Every developer would like to create the next RISK or American Idol and own the IP outright. That is certainly the ideal. But there is a really good reason that licensing a popular game or brand is often better than trying to invent your own IP, namely: traction. The license represents years of R&D and a built-in consumer base. It includes countless hours of play-testing and perfecting—often over decades. Brands add value, and the best have their own cultural or even global mythology behind them, making consumers believe they are participating in something bigger when they a play a familiar game.
But if brands add so much value, why is it that interactive versions of our favorite toys or games sometimes miss the mark? Does the large advance for the license lead to reduced production budgets? Is it that developers would rather create their own IP, so the teams produce licensed games only grudgingly (no fun for the developers, none for the player)? Or is it that interactive games are sometimes such a different animal that the essence of the original toy or board game loses something in translation, or perhaps can’t be translated at all?
Let’s License a Brand
After a long day of trying to find the next hit from a pile of internal and external game submissions, you arrive at a friend’s house with few less hairs on your head and she breaks out a favorite board game to help you relax. You play it and it’s great! The gears are turning in your head—because you’re in the casual games business, and you’ve just hit gold! The next day you telephone the ACME Game Company—you simply have to make that game—and the negotiation begins.
Lucky for you, your lawyer and smart associates have you ready for this conversation. Here are some of the things you’ll want to discuss.
• What: What rights are you after? Licensors often sell rights for specific platforms, making the advance within reach of small-to-medium publishers. Casual download rights, retail, XBLA, Wii, DS? The more you want, the more the license is likely to cost.
• Who: Who is going to exploit these rights? Perhaps it’s your company, and also your affiliates. In casual, you depend upon third parties to market and sell your games. The licensor wants to understand your business model and who you will depend upon to publish or distribute the game.
• How Long: A license may have several exploitation periods that open up based upon hitting negotiated, financial milestones. For example, after the initial term, if you hit the agreed upon financial milestone, you can extend the license for an additional year or years. If you fall short, you may lose the license, or the rights may get ratcheted down (for example, the rights, or some subset may become non-exclusive). There is typically a maximum term for a license, creating a great sense of urgency to get the product out to customers ASAP and market it like crazy. Your goal is to make lots of money—and not lose those rights!
• Where: In what territory do you plan to exploit the property? All over the world? Only in English-speaking territories? The licensor will want to ensure that you have the ability to market the game in every part of the territory to which you’re granted rights. For example, if you aren’t able to market a license-based product in Japan, the licensor will want to retain control over the Japanese rights.
• How Much: There are several amounts you will be negotiating. All are typically advances against royalties for each leg of the license. There’s the first year’s payment. At least half of that year might be tied up in production, so this amount is typically much lower than the years that follow. Year Two could be double Year One or more, for example. Often the license can be extended for additional years after the first periods, provided you have reached various revenue milestones, with a cap for the entire contract—or “sunset” as it is often referred to—which often can be extended if both parties are happy with the relationship.
• Revenue Split: How will you and the licensor split the revenue you receive? 50/50? 70/30? 90/10? Will the revenue split be based on gross revenue or net revenue? If net, what deductions will you be entitled to take? It’s all negotiable and typically based upon the strength of the brand versus that of the developer/publisher. You should know what minimum revenue split you’ll need in order to make the project financially viable. And keep in mind that, in addition to revenue splits, the contract will also stipulate dollar minimums that you as the licensee will need to pay to hang onto the license in the years ahead—regardless of the revenue the game generates. For example, if the licensor’s minimum share for Year Two is $100,000, but in actual revenue its share only hits $85,000, you will still need to pay the additional $15,000 to hold onto the license.
• Approval: Every licensor has a different approval process. The process needs to be clear and spelled out upfront so that everyone understands what they are getting into. Some licensors need three business days (72 hours during a business week) to review materials; others may insist upon an unlimited amount of time for reviewing deliverables. Regardless of the terms you agree to, the licensor ultimately wants to be sure that it has visibility into the production, and can give timely and helpful feedback—in direct conflict, sometimes, with the licensee’s desire to release the product and start recouping the advance.
