The piece of the action you negotiate usually reflects the techniques and mind-set you apply to the negotiations. Which raises an intriguing question. Top athletes wouldn't think of negotiating a contract without a high-powered agent. Neither would movie stars or big-name writers. As more and more businesspeople clamor for a piece of the action, will "superstar" programmers and product designers start using agents to represent their interests?
It's not as far-fetched as it sounds. In fact, it's already happening. The digital-entertainment business stands halfway between agent-obsessed Hollywood and the represent-yourself worlds of computer hardware and software. Today it is absolutely routine for software developers writing computer games and interactive CD-ROMs to use "cyberagents" to negotiate on their behalf -- usually in return for a 10% cut.
Heidi Sinclair is one such cyberagent. She is a top executive at International Creative Management Inc. (ICM), Hollywood's most powerful talent agency. But Sinclair's roots are in the computer business, not entertainment. Before joining ICM, she was vice president of corporate strategy at Borland International and an executive at Lotus Development. Does she expect to be representing some of the people she used to work with?
"There's been a shift in mentality, and it started in the game community," Sinclair replies. "Programming 'stars' are rising to the surface and beginning to cut deals. This approach can extend very directly into other parts of the digital world, whether it's application software or operating systems -- wherever you find really key players and hot developers."
Cyberagent Stefanie Henning has worked at ICM for four years. She has about 30 clients, including game writers, new-media producers, software programmers, and computer-graphics artists.
"I started representing programmers because they were really frustrated," she says. "They weren't getting any financial participation in the products they were creating. We pulled them out of the big companies and structured more of a 'work-for-hire' environment. Programmers were in such demand that we had lots of leverage in creating back-end participation opportunities for them.
"Now we're in a different stage," she continues. "We're taking individual programmers and building companies out of them. You have a technical director overseeing a group of programmers, and they work on three or four different projects. We try to build participation within each project."
In the world of digital entertainment, a piece of the action seldom involves equity. Rather, the primary currency is royalties tied to the marketplace performance of specific games. For example, one of Henning's clients is a company of 10 programmers called Evolutionary Publishing in Santa Monica. Most of its games cost $2 million to $3 million to develop. It typically receives an upfront programming fee of 10% to 25% of the game total budget, back-end royalties based on sales, and bonus payments for reaching certain volume shipments.
Peter Marx, 32, a founder of Evolutionary Publishing, thinks such deals make perfect sense. "Computers are the one place where someone with a relatively small amount of resources and equipment can develop a program that can change the world," he says. "If that happens, you deserve to be compensated. It's the American way."
But why does Marx need an agent to negotiate for him? "Let's face it," he says, "computer programmers are relatively antisocial creatures. And Hollywood is intimidating. I've always used lawyers on my deals, but Hollywood is different. For programmers like us, it's nice to be able to hide behind an agent."
Stefanie Henning agrees. "It's very hard for people to negotiate good deals for themselves," she says. "An agent serves as an outside 'business affairs' person. It's not like you pay us an hourly fee. We make money only if you make money."
Eric Matson is a member of the Fast company editorial staff. Rusty Weston provided additional research for this article.
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