A Question About Kickstarter.

I was having an argument with a friend over the recent rash of Kickstarter-funded games. He thought that the business model sucked; instead of making the game, selling the game, and then making a second game on the profit from the first game, Kickstarter games are sucking up the profit on the first game to make the first game. Worse,all of the money donated to a Kickstarter game has to be used to develop that game, and that game only. If the game makes several times more than the developer’s original estimate they have to plough the extra cash back into the game instead of keeping some back to see them through the lean times in between releases. His argument was that this just wasn’t a sustainable business model, and that this current fad for Kickstarter funding will burn itself out once people see that it only gets you that one game.

My counterpoint was that not everyone who is going to buy the game is going to donate to the Kickstarter. Donations are going to come from people who are really invested in that kind of game or that game’s pedigree since it’s not even like preordering a game from Amazon; you have no guarantee that the product will be made, that it will turn out anything like the developers say it will, or even that they’ll hit even their most optimistic release deadline of nine months to a year away. Those factors are going to put a lot of people off, and so the potential market for these games are much larger than the pool of Kickstarter donors, especially once you add in factors like Steam Daily Deals. I’m no expert on the economics of videogame retail, but I definitely think that they can make at least as much money as they get in funding from additional sales after release, especially if the game is good and word of mouth gets around.

Anyway, I’m interested in getting some additional opinions on this one. What do you think is the likely future of the crowdfunded development trend?


21 thoughts on “A Question About Kickstarter.

  1. Smurf says:

    I somewhat agreed with whoever wrote that article on RPS recently about Kickstater being used to fund games that publishers don’t want to take a risk on.

    “If the game makes several times more than the developer’s original estimate they have to plough the extra cash back into the game instead of keeping some back to see them through the lean times in between releases.”

    Two points here. Is this actually the case? Is there any legal requirement for the company to spend all kickstater money on the game in question? The Kick It Back project suggests no, that the company can do whatever the hell they want with the money.
    Secondly I don’t actually see projects being over funded as an issue. I don’t see companies thinking they’re going to get 100% of the funding required through kickstater so they maybe plan to set the kickstater goal at 80% of what they need and then get the other 20% from investors and existing capital. If the kickstater makes more money then that’s just less money they need to get from investors or that they need to raid from their back account. Also, although £3 million might seem like a lot to us but it’s pennies in terms of game development. I don’t think any developer is ever going to have the problem of making too much money from kickstater. All it means (as we’ve seen) is that they can add in additional platforms and art and story and everything else. An over funded kickstater just means that developers are more likely to be able to make the game they WANT rather than the game they’re FORCED to make by smaller funding.

    I don’t see the issue of this ‘reverse funding model’. Kickstater is essentially an expanded pre-order. As you said, not everyone that wants the game is going to put money into the kickstater. Like me. There are a few games I’m interested in but I’m not putting any money down until there’s a product and reviews.

    I really don’t see the issue with using the funding from the first game to make the first game. You want to make a second game? Use the profits you make from selling copies to non-kickstarters, get more investor funding because you have a track record and then put up another kickstater which people will donate to if your first game was any good. Most of the minimums you have to put in to get a ‘free’ copy of the game in question so it goes back to treating it like a pre-order.

    • hentzau says:

      I think the “They can only use the money for the game” is more a case of: while they don’t *have* to use all the money for the game, while they could spend the bare mininum on the game and use all the rest of the donations to fund a weekend in Vegas, there are some very rich nerds giving money to these games and doing that would open the developer up to the kind of legal nightmare that no small company really wants to deal with. People donate money on the understanding that it will be used to fund the project described by the Kickstarter. If it isn’t then things could get painful for the developers even though there’s nothing contractually binding.

      • Smurf says:

        Well yes, I didn’t mean to that extreme. I think if at the end of the project they had enough left over to pay the wages of their staff for an extra 6 months or something while they started another project, then I don’t think anybody would have much to complain about.

  2. innokenti says:

    As someone said, it’s patronage-based. There’s no reason that we need to stick to the expected rules of how any kind of funding works. Kickstarter allows a sort of collective patronage of something and it’s not quite the relationship of patron and craftsman, but near enough.

    Nothing wrong with that, and all the better for being an offer from the creator and support from more than one person interested in it.

    So the Kickstarter gets you the one game? Might be a bit of a problem if that’s how you did everything, but if it’s just one of the sources of funding that you use to make games, that’s probably going to work out okay. And any /profits/ you make from the game can go into the capital of working on something new or whatever.

    • hentzau says:

      It’s definitely more like funding the arts than it is buying a game, but I wonder what will happen when people *realise* that.

