s not to like?

PRESS SPACE TO TAKE YOUR TURN

Cliff Harris, Positech Games

Nicholas,

I accept people are prepared to pay different prices for games, but this is why we have collectors editions and DLC. I don’t accept that we are just being shackled by the physical properties of the medium, because that also applies to books and movies. They capture the whole audience by having hardback or signed copies, and DVD specials with extras.

This is all fine. I have no problem with extra content being made available after a product is complete. The difference is that you are advocating designing the game around such a business model from the start, which I think makes for an inferior product. Books may come as hardback/paperback, but you don’t have to pay extra to get all the characters, that would be mad, yet it’s how F2P games are being designed.

The other problem is that the game is no longer a shared experience or level playing field. I can now be shot by someone with a gun I didn’t buy, or outrun by a car with engines I haven’t bought. Games are about fantasy and adventure and getting away from the rat-race and treadmill of real life. Is it not bad enough that MMOs feel like a second job, without importing all the envy and unfair competition from the real world too? Real world games would never allow this. Football teams don’t get more players if their team has more money, we accept that when it comes to games, it should be about skill, not bank balances. And as for barriers to entry, there are already none when the game has a free demo.

Nicholas Lovell, GAMESbrief

Dear Cliff

I think that we are coming at this issue from two different directions. I care about players, but I also care about the businesses that make games. After all, if it is hard or impossible to make a living from making games, fewer talented people will make fewer great games.

So I start from the premise that if the market is being changed by digital distribution and the immutable economic law that if the costs of making another copy of something trends towards zero, so does the amount that people will pay for that copy. In that environment, I think it will be very hard to keep the price that an end user will pay for a gamer at anything above very low (meaning iOS style prices). It is very hard to make a living at a price point of £0.69 for all but the very lucky. Even Rovio, often shown as the posterchild of iOS development, needed commitment and luck: Angry Birds was their 52nd game.

You’ve argued that you need to gross £100,000 (I think) to make a living. That means selling 145,000 copies of the game if the price is £0.69. You would need to sell 20,000 copies at £4.99.

There is another way. What if you can find a business model that allows people who love your game to spend more? If you design the game to allow those people who love what you do to spend a day’s wages over the course of a year of playing? In the UK, a day’s wages is £100. That would mean you would only need to have 1,000 players who loved what you do to make enough money to live on.

Isn’t that easier and more attractive than trying to appeal to everyone in the same way?

How would that business model work? You make the game entirely available for free, so that people can play, explore and experiment in your world. You offer a way for people to spend £1. They may be able to buy aesthetic changes like personalised outfits, new skins or new buildings that don’t affect gameplay. They may be able to level up faster, unlock items earlier than someone who plays the standard mode. They may even buy additional content (although in my mind, it is better to sell personalisation than content).

Then you need to make it *possible* to spend £100 per month. Not because people will (although some might), but because you want your biggest fans to have choice – about the personalisation, the status, the progress, whatever it is that excites them – and if they are *able* to spend £100 a month, maybe they’ll spend £10.

A thousand true fans, out of perhaps 100,000 playing your free game, and you have an exciting business that is all about making cool new stuff that your biggest fans will love – and want to pay for.

That seems to me to be the best of all possible worlds.

Cliff Harris, Positech games

“Ah but here is the fundamental contradiction. You suggest that because stuff can be copied, it’s natural price is zero, but then you also talk extensively about ways to get money from people for games by other means.

Ultimately, it’s just a shuffling of payment from all gamers equally to a few wealthy ones, but the same amount of money is being generated. The ‘free to play’ games are clearly nothing of the sort, they are more like ‘patronage’ games, where some wealthy people who suffer from gaming addiction subsidise everyone else’s leisure time. An interesting way to do it, but not something that is being done in the interests of making games better. If your business strategy relies on milking a core group of hardcore wealthy addicts, then it means games get designed effectively for a small hardcore subset.

Besides, the popular ‘thousand true fans’ model doesn’t require micro-transactions and free-to-play, they are unrelated.

You can have your thousand true fans who buy the game, without requiring them to be a subset of 100,000 casual players who value their playing time at zero.

I could just about get by with a thousand true fans by selling them $30 games, and many people do exactly this, like spiderweb software and the guys making hex-based WW2 strategy games. There are many people out there happy to pay $20-40 for a game that they really like. It’s a myth that gamers will only pay $0.99 for a game, it’s just that those gamers are a very loud, shouty minority.

You can have your thousand true fans who buy the game, without requiring them to be a subset of 100,000 casual players who value their playing time at zero.”

Nicholas Lovell, GAMESbrief

Dear Cliff,

Of course you can get by with 1,000 true fans paying $30 for your games. The difficulty is in finding them.