• Marketing: What marketing commitments are you willing to take? Will you need the licensor to do cross-marketing?
• Other Stuff: There are many boiler plate and non-boiler plate items you may find in a licensing contract, including: The date which the game must be launched (that is, available to the public); insurance and indemnity clauses; termination procedures, etc. (For an excellent explanation of standard contract clauses, see Michael Mei’s articles in the Fall 2006 and Winter 2007 editions of Casual Connect magazine.—ed.)
The Relationship Begins
Now, having obtained the license for your fictitious game property, you may start to wonder what this relationship is going to be all about. To help explain the nature of licensing relationship, we asked Rachel Hoagland and Jim Eisenstein of Hasbro Digital Media & Gaming, and Jason Turner of Fremantle Media to weigh in on what to expect during production.
When licensing your brands for interactive games, what are the main things you look for in a licensee?
Turner: Good people. The first thing I ask myself is, “Would I want to work with this group for the next two to three years?” Once that question is answered, I look at the creative quality and design capabilities represented by their roster of current titles. Finally, I want to see how they will creatively market and promote the game to secure maximum distribution and reach.
Hoagland: We look for market leadership, global distribution capabilities, and a proven track record of developing great games.
What separates a successfully licensed product from an unsuccessful one?
Turner: Above all else, the licensed product needs to be true to the brand. In reality, a brand is a promise, and with all of our titles, we demand that the game-play stay as accurate as possible to the actual TV show. As most of our titles are licensed in the casual game space, the proper balance between high design and approachable and simplistic game play needs to be struck.
Eisenstein: The developer that has a true understanding of the core essence of the brand and real empathy for the player in the design of the user interface will typically deliver a licensed game that hits the mark.
Think of a specific brand you own. Where do you draw the line between what’s untouchable, and what’s open to translation?
Turner: Inasmuch as our titles are immediately successful because of their rich history and inherent game-play, we insist that the show’s game-play translate into the licensed property—without exception. For our Family Feud downloadable game, the licensee asked to skin the game to add seasonality—Family Feud: Holiday Version. This was a shift from past title interpretations, but we allowed some flexibility here to meet market demands and to stay fresh.
Hoagland: We encourage our partners to be as creative/innovative as possible and extend the play experience where appropriate within the parameters of the brand.
What features and bells and whistles do you hope game developers will take advantage of as they translate your brands into digital media?
Turner: In a word, “community.” In the changing landscape of new media, what’s clear is that sociability is key. Players all want to interact with brands and with each other as they do so. The value of community and peer recommendation in casual gaming should not be underestimated.
Eisenstein: We’d like to see the unique features in each hardware platform cleverly taken advantage of to create new patterns of play. For example, the Wii and DS both have great gesture oriented input devices. The PS3 six-axis controller also presents a real opportunity for input innovation as well. Audio and visual input could be used in many fun new ways. Those input devices are available on many PCs as well as on consoles. The microphone, camera and GPS capabilities on mobile phones present all sorts of compelling possibilities for new ways to play.
What checks and balances do you have in place for both licensor and licensee to make sure your IP receives an excellent digital translation and delights customers?
Eisenstein: We have an experienced team of design and development approval experts within Hasbro that have a proven track record of evaluating play patterns, recognizing design flaws, and keying in on great innovation.
Turner: We have a seasoned creative team and a stream-lined approval process. We have a well-developed style guide for each property, each of which serves as a fantastic compass for our partners to use as they begin development. Having over 400 brands throughout the world, this process is essential. We take a cradle-to-grave approach with each licensee to ensure that our comments, approvals, and suggestions are integral to the game build. We think one of the keys to a successful game is encouraging collaboration between the brand experts and the game development experts.
Once the developer reaches a production milestone—let’s say the first pass of the design of the game—what do you look for and what kind of feedback do you give?
