While most publishers will let a developer retain the intellectual property rights to the game, this does not While most publishers allow a developer to retain the intellectual property rights to the game, this does not automatically mean that the developer is free to create new video games within the same franchise. Many video game publishing agreements include clauses that restrict how future games, such as sequels, prequels, or spin-offs, can be developed or published.
These clauses are often framed as one or more of the following:
- The right of first negotiation
- The right of first refusal
- The right of last refusal
- An exclusivity clause
Terminology varies widely between contracts. A clause titled “right of first refusal” may, in practice, function as a right of first negotiation, depending on how it is drafted. For that reason, developers should always assess the actual obligations in the text, not just the heading.
The right of first negotiation
The right of first negotiation requires the developer to first negotiate with the publisher about any derivative game, such as a sequel, prequel, or spin-off.
The purpose of this negotiation is to assess whether parties can reach a new publishing agreement for the follow-up title. Only if no agreement is reached after this negotiation period may the developer is allowed approach other publishers.
From the publisher’s perspective, this clause protects their investment in building the franchise by giving them priority in discussions about future titles.
Example of the right of first negotiation
Below is an example of a right of first negotiation in a video game publishing agreement which we have seen in practice, so that you can recognise a similar clause in your own draft:
“During the Term, if Developer decides to: (a) further exploit the Game (which includes without limitation sequels, prequels, spin-offs and new editions); and/or (b) develop another game on any platform, it will first provide Publisher with reasonable details of the proposed project including all material financial terms. The parties will then engage in an exclusive negotiation with each other in good faith with respect to discussing Publisher publishing such project for Developer for a period of up to 2 (two) months. If at the end of that period no publishing agreement has been reached by the parties despite their commercially reasonable efforts, Developer will be free to proceed with the proposed project as it sees fit.”
The right of first refusal
The right of first refusal gives the publisher the right to publish a derivative game under predetermined conditions that were already set in the original publishing contract.
Unlike the right of first negotiation, this clause does not allow for a new round of open negotiations. The developer is bound to the previously agreed commercial terms, leaving little to no room to renegotiate.
Example of a right of first refusal clause
Below is an example of a right of first refusal in a video game publishing agreement which we have seen in practice, so that you can recognise a similar clause in your own draft:
“Developer hereby grants Publisher the exclusive right of first refusal to publish any sequel, prequel, spin-off, downloadable content, or other derivative work based on the Game (“Future Game”). The commercial and financial terms for such Future Game shall be substantially identical to those contained in this Agreement, including without limitation the royalty structure, recoupment provisions, and revenue share percentages, unless otherwise agreed in writing. Developer shall notify Publisher in writing prior to offering any Future Game to a third party. If Publisher elects to exercise this right, the parties shall enter into a publishing agreement for the Future Game on the same terms as this Agreement. If Publisher declines or fails to respond within sixty (60) days of Developer’s notice, Developer shall be free to enter into an agreement with another publisher.”
Why rights of first refusal are problematic for developers
Generally, a right of first refusal is not recommended from a developer’s perspective.
When publishing a first title, it is often unclear whether the game will be commercially successful. This uncertainty is reflected in the deal terms. After release, however, the franchise’s commercial value becomes much clearer.
If the first game performs well, the publisher can lock in the sequel on the same (early-stage) terms. If the first game performs poorly, the publisher can simply decline, leaving the developer to find alternative funding. This creates an imbalance where the downside risk lies with the developer, while the upside is limited.
The right of last refusal
The right of last refusal allows the developer to negotiate freely with other publishers. However, once an offer is received, it must be disclosed to the original publisher, who then has the right to match the offer.
If the original publisher matches the terms, the developer is required to sign with them.
Key Differences:
- Compared to first negotiation: The developer may approach other publishers first.
- Compared to first refusal: The deal terms are set by the market rather than predetermined, but the original publisher can still step in.
Example of a right of last refusal clause
Below is an example of a last refusal clause in a video game publishing agreement which we have seen in practice, so that you can recognize a similar clause in your own draft:
“If the Developer receives an offer from a third party to license the publishing and distribution rights to any derivative game, the Developer must promptly notify the Publisher in writing and share all deal terms of that offer. The Publisher then has fourteen (14) days from receipt of the deal terms to decide whether to accept the offer on the same conditions. The Developer may only accept the third-party offer if the Publisher rejects it or fails to respond within the fourteen (14) day period.”
Why rights of last refusal still limit developers
Although less restrictive than a right of first refusal, a right of last refusal still limits the developer’s freedom. Even after securing a better offer, the developer may be forced to continue working with the original publisher.
This can be particularly problematic if the prior collaboration with the publisher was not satisfactory. For that reason, developers should consider negotiationg carve-outs for situations where continuation of the relationship is undesirable.
Exclusivity clause
An exclusivity clause prevents the developer from developing, announcing, or releasing derivative games for a certain period of time.
Why include an exclusivity clause
The rationale behind exclusivity is to ensure that the first game receives sufficient attention. This can be in the best interest of both parties. Announcing a sequel too soon after release can cannibalize sales of the original title.
At the same time, developers need to ensure that exclusivity does not prevent from working on future projects that are essential to the studio’s long-term sustainability.
Example of the exclusivity clause in a publishing agreement
Below is an example of an exclusivity clause in a video game publishing agreement which we have seen in practice, so that you can recognize a similar clause in your own draft:
“Developer agrees that, for a period of twelve (12) months following the initial commercial release of the Game, Developer shall not develop, announce, market, or release any sequel, prequel, spin-off, or other video game that is substantially similar in theme, gameplay, or branding to the Game (“Derivative Game”) without Publisher’s prior written consent.”
Points of attention when negotiating an exclusivity clause
One of the most important safeguards is to remove any prohibition on development of future games. If a new game is not announced or released, it cannot cannibalize sales of the released game.
Any concern that the team must remain available for bug fixes, updates, or DLC is typically already addressed through the Key Personnel clause.
Before you sign: summary and next steps
Future game clauses can significantly limit a studio’s freedom if they’re drafted too broadly. Rights of negotiating, refusal, and exclusivity should protect the publisher’s investment without preventing developers from building sustainable franchises.
Before signing, developers should carefully assess how these clauses affect their ability to negotiate better terms, switch partners, or start new projects. A legal review at this stage can prevent long-term restrictions that are difficult, or impossible, to undo later.
Next up, we’ll look at Consequences of Termination, where many of these clauses come together in ways that can have far-reaching effects.