Free-to-play games suffer from this discoverability problem too: they need to spend to acquire customers in the same way that traditional games companies have to market their games. The difference is that, because their games are free, they can get many more people into the game to discover if they enjoy it. They can play the game for longer – often forever – before the paywall comes slamming down. They can get their friends playing without having to persuade them to shell out $30. And when they find a true fan, they can make a lot more than $30, while offering things that the true fan values.

There will still be companies making money from games that are single upfront payments for quite some time. Most of them will have established reputations, while new businesses are more likely to start by assuming the free is the optimum price point for consumers AND for the company.

The important thing is that a wider variety of good games will have a chance to get developed than ever got developed before. I think that is something that we can both agree is a very good thing.

Taptitude – a Windows Phone Success Story

2012-05-04T22:13:07Z

This guest post is cross-posted with permission from Four Bros Studio.

FourBros Studio began developing Taptitude early in 2011. This article is going to look back over the last year as the game has evolved to see how far we’ve come and how we got here. For those not familiar with Taptitude, it is a free Windows Phone 7 game with a collection of over 60 competitive minigames. We initially launched Taptitude in March 2011 with just a handful of relatively simple minigames, and have since updated it every week adding new games and platform features.

Taptitude is free to play, and is supported by pubCenter ads. In this buisness model, you are paid based on how many ‘impressions’ you get each day. The amount you’re paid per thousand impressions is refered to as ‘eCPM’. For example, if you get 10,000 impressions at $1 eCPM, then pubCenter will pay you $10.

Over the last year, we’ve seen exponential growth in our impression rate. For the first few months we made very little money, and only served a few thousand impressions per day. As we stuck with the project we added many weekly updates with features including online leaderboards, stars to unlock minigames, coins to purchase game upgrades, and stats to track your progress. Taptitude continues to evolve, but lets take a high level look at how we did on average over the last year:

We’re at nearly 100 million ad impressions, and much of that was in the last few months as you can see from this breakdown of impressions per week over the last year:

Over the same timeframe, you can see that our eCPM fluctuated pretty wildly:

We would love to get $3 eCPM every day, most of the time it’s closer to $1. In the next chart we can see how our revenue is a combination of both eCPM and Impressions:

As you can see, in the weeks of November we had a big spike in eCPM resulting in record revenue despite having significantly less impression than recent weeks. As we settled into the lower $1 eCPM we’ve had to grow our user base in order to make it up with impressions.

At the time of this writing, we are about half way through April and we have record impressions per day as seen by the following chart. There are two clear dips in this chart that show when we diverted our pubCenter ads over to AdDuplex during different marketing blitz efforts. The reason for this is that we either show a pubCenter ad or a AdDuplex ad, but not both. Toward the end of this graph, you can see our 1 million impression days!

* NOTE: the dips in pubCenter ads correspond to a spike in AdDuplex ads because this is where we marketed our game using AdDuplex.

The graphs above show how our impressions have grown over the last year, now lets look at how that correlates to our userbase growth:

In this chart, the orange line shows the cumulative downloads of Taptitude, and the green line represenets the number of unique downloads per day. You can see from this graph that we stayed pretty flat at around 350 new users a day for over 6 months! There are a couple spikes which tend to line up with getting featured in the Marketplace, releasing major new updates, as well as marketing campaigns that we ran on Facebook and AdDuplex.

Taptitude has been downloaded nearly 300k times in the last year. With this many users, it’s interesting to slice and dice the demographics. Lets look at the data we’ve collected in the last 30 days.

We publish an update for Taptitude every week. We wondered how quickly our users were updating to the latest version:

Most of our active users do a good job of staying on the last few weeks, but there is an anomoly where a significant portion of our users are still on v4.5. It turns out that v4.5 was the last version we released pre-Mango. Anyone that hasn’t updated to Windows Phone 7.1 (Mango) will be stuck seeing only version 4.5 on the Marketplace. We’ve asked our users why they don’t update to Mango, considering it’s free, and most of the responses were because they didn’t have a computer to update their phone with. Unfortunately this can’t be done over the air.

Now let’s break down which phones (devices) have played Taptitude in the last month:

Nokia is leading with the Lumia 800 followed by the 710, with the 900 making significant gains in the short period of time since its release. Despite this, HTC is actually the #1 manufacturer at this time due to the breadth of devices they offer:

We also keep track of the ‘culture’ of the phones that play Taptitude. This corresponds to the region that the player is from:

As to be expected, en-US is the primary culture considering Taptitude is only localized to English. This is followed by a significant portion of our users coming from Great Britain, Germany, and Spain respectively.

Windows Phone is a rapidly growing market where indie developers can be successful. We are looking forward to an even better second year as indie game developers, and can’t wait for Windows 8!

That wraps up our analysis of the last year of Taptitude. In a future article we will dig into some of the specific stats that we track in game to see how our users are doing. If you like this type of analysis, follow @FourBrosStudio on Twitter, and/or check out the Taptitude Facebook page.

