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As noted by all seasoned professionals in the sector, the preparation of a video game is a crucial step and a determining factor in the project’s success. Beyond its artistic and innovative aspects, defining the technical concept and its commercial exploitation are mandatory elements for structuring and financing its development.
Updated September 2024. In its report “Expenditure Review: Support for Businesses,” the French Inspectorate General of Finance recently proposed the elimination of the tax credit for video game development companies. In place since 2008, the scheme offered a tax credit rate of 30% of the production costs of a new video game, subject in particular to development costs exceeding €100,000, for exploitation near publication by a majority French entity that has received dual CNC approval.
Noting the lack of evaluation of the effectiveness of this measure, the General Inspectorate of Finance recommends its abolition, which would represent a saving of 40 million euros annually.
Video Games & Rights: Legal Issues
All of these issues have legal implications, including:
The legal framework for video games and their regulatory obligations. Legally considered a “complex work,” its legal framework varies depending on the elements constituting the video game: computer code, stories, music, sounds & voices, gameplay and design, etc.
All of these elements have intellectual property implications.
Handling a considerable amount of data, video games are now required to comply with personal data protection and GDPR regulations.
The contractual framework related to the development and subsequent operation of the game (EULAs) – particularly when creators use third parties – involves the assignment of copyright or video game publishing and distribution agreements.
Licensing and distribution agreements must be carefully drafted to protect the studio’s interests and ensure optimal operation of the game on the various existing platforms – Steam, PlayStation Store, etc.
The commercial exploitation of video games through the definition of their economic model is a key element of the project. Depending on whether creators have planned compensation systems based on the creation of new content (DLC), free and/or paid offerings (Freemium, Pay-to-Win, NFTs, and in-game items), skin gambling, and loot boxes, creators will be more or less constrained by specific legislation vis-à-vis players and authorities.
Developers must also navigate the regulations specific to each market, particularly regarding sensitive content and monetization practices. Proper legal preparation helps minimize risks and maximize the game’s chances of commercial success.
Find all of our presentations on the legal issues related to video games, as well as our dedicated guides.
Structuring & costs of a video game
Furthermore, budget planning and fundraising are also essential to ensure that the project has the necessary resources to move forward without interruption.
Producing a video game involves a number of expenses and costs that must be anticipated by the studio before its launch and throughout the entire creative process.
- In pre-production, market research related to the project, analysis of competing products, and even the development of concepts, prototypes, and POCs;
- During game development, compensation of developers, artists, designers, and other participants according to their status—freelance, employees, or partners; obtaining licenses related to the video game engines—Unreal Engine, Unity for the main ones—and other software used, computer hardware, etc.
- Putting the game into production and preparing for its release raise issues related to testing and bug fixing, translating and adapting the game for the target markets, advertising and marketing campaigns, as well as physical and digital distribution costs – Steam, PlayStation Store, etc.
- Subsequent support and maintenance costs via updates, bug fixes and customer support, or even game additions – DLC, mods, organizing esports events, etc.
- Finally, legal and administrative costs related to intellectual property protection, contractual framework, business management, accounting, etc.
Funding the creation of a video game
Depending on the size and ambition of the project, developing a video game requires significant funding to cover all costs associated with the production and launch of the video game. Project leaders can consider several options to contribute to this funding:
Fonds propres, Love Money
The primary source of financing for most companies and startups is the integration of personal funds from the studio’s creators, as well as support from close friends and family.
Crowd Funding. To a lesser extent, the use of crowdfunding systems can be considered, subject to a successful promotional campaign.
Self-financing: Where video game studios have other sources of financing—other previously published titles, other professional activities—self-financing is a particularly convenient way to finance the development of new video games.
For startups, such methods are rarely considered before the game’s release, except for pre-sale campaigns for tokens or in-game items.
While these methods give game creators significant control over the management of their projects, a structured legal framework is necessary to avoid any subsequent litigation, particularly in the event of a game’s launch failure.
Grants: Regions, CNC, BPI
Regional grants from the company’s headquarters and those from the National Center for Cinema and the Moving Image (CNC) constitute non-repayable financial assistance. The CNC offers several programs: Video Game Support Fund, Writing Assistance, and Tax Credit for Video Game Creation Expenses (CIJV) covering 30% of eligible expenses. Regional governments may also offer grants to support local projects.
BPI Grants. The Public Investment Bank (Bpifrance) offers various financing tools for developing companies, including video game studios. A more comprehensive and technical project presentation file is required to obtain various funding in the form of grants for innovation and research, various guarantees, and even certain loans: French Tech Grant, Innovation Grant.
These grants are generally conditional on compliance with various obligations, which may include legal guarantees regarding intellectual property rights, the company’s capital and structure, and the profile of its founders.
Debts and financial loans
Bank loans. The use of such credit solutions varies depending on the size and launch conditions of the project, as banks can be very demanding regarding the guarantees required in return for the loan.
Donor loans. An attractive solution, donor loans are granted to individuals or legal entities with very low or even zero interest rates. They can usefully supplement the cash flow of startups, which are relieved of generally more expensive bank loans.
Fundraising
Fundraising involves approaching private investors or venture capital funds to obtain capital in exchange for shares in the company.
Unlike the previously considered solutions, the integration of investors will be more restrictive for founders, who are governed by the conditions set out in shareholder agreements, with the capital and control of the company being de facto diluted in favor of the new shareholders.
Create a video game – Specialist lawyer: Digital law
Support from lawyers specializing in digital law with dedicated experience in the video game sector constitutes a competitive advantage:
In-depth expertise in the laws and regulations applicable to the video game industry, as well as the experience gained from supporting numerous projects, constitutes an undeniable advantage and accelerator for studios, allowing them to focus on creative development while minimizing legal risks and maximizing commercial opportunities.
Advice on upstream company structuring, management of founders’ rights through their company, and trademark, patent, and intellectual property registrations help prevent potential disputes between partners and secure the studio’s intellectual assets.
Support in drafting and negotiating contracts is essential, covering all contractual documents used throughout the game’s operation: employment and freelance service contracts, collaboration and confidentiality agreements, software licenses, and distribution agreements.
Good contract management is crucial to avoid misunderstandings and conflicts with partners, employees and distributors, especially in an international distribution context.
