When developing a Terminator video game, the ideal scenario is to feature Arnold Schwarzenegger in all his iconic presence. However, that isn't always achievable. So, why is that? The developer behind an upcoming Terminator title has shed some light on the matter.
Terminator 2D: No Fate, scheduled for release this September, is a retro-style game inspired by the 1991 action classic Terminator 2: Judgment Day. It includes key characters from the film, including John and Sarah Connor, the T-1000, and the T-800. Watch the video below for gameplay footage and developer insights from Bitmap Bureau.
Although Terminator 2D: No Fate does include the T-1000 and the T-800, it does not use Arnold Schwarzenegger's likeness. In a conversation with IGN, publisher Reef Entertainment explained the reasoning and gave insight into how licensing typically works for video games.
Reef, having obtained the Terminator 2 license, has permission to use characters from the film such as Sarah and John Connor. In addition, they hold image rights for certain actors who granted those rights to Studio Canal—the owner of the first two Terminator films—as part of the overall arrangement.
Still, the right to depict the Terminator does not include the right to use Schwarzenegger's appearance. This is why Terminator 2D: No Fate uses the endoskeleton design for its character art, rather than Arnie's likeness.

Moreover, Reef contacted Michael Edwards, the actor who portrayed General John Connor in the memorable opening of Terminator 2, to secure his likeness rights for the game. Terminator 2D: No Fate includes a gameplay segment where players take control of John Connor during the future war, expanding the brief opening scene from the movie into a complete game section.
Though Edwards appears for only a few seconds in the film, his scarred face and determined gaze left a lasting impression, conveying the heavy toll of humanity's war against the machines. Reef negotiated separately with the 80-year-old actor to include his likeness.
(In 2021, Edwards returned to the role of John Connor for a fan-made Terminator movie titled Skynet.)

In summary: acquiring the Terminator 2 license and permission to use its characters is different from obtaining an actor's likeness, which requires a separate agreement.
This does not mean it's impossible to feature Arnie's likeness in video games. For example, Mortal Kombat developer NetherRealm has achieved it several times, most recently for the Conan the Barbarian DLC in Mortal Kombat 1. They also secured his likeness for the Terminator T-800 DLC in Mortal Kombat 11. However, the scale of a project like Terminator 2D: No Fate is far smaller than that of the Warner Bros.-supported Mortal Kombat franchise.
It's also worth noting that while NetherRealm used Arnie's likeness, the voice work was performed by soundalike actor Chris Cox. It appears the 77-year-old Schwarzenegger is not currently pursuing voice acting roles for games.
Here is the full statement from Reef Entertainment to IGN regarding the licensing process:
Arnold Schwarzenegger isn't in the game it’s just a T800. We didn't have his license, unfortunately. But for the rest, you have to ask each actor individually to use his portrait.
What we have is the right to use the characters. So like Sarah, John, T1000, T800, and then certain actors will also provide image rights to Studio Canal, which is included in the agreement. For example; Linda Hamilton is Sarah Connor, which is why you can see Linda at the beginning of the trailer. Whereas our right to use the Terminator itself, it doesn't include Arnold. When you see the character artwork for that, you'll see it's like the Terminator itself rather than Arnold. It's basically the endoskeleton that we have the right to use.
Michael Edwards played the future war version of John in the opening of T2. You see him, he lowers his binoculars, he's looking over the battlefield. Someone like that, we reached out separately to him to include his likeness. There's a definite difference between signing the T2 license and having the agreement to use the characters compared to the actor's likeness, which is separate.