Business Transactions

Indie Video Game Developers Earn Through Licensing Deals

Traditionally, the video game industry has been comprised of large companies like Electronic Arts, Microsoft, and  Nintendo selling their multi-million dollar budgeted, blockbuster titles directly to consumers. The industry now includes more web-based, lower-budget, independent games which find sponsors and audiences through websites like Flashgamelicense.com, Kongregate, and Addicting Games.

The Wall Street Journal recently carried an article on the trend, "Notes From the Underground: Indie Videogames Come of Age", written by Christopher Lawton. Lawton's article includes an estimate of the independent video game market or casual game market being at $1 billion when you factor in revenue from advertising, downloads, and subscription fees.

The trend spawns a growth in transactions in which independent developers earn income by licensing their games to intermediaries and/or by sharing in advertising and premium sale revenue with those intermediaries. As a business and intellectual property attorney who has worked on many licensing deals, I offer some issues about revenue-sharing, representations, and exclusivity for the consideration of those negotiating such video game licensing transactions

Some Initial Tips for Selling a Business

Here are just three initial tips for business people considering selling their company:

• If your company is organized as a corporation or limited liability company, make sure that your organizational documents are up-to-date. You will have to represent that they are as part of the sale.

• If your business includes valuable copyrights, trademarks, and other intellectual property, make sure you actually own that intellectual property and are authorized to transfer it to the seller.

• Begin the deal with a term sheet . A term sheet is a document of a few pages that outlines the key elements of your deal. Think of it as a road map to closing. By completing a term sheet, the buyer and seller confirm that a deal is possible before they expend time and resources on the negotiation of a much longer purchase agreement.

An Introduction to Joint Ventures and Strategic Alliances

For some, a joint venture or strategic alliance may sound like the territory of a Fortune 500 company. In truth, your venture or alliance might be as straightforward as collaborating with a colleague on a software application, teaming up with another company on a marketing campaign, or licensing a product you've developed.

The terms joint venture and strategic alliance are often used interchangeably but there are some distinctions between the two. Here are formal definitions of  “ joint venture” and “strategic alliance”.

Steps in a Business Transaction. Part Six. Closing and Ancillary Documents.

This is Part Six in a series discussing steps in a business transaction.  In this part, I’ll discuss closing and ancillary documents.

For simple transactions, the “closing” simply consists of the parties signing the final version of the definitive agreement and making any payments due upon signing. For more complicated transactions, signing of a definitive agreement sets forth all the steps that are to occur prior to the closing. 

Steps in a Business Transaction. Part Five. Due Diligence Review.

This is Part Five in a series discussing steps in a business transaction. In this part, I’ll discuss the due diligence review. In short, a due diligence review is your chance to make sure that you are receiving in the transaction that for which you have bargained.

The scope of the review depends upon the transaction. If you are spending a few million dollars to purchase or invest in a company, you will do a more thorough due diligence review than if you are entering a licensing agreement that can be terminated with thirty days notice.

Steps in a Business Transaction. Part Four. Regulatory or Third Party Approval.

This is Part Four in a series discussing steps in a business transaction. In Parts One, Two, and Three, I discussed term sheets, definitive agreements, and financing. In this part, I’ll discuss regulatory and third party approvals.

Steps in a Business Transaction. Part Three. Financing.

This is Part Three in a series discussing steps in a business transaction. In Parts One and Two, I discussed term sheets and definitive agreements. In this part, I’ll discuss financing considerations.

There are several methods of financing. Having the money required to complete the transaction available in your company or personal account certainly simplifies matters from a legal and paperwork point of view. However, there may be good business reasons that you want to use other sources of money for your transaction.

Other forms of financing include, private investor financing, venture capital financing, bank financing, and seller financing. These are the forms of financing most commonly used by my clients; however, the list is not exhaustive. Each method offers pros and cons.

Steps in a Business Transaction. Part Two. Definitive or Long-Form Agreements.

This is Part Two in a series discussing steps in a business transaction. In Part One, I discussed term sheets, also sometimes referred to as letters of intent or deal memoranda. In this part, I’ll discuss preparation of the definitive agreement for your transaction.

Steps in a Business Transaction. Part One. Term Sheets.

In this blog series, I’ll discuss the steps in a business transaction. Of course, the steps in any particular transaction will depend on its objectives and complexity. Buying a company, licensing technology, financing your business, merging with another business, or partnering with another company for a project are all business transactions; however, each may not require all the steps I’ll discuss in this series.

Hence, my comments are general. Let’s start with term sheets.