The board game industry operates heavily through a certain type of legal arrangement called “licensing.” You may have heard the word before, but aren’t 100% sure what it entails.
I’m here to help.
There are three distinct types of licensing arrangements, each serving a unique purpose in bringing games to market.
Whether you’re looking to create a game based on a popular movie franchise, publish an exciting new designer’s work, or bring your successful game to international markets, understanding these licensing structures is crucial for success in the industry.
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IP Licensing – Bringing Popular Brands to the Tabletop
Creating board games based on established entertainment properties represents one of the most complex licensing arrangements in the industry.
These agreements require careful navigation of both creative and legal requirements to ensure the final product satisfies both the brand owner and the target audience.
Platform and Product Specifications
Modern IP licenses under a comprehensive agreement usually specify exactly where and how the licensed property can be used.
This includes traditional retail channels, but also extends to digital marketplaces, websites, third party distributors, direct-to-consumer sales, etc. The rise of digital implementations means publishers must think beyond the physical product when negotiating these rights.
You don’t want to be caught with a severe limitation on your options, if you end up having a hit on your hands!
When defining product specifications, precision matters. A well-crafted agreement clearly outlines what constitutes a licensed product, including base games, expansions, accessories, and digital adaptations.
This prevents future disputes about what falls within the license scope.
Approval Rights and Timeline Management
IP holders typically require strict approval processes to maintain brand consistency.
Standard agreements allow for a 10-14 business-day review period for the IP owner to evaluate and approve, or provide specific feedback on product designs, marketing materials, and any modifications to the original IP.
The approval process works in stages.
First, the publisher submits initial concept materials showing how they plan to use the IP. Once these receive approval, more detailed designs follow. Finally, production samples must meet quality standards before manufacturing can begin.
Missing any of these approval windows can derail production schedules, so successful publishers build adequate time for approvals into their project timelines.
If you’re the “licensee” (the one getting the license and making the product) you will typically want to build in some protections against an unresponsive “licensor” (the one who owns the intellectual property you’re getting).
Some options include:
- Making lack of response in the allotted time period mean approval (licensors hate this)
- Adding a reminder/escalation that puts some time pressure
- Delaying due dates for the same amount of time as the delayed response
Ultimately, it’s all about what you can get the licensor to agree to. They are usually pretty protective of their IP, so getting any kind of auto-approval could be difficult.
Financial Structures in IP Licensing
IP licenses typically command higher royalty rates than other gaming agreements, reflecting the value of established brands.
A standard structure includes both an advance payment and ongoing royalties.
For example, a typical agreement might require a $15,000 advance plus 15% of net receipts. Understanding how these payments work requires diving into the specifics of what constitutes “net receipts.”
The definition of net receipts significantly impacts the actual compensation paid to IP holders. Most agreements allow publishers to deduct specific costs before calculating royalties.
These typically include manufacturing costs, shipping and handling expenses, sales taxes, trade discounts, and marketing expenses.
However, marketing deductions often come with caps – commonly around 15% of gross revenues – to prevent excessive deductions from eating into the IP holder’s compensation.
Other licensors with more valuable brands may insist on their percentage coming off the top, prior to any deductions. Just be careful when reviewing the terms and understand the financial implications of what you’re agreeing to.
Quality Control and Brand Protection
Brand protection is a cornerstone of IP licensing.
For example, publishers licensing IP rights must typically maintain comprehensive insurance coverage, often at least $1 million, to protect against potential claims.
Beyond insurance, quality control extends to every aspect of production. Publishers must submit regular production samples, maintain consistent manufacturing standards, and follow detailed brand guidelines in all marketing materials.
Manufacturing standards often include specific requirements about component quality, safety testing, and packaging durability.
These requirements can significantly impact production costs and timelines, making it crucial for publishers to understand these obligations before signing an agreement.
Designer Licensing Agreements
On the other side of the IP spectrum, very often publishers will license rights to individual game designs from designers (rather than the intellectual property that is overlaid on a game design). These designer agreements form the foundation of the board game industry’s creative pipeline.
These contracts differ significantly from IP licenses, focusing more on fostering ongoing creative partnerships while protecting both the designer’s intellectual property rights and the publisher’s business interests.
Rights and Responsibilities
The core exchange in a designer agreement appears simple: the designer grants the publisher rights to produce and sell their game in exchange for royalties and certain creative protections.
However, the details of this exchange require careful consideration to create successful partnerships.
Initial Deliverables and Development Process
When a designer signs with a publisher, they typically must provide comprehensive game documentation, including complete rules, component lists, and playtest results.
Many agreements also require designers to submit any existing artwork or components, though publishers usually create new art for the final product.
The development process often extends well beyond the initial signing. Good agreements clearly outline expectations for ongoing designer involvement during development, including playtest participation, rules refinement, and consultation on major changes.
Publishers typically maintain final decision-making authority over production and marketing decisions, but successful partnerships involve meaningful designer input throughout the process.
Compensation Structures in Designer Agreements
Designer royalties typically follow a similar model to the IP licenses, though variations exist across the industry.
Most agreements base royalties on either wholesale price or net sales, with rates typically ranging from 5-8% for a newer designer and increasing for designers who have had successful titles in the past.
The choice between wholesale and net sales calculations can significantly impact designer earnings. Wholesale-based royalties offer more predictable calculations but might result in lower payments for direct sales.
