The Curse of the NDA
‘Terms of the Deal were Not Disclosed’ is a phrase we hear a great deal in the games industry. But who benefits from the NDA? Is it akin to the old Hollywood studio system that sought to limit the earning power of creatives? Dan Lee Rogers, an agent with ISM, offers a fascinating insight…
In many ways the videogame industry can be compared to the Marrakech bazaar. After all, we have our share of snake charmers, love-potion vendors, software herbalists and fortune-tellers.
On the other hand, there’s a noteworthy difference between how we conduct business and the way a Marrakech vendor sells goods and services from his souk, openly negotiating with customers.
Videogame haggling is done privately, under the constraint of non-disclosure agreements that hang ominously over the industry, threatening to rain legal mayhem on anyone reckless enough to speak openly of their latest deal.
moscallout “We just signed a major contract with a publisher whose name starts with E and ends with A. The budget is confidential, so just imagine what Justin Timberlake bought his Hollywood Hills home for last year and then multiply by two.” /moscallout
As a result, videogame professionals have developed an ineffective wink-and-nod argot that tempts insiders with slightly out-of-reach facts. For example, if a game developer wants to tell you about their latest publishing agreement, it often comes out sounding like this: “We just signed a major contract with a publisher whose name starts with E and ends with A. The budget is confidential, so just imagine what Justin Timberlake bought his Hollywood Hills home for last year and then multiply by two.”
While information like this may be intoxicating, it is of little practical use. Furthermore, it undoubtedly breaches a non-disclosure agreement anyway.
Admittedly, there are important reasons to keep the details of a videogame deal confidential, but it comes at a cost. For a publisher, knowing with certainty how much a developer was paid for their last deal would be invaluable in determining how much they should be paid for their next. Knowing the specific terms of Electronic Art’s Harry Potter licensing agreement, and being able to talk about it openly, could help THQ in its next discussion with the World Wrestling Federation or Activision’s next movie-license negotiation.
For videogame talent, non-disclosure agreements prevent them from negotiating their compensation based on what their competitors are earning, which in turn keeps them from arguing their value based on market demand. Their earning potential is thus constrained by what they have learned from their past deals and the rumors they pick up on the street. That’s not exactly prime negotiating power, especially when millions of dollars are at stake.