      • innokenti says:

        Well, hopefully anyone who listens to the Rum Doings podcast will have already realised that, given that Nick and John have harped on about that point an awful lot.

        As for the rest… I guess it would be nice if Kickstarter itself did a little more to enthuse on that point. Their “Learn More” is a little bit too brief perhaps and I don’t think they’ve really delved into it much in their blog. Or really shouted it at all.

        I suppose that’s not really a problem, but it’s possibly something they need to do in response to this games influx.

  3. Smurf says:

    I am disappointed with the lack of discussion this generated.

  4. hentzau says:

    I think what we’re homing in here given Smurf + Kenti’s points is that Kickstarter is an excellent way for a small established development company to make a game that wouldn’t get funding otherwise — if the company can make that game then that’s great, but if they can’t it’s not like they don’t have other things they can do. They are not a way for you to get started in the games industry with little risk; games like FTL are going to be the exception rather than the rule.

    • Smurf says:

      Absolutely. Kickstarter is very much going to be “Oh hey! Soandso is making a new game!” rather than “That’s an interesting idea, I’d like to play that”. Mainly because there are so many projects on kickstater that you need something to stand above all the dross. I don’t think people go to kickstater to search for something to fund, they go there because they’ve heard of a project they want to give money to and go straight to its page. I wonder how many of them stay on the website and look at other projects after that?

      I don’t think that should put new startups off from trying a kickstarter though. I believe that if you do have a genuinely good idea then you should get enough press coverage to get funded. Of course I’m only looking at this from a game developer point of view. I have no idea if all of this holds true for other medium using kickstater.

  5. g2-79d9f3f806c7b729d68eb34e6079a4d2 says:

    If people gave you money via Kickstarter enough to make your FIRST game and that was successful enough to get a SECOND game, then surely you’d get just as much, if not more (as you are now proven), via Kickstarter the second time around.

    And if you don’t, then it’s probably because your first game sucked.

    • hentzau says:

      You can’t rely on Kickstarter to fund your entire business though, surely. The question is, how can you turn this into a sustainable thing? Can you make enough money from one game to cover the costs of making that game and the majority of the next one?

    • aosher says:

      I think that assumes that Kickstarter isn’t going to be subject to massively diminishing returns as donation fatigue sets in.

  6. aosher says:

    I wonder whether this is significant.

    In short, it’s a smartphone game which explicitly does not include a copy of the game itself at any backing level, on the grounds that:

    The quickest, and basically only path to success, on the Android and iPhone market places is with sales. If we gave the game away, our #1 asset which is our fans, would be gone on day one.

    Kickstarter backers get unique DLC and content, as well as other perks, like t-shirts and suchlike.

    It’s a mobile game, so its target and donations were much lower – they were aiming for $20k, and got $36k, including two backers at the top level of $1k – but it may point to a more sustainable model. The fact that there is an assumption that you get a copy of the game at some level of backing runs a bit contrary to the “patron of the arts” ideal of Kickstarter, and it’s nice to see some flexibility in that.

    • aosher says:

      Formatting balls. Only the first paragraph of that quote is the actual quote ¬_¬

    • hentzau says:

      That’s a different sales environment, though. There are just so many apps clamouring for attention that high sales are directly correlated with how much attention your game will recieve, and developers can’t afford to ignore that. By contrast you can still showcase your game on PC with a Steam Daily Deal, ensuring it gets both attention and sales after release.

      • aosher says:

        So are you saying that a kickstarter that didn’t include a free copy of the game a an option wouldn’t get traction?

        If you look outside of the games section of kickstarter, I would say that it is, at least, common for support to not necessitate a version of the product. While I accept that every market is different, isn’t it self-defeating to assume that the games market is resistant to that as a model?

      • hentzau says:

        It would get less traction. There’s plenty of people who are using Kickstarter the way it is intended — as a way to donate, not to preorder — but if we assume everyone paying the minimum amount is doing so in order to get a copy of the game, you’re looking at donations being cut by a third to a half.

      • aosher says:

        Donations being cut by a third to a half sounds like bringing it in to a more sustainable average, to be honest.

    • innokenti says:

      I think it depends on how it was all framed. E.g. if you had a selection of low-level funding options with moderately attractive bonuses and the expectation that the game would come out at say £15… I don’t think I’d have too much of a problem kickstarting projects I would be keen on.

      On the other hand if you were just asking of the funding and expecting the finished product to debut at £30… well… erm… go somewhere else please?

      In this specific case I think they’ve made a relatively sensible decision because of how popularity and exposure works on the iOS/Android systems. Which is a bit of a shame because the system really is pretty terrible, if perhaps a little better than conventional sales charting. I think it would have been nice to see some entries at 10 and 15 dollars though.

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