Licensing & IP Management in the Gaming Industry
Leveraging Licensing Models to Empower Creativity
The year: 1912.
The day: March 20th.
The place: A posh estate deep in the heart of the British countryside.
I had received a rather odd invitation to attend an elegant party by the infamous Alistair Rhodes. The manor was elaborately decorated; the main hall in particular was adorned with a collection of eclectic antiquities that bordered the curious to the downright bizarre. The guests in attendance were an invariable who’s who of high society dressed in their finest attire, the same kind of people whose very presence makes you question if your attendance was a mistake.
It wasn’t until I noticed the 4 other characters whose appearance and demeanor made them stand out in a way that seemed so familiar to me, but I couldn’t quite put my finger on. It was in that moment of searching the archives of my mind that I heard the tapping of a champagne flute and looked up to see Alistair standing just below an ornate black crystal chandelier ready to address the crowd. As he spoke a strange aurora began to emanate from the chandelier, seemingly drawing the partygoers in closer to him with every word, everyone except the 4. It was only when I heard them yell directions to each other did it click in my mind that I knew exactly who each of them were: Kiefer Sutherland, Helena Bonham Carter, Brian Blessed, and Charles Dance…and yet curiously I found that I wanted to eat their brains.
Activision Blizzard has a history of leveraging actors likeness and voiceover skills for their long running successful franchise, Call of Duty. The above narrative is no exception and was inspired by one of their more recent installment of their zombie defense game Call of Duty: Black Ops 4. GameSpot detailed this list of the biggest Hollywood names to appear in and voice video game characters.
Licensing IP for video games, with a combination of licensing content in and licensing content out, is a powerful mechanism for a game publisher to create a competitive advantage for their games and build out new revenue streams. However it is important to have a robust infrastructure for managing the IP licenses and royalties in order to support rather than hinder that innovation.
Within almost every video game there is typically some degree of licensing that can be found. Similar to film production, a lot goes into creating a video game. There are writers, producers, actors, composers, a wide array of developers, and even directors; and each one could be creating something that could ultimately be licensed.
During the E3 2019 conference, Microsoft’s Xbox Division shared a special upcoming game trailer for Cyberpunk 2077. The new game is a great example of licensed content so let’s break it down.
- First there is the game developer or developers. In this example Microsoft licensed the game from the game developer studio CD PROJEKT RED.
- Next there is the ever-popular notion of character likeness. Near the end of the game trailer there is a surprise cameo of an unmistakable digital avatar of famous actor Keanu Reeves speaking to the player. Keanu Reeves’ voiceover and likeness was licensed in for use in the game.
- Music licensing for video games, just like talent likeness and voiceover work, is something heavily used in video games. In the trailer, the music in the background gets louder – that music was licensed in from popular Swedish hardcore punk band “The Refused.” Examples of music licensing can be found in almost all of the EA Sports Madden NFL series, Rockstar’s Grand Theft Auto series, and the Bethesda Softworks Fallout
Game publishers should consider whether they are able to manage the complexity of these different types of agreements from a host of different IP and Trademark holders. With the introduction of new technologies and methods of content monetization, licensing agreements and their subsequent royalty calculations are becoming much more complex. There is a growing demand for accurate and transparent reporting to all parties involved.
Licensing In Game Engines
While things like music, talent likeness, and voiceover are examples of some of the more obvious forms of licensing that can be found within the gaming industry, there are lesser known examples such as game engines. A game engine is development software specifically used to create the multi-layered facets of a video game. Each video game developer studio has a game engine in their arsenal, regardless if the game is a 2D arcade like BANDAI NAMCO Entertainment’s Pac-Man or if it’s a virtual or augmented reality game such as Valve Corporation’s Half-Life: Alyx or Niantic’s Pokémon Go respectively. Game developer studios will license in game engines like the “Unity Engine” from Unity Technologies to help them with things such as rendering, animation, in-game world based physics, character models, and even sound. It’s fair to say that if Ubisoft had licensed a different game engine other than the “Unity Engine” the Assassin’s Creed games would be drastically different from how we know them today.
Licensing in the video game world can be a 2-way street. Things that have been created either wholly original, or through other licensed means, can be sub-licensed out to other gaming companies:
- One example is when Gearbox and 2K Games licensed their Borderlands properties to Epic Games and Warner Bros. Interactive Entertainment to have featured in their popular battle royale game Fortnite. This licensing can and typically does extend beyond one gaming company to another.
- Foam pixelated pickaxes and swords licensed out from Mojang’s openworld crafting based game Minecraft, or character models and action figures of “Guardians” from Bungie’s Destiny franchise are examples of consumer product based licenses.
- Even film and television adaptations such as Netflix’s “The Witcher” or Walt Disney’s “Prince of Persia: The Sands of Time” can be categorized as examples of licensing born out of video games.
- Original compositions for games from Square Enix’s Final Fantasy can be licensed out for live performances by the Los Angeles Philharmonic; and then there is the Grammy-Award winning song “Baba Yetu” originally composed and featured in 2K’s Sid Meier’s Civilization IV was played on America’s Got Talent by the Angel City Chorale.
- Not to mention LEGO and all of their co-branded games coming from licensed characters, such as Star Wars and Batman!
New ways to monetize content such as merchandising, time spent in-game, skins, battle passes, DLC, and microtransactions can be extremely powerful as long as you can effectively manage, validate and calculate the rights and royalties.
Licensing, Streaming and the eSports Movement
The licensing train keeps on going within the world of “Streaming”. Over the last few years there has been a significant increase in streamers on platforms like Twitch, Mixer, and Youtube; each one working towards creating brand recognition in an effort to maximize their licensability. Tyler “Ninja” Blevins is a prime example of a streamer who saw the value in their brand licensing; it became a key sticking point during negotiations that led him to end talks with Amazon’s Twitch streaming platform and join Microsoft’s Mixer platform exclusively.
The Streaming industry, paired with the exploding competitive gaming “eSports” movement are uniquely positioned to capture the attention of casual viewers looking to fill the void due to the suspension of live sporting events. It’s really no wonder the multi-billion dollar juggernaut that is the gaming industry isn’t slowing down – and neither is its licensing.
We discussed how game development and monetization is a 2-way street which means that gaming companies have an interesting challenge. They need to manage all of the licenses flowing in and out of the organization specific to their games, as well as all of the royalty payments and collections flowing in and out – ideally in a unified, comprehensive way. Without effective controls and calculations of the licensing and royalties they stand the chance of stifling creativity which ultimately means stifling revenues.
Companies need to be able to:
- Manage content licensing for music, characters, logos, likeness, animation, and in-game 3D models
- Identify and manage new ways to monetize content such as time spent in-game, skins, battle passes, DLC, and microtransactions
- Ensure compliance with all of the video game licensing agreements
- Calculate accurate royalty revenue from merchandising, content distribution, and OEM activations
- Process millions of transactions monthly, from retail and e-commerce sales, downloads, subscriptions, App Store activations, inbound royalties, etc. to properly calculate royalties owed
- Support existing game libraries with a heavy focus on licensed-in content while simultaneously reinvesting in generating wholly original content that can be leveraged for outbound licensing revenue streams
For more information about how FADEL IPM Suite can empower game publishers to manage and validate the inbound and outbound licensing, and calculate the related royalties, request a no-obligation discovery call.