UPDATE: thank you all for the interest in our post. Looks like many of you are interested in the per-day figures as well, so here is a chart showing our per-day revenue over the last 30 days.

No related posts.

How much are Tablet users spending on Virtual Goods? ABout $62

2012-05-14T16:03:49Z

Magid Associates have released their latest gaming trends research (although 10 minutes of Googling and I still can’t find the original. I’m relying on GamesIndustry.biz’s write-up).

The key stats that leaped out at me:

Where are the active gamers (%age playing games on a platform in a week):

50% played console games at least once a week
44% played mobile games at least once a week
37% played social games
24% played handheld games

Where is the money on new platforms?

Tablets: The average tablet gamer downloaded 20+ apps last year, and 23% of them are paying for virtual goods, averaging $62 per spender
Smartphones: The average smartphone gamer downloading 10+ games last year and 14% of them are paying for virtual goods, averaging $25 per spender.

Note that these appear to be “self-reported” numbers, which can be very unreliable.

More details over at GamesIndustry.biz.

Kickstarter and the Gartner Hype cycle

2012-05-08T22:01:04Z

Yesterday, I wrote about the inevitable bursting of the Kickstarter bubble. (The post was originally made on Gamasutra).

I had meant to check out the Gartner Hype Cycle and a link from Tadhg Kelly reminded me to do so. Here it is:

It seems to me to be pretty clear that we hit the peak of inflated expectations at around the time that Double Fine raised $3.33m two months ago. We are now on the downward slide towards the Trough of Disillusionment, and we will hit bottom in October or so of this year.

Then, as developers and consumers begin to really understand the true potential (and pitfalls) of Kickstarter, crowdfunding will really start to come into its own in 2013.

No related posts.

What’s the use of contracts?

2012-05-03T21:46:26Z

In this guest post from John Halton of Cripps Law, we look further at contracts, specifically for managing business relationships. Don’t forget to check out the recent Dear Jas post on contracts from the perspective of EULAs.

Shared under a creative commons license by Victor1558

During April, rumours swirled that the Prey 2 first-person shooter had been cancelled by Bethesda Softworks due to a contract dispute with the developer, Human Head – who were said to have downed tools on the project in November 2011. Bethesda subsequently announced that the game had not been cancelled, but delayed beyond 2012 as it “does not currently meet our quality standards”.

If the delay is indeed down to a contractual dispute, it will not be the first time that a developer and its client have fallen out in this way. This is a particular risk on projects – such as the development of video games – where the exact scope of the project is not clear from the outset. The client can become frustrated at the apparent lack of progress, while the developer can feel trapped by a fee structure that no longer reflects the scale of the work.

As the problems mount, sooner or later someone decides it’s time to pull the contract out of the bottom drawer and see what their legal options are.

The first thing they may discover is that the bottom drawer is empty: there either never was a contract (“let’s just get started and worry about the legal stuff later”), or the contract was never signed.

Or they may find the contract is there, but doesn’t help them. It may leave ownership of intellectual property unclear, resulting in an impasse in which neither party is able to use or sell the finished product. Or it may bear no resemblance to reality – either because it was a generic document which ticked the box marked “contract” but never reflected what was actually intended, or because it failed to take into account changes as the project went ahead.

Uncertainty abounds, tempers rise, lawyers are called in, the relationship collapses, and – most important of all – a great commercial opportunity is lost for everyone.

Given all this, the obvious question is: “What’s the point of having a contract in the first place?”

As I see it, in most circumstances there are only two main reasons for having a contract, and for caring about what it says. The most important is this: to make the parties think about things before the contract is signed. As a general rule, if the contract doesn’t mention something, that probably means the parties haven’t thought about it – or they’ve each thought about it, but haven’t talked about it to one another, and have signed the contract with very different expectations about what happens next.

A good contract will flush out issues that the parties may not have thought about, but which they then realise matter to them. Intellectual property use and ownership is a classic example; service levels, timescales and change management are another. This gives them the opportunity to reach an agreed position before the contract is signed – or, at worst, to walk away from the deal before it’s too late.

This in turn helps to build the commercial relationship: each party has a better idea of what they want and of what the other party wants, and so there’s a basis for trust and an avoidance of misunderstanding and uncertainty later.

The second reason for having a good contract is so that you never have to worry what a court will say about it. The vast majority of commercial disputes are resolved without ever darkening the doors of a court, and those that do reach court usually do so because the contract leaves things unclear (and because there’s a lot of money at stake – but that’s another story). A good contract gives the parties a clear basis for negotiation, which increases the chances of a deal.

Business relationships are like any other relationship: things will go wrong, arguments will happen. But they are also like any other relationship in this: prevention is better than cure. Better to understand where the other person is coming from, and leave as little as possible to chance or misunderstanding.

John Halton is a partner in the Advertising, Technology and Media group at Cripps Harries Hall LLP. He blogs at Law in the Cloud @johnhalton

No related posts.