Hoagland: One of our primary goals is to ensure that the design is delivering on the essence of the brand.
Turner: Between a game design document and alpha/beta review the brand authenticity and game-play is revealed. We generally are looking to see where and if any corners were cut, and (ignoring expected bugs) whether the true game-play from the TV show has been translated.
Eisenstein: We’re also looking for features or a set of features that make the game fun and provide a point of differentiation from other games in the genre.
What parts of your organization weigh into each milestone? Which have final approval?
Turner: From a production standpoint, my team takes a first pass at the build to make sure that the translation into a digital product is clean in terms of look-and-feel and game-play. We then hand it over to our creative team who makes creative comments. Along with the creative comments, my team makes the final approval.
Hoagland: Each milestone includes a review and approval by marketing, design and development and the digital creative operations organizations.
Based upon your years of experience with game developers, what are three do’s and don’ts that licensees should know about when they are working with your brands?
Hoagland: Do stay within the parameters of the brand.
Eisenstein: And don’t violate the brand parameters.
Turner: Do’s:
1. Stick to the brand essence and game-play. They are successful, tried-and-true properties for a reason.
2. Think of creative ways to market the properties by activating enthusiasts and working with partners.
3. Have fun.
Don’ts:
1. Don’t do the bare minimum for promotion and marketing. While our properties give our partners a leg up because of the tremendous brand equity and inherent game play, the competitive landscape requires that the properties be marketed consistently.
2. Don’t “completely” rely on our TV talent to sell the game. While this talent can sometimes be helpful in selling the game, the inherent game play and rich history can be the best salesman.
3. Don’t over-price or under-price the product.
After the game is released, what kind of marketing support does the developer get
from you?
Turner: We always encourage cross-promotion between our partners—retail to digital and digital to retail. To the extent we can, we endeavor to offer in-show as well as online promotion for the property. We have a robust database that we can activate and market to on behalf of our partners. Where some content owners may hand over their style guides and wait for their royalty checks, we like to take a hands-on approach in finding creative ways to offer marketing support for our partners.
Hoagland: Cross-marketing with our analog toy and game products is primarily how we support the release of the game. This helps raise awareness of the game in two ways: 1) It creates a link between the toy and the digital game for the consumer; 2) It gets the game outside of its primary distribution channels and allows it to extend beyond traditional aisles within the store.
What final advice would you give to anyone bringing your brands to digital media?
Turner: Activate brands/sponsors to integrate, and activate a community to participate.
Hoagland: Be innovative. The analog version of the brand can be so much more in the digital media.
Jim Eisenstein (jim.eisenstein@casualconnect.org) is currently the Creative Producer Digital Media & Gaming at Hasbro, Inc., including the design, manufacture and marketing of games and toys ranging from traditional to high-tech. Jim has been in the industry for more than 25 years as a game developer, designer, and executive project manager with a focus on casual and mobile games.
Jason Turner (jason.turner@casualconnect.org) is Director of Interactive, Americas, FremantleMedia Licensing Worldwide. In this role, he oversees the on- and off-air interactive activities of FremantleMedia throughout the U.S., including brands such as American Idol, American Inventor, Family Feud and The Price is Right. Mr. Turner is responsible for establishing and generating new business opportunities through licensing and sponsorship while effectively building brands and monetizing those brands for new media.
Kevin Richardson (kevin.richardson@casualconnect.org) is a consultant in the entertainment business. Kevin was the Executive Producer over the ClueFinders series and numerous Reader Rabbit games while at The Learning Company/Mattel Interactive, and spearheaded outbound licensing for books, music, and television on a variety of brands. Before that, Kevin ran the German wing of the European Studio Grouping PALOMA, developing and localizing animated content for the German television market. He has produced over 30 “E” rated games, contributed to five feature films, and overseen animation production at home and abroad.
Mike Cavaretta helped Kevin fact-check the article and is a licensing and videogame lawyer at Boston-area law firm Morse, Barnes-Brown
& Pendleton.