Net sales royalties can provide better returns on direct sales but require more complex accounting (because you’re typically required to demonstrate all of the deductions you’ve made in calculating the royalty).
Payment timing matters as much as rate structure.
Most agreements specify quarterly payments, but only after royalties reach a minimum threshold. This threshold helps publishers manage administrative costs while ensuring designers receive meaningful payments (you’re not making quarterly payments for a few dollars – the payments accrue until there’s one worth making).
Advances, while not universal, appear in a decent amount of designer agreements, typically ranging from $500 to $2,000. There is a movement to increase this, but it’s going to depend on the designer’s credentials.
Creative Control and Recognition
While publishers maintain final decision-making authority, designer agreements must balance business needs with creative recognition.
Standard agreements include clear requirements for designer credit on the game box, rules, and in marketing materials. Most publishers provide designers with complimentary copies and allow designers to use the published game in their portfolios and promotional materials.
Digital Rights and Future Development
Modern designer agreements must address digital adaptations and future development rights.
Publishers typically secure rights to create digital versions, but royalty structures often differ for digital sales due to the different sales channels and how those work. In agreements I work on, I typically include specific provisions for digital implementations, with separate royalty calculations for these formats.
Foreign Language Licensing – Expanding Global Reach
Foreign language licensing represents a crucial pathway for publishers to expand their market reach.
These agreements combine elements of both IP and designer licenses while addressing unique challenges of international distribution and cultural adaptation.
In this case, the publisher is now the licensor – the tables have turned!
Manufacturing Models and Payment Structures
Foreign license agreements typically follow one of two manufacturing models.
In one model, the original publisher handles manufacturing, with the licensee paying per-unit costs upfront – often split between signing and manufacturing completion.
This approach ensures quality control but requires significant upfront investment from the licensee.
The other model places manufacturing responsibility with the licensee, who pays ongoing royalties on sales.
This structure reduces upfront costs but requires more extensive quality control measures and often includes minimum guarantee payments to protect the original publisher’s interests. You don’t want another manufacturing handling your licensed game, and not meeting the quality of your original game.
Remember – in any licensing situation, retaining the brand goodwill (even through a licensee) is extremely important. You don’t want your brand tarnished due to some poor quality versions of your game being out there.
Territory and Language Rights Management
Territorial rights in foreign license agreements require precise definition.
Beyond simply listing the countries they can sell in, agreements might address online sales, international shipping policies, and territory overlap with existing licensees.
Language rights often extend beyond simple translation permission – they may include rights to adapt game text for cultural relevance and market preferences.
Translation Quality and Cultural Adaptation
Successful foreign licensing depends heavily on translation quality and cultural sensitivity.
Agreements typically require licensees to submit translations for approval before production begins. This process often reveals needs for cultural adaptation beyond simple language translation.
Rules explanations might need restructuring, and game themes might require adjustment for local sensibilities or laws.
Typically you’re going to trust your licensee to be able to navigate this properly, which is often why you’re doing the licensing in the first place – having to do this for numerous languages and countries is a big job for the average tabletop game publisher.
Contract Implementation and Practical Considerations
Across all three license types, several practical considerations determine success or failure in implementation. Understanding these elements helps all parties navigate the relationship more effectively.
Quality Control and Production Standards
Quality control extends beyond simple manufacturing specifications.
Modern agreements often address things like component quality, safety testing requirements, and environmental sustainability standards. Digital products require additional quality considerations, including platform compatibility, update processes, and customer service and technical support.
The approval process for production samples varies by license type.
IP licenses typically require multiple approval stages, while designer agreements might focus more on functional testing than aesthetic approval.
Foreign licenses often combine both approaches, requiring approval of both physical production and linguistic accuracy/localization quality.
Reporting and Financial Transparency
All three license types require clear reporting structures.
Standard agreements require quarterly sales reports detailing units sold, territories reached, and pricing structures. These reports support royalty calculations and help all parties track market performance.
Audit rights typically allow rights holders to verify reported sales, though practical limitations often restrict audit frequency to once per year and may have a time limitation (once 2 years have passed they can’t audit anymore).
There’s also usually some language where if the underpayment shown by an audit is large enough, the licensee needs to cover the audit costs.
Term Management and Rights Reversion
License terms typically range from a few years for foreign licenses, while designer agreements often extend longer. IP licenses vary significantly based on brand requirements and how strong the brand/licensor is.
It’s all a question of bargaining power and how much the parties can get away with.
All agreements need clear provisions for term extension, rights reversion, and inventory management after termination.
Rights reversion clauses protect creators if publishers fail to maintain active distribution or meet minimum sales requirements. These clauses typically include specific timelines – something like 24-36 months – for initial publication or crowdfunding, and continuous availability requirements thereafter.
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Conclusion
Success in board game licensing requires understanding these distinct agreement types and their practical implications.
Each type serves specific purposes and requires careful attention to different details. Whether you’re a designer seeking publication, a publisher expanding globally, or a brand owner considering tabletop games, knowing these differences helps create more successful partnerships.
Remember that while standard agreements provide starting points, each situation requires careful consideration of specific needs and circumstances.
Working with experienced counsel who understands the board game industry can help ensure agreements protect all parties’ interests while facilitating successful market entry.
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