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How long before the Kickstarter bubble bursts?

By on May 8, 2012

This article is cross-posted with permission from a regular series of posts Nicholas is writing for Gamasutra.


Image shared on a CC license by Jeff Kubina

2012 has seen an unprecedented level of euphoria over crowdfunding sites. Regular readers of Gamasutra will know that Double Fine raised $3,335,265 in a record-breaking campaign to produce a game about which purchasers knew very little, except that it would be a point-and-click adventure created by two of the doyens of that industry: Tim Schafer and Ron Gilbert. Then InXile CEO and Interplay founder Brian Fargo followed the example, raising $2.9m to fund a sequel to 1988 game Wasteland.

Not only have two games that traditional publishers wouldn’t touch now been funded by fans, but they appear to have opened the floodgates to other Kickstarter projects. In a recent blog post, Kickstarter said that blockbuster projects draw more people into the crowdfunding ecosystem. Successful, large-scale fund-raisers don’t suck up all the available money; they increase the number of people funding projects, increasing the pool of potential funders for other projects. Kickstarter’s key statistics:

    • In the first two years of Kickstarter, the Video Games category saw pledges of $1,776,372. In the six weeks after the Double Fine project was announced, $2,890,704 was pledged (if you added Double Fine’s amount to that, you get $6,227,075.)
    • Before Double Fine, one video game project had exceeded $100,000. By March 29, 2012, nine projects had.
  • In the month before Double Fine, the Video Games category averaged 629 pledges a week; after (but excluding) Double Fine, that jumped to 9,755 pledges per week.

There are currently 314 projects live on the Video Games Channel on Kickstarter. Several are fully-funded already (like YogVentures). Others never will be (I’ve seen at least two massive open-world sandbox games proposed by people who have never made any games before). The ones I worry about are the ones that combine the two: fully funded projects by wildly-optimistic promoters. That is where the trouble will start.

Only 10% Spend On Development

Independent developer Warballoon raised $36,967 on Kickstarter to fund their iOS game, Star Command. Only they didn’t:

    • $2,000 just didn’t turn up (payments didn’t transfer) and when Amazon and Kickstarter took their fees, Warballoon got $32,000.
    • Prizes cost $10,000! Much more than Warballoon was expecting. (Note to Kickstarters: do your costings carefully, and remember to include postage halfway round the globe.)
    • Then: music ($6,000), legal and accounting fees to set up the business ($4,000), poster art ($2,000), iPads ($1,000), attending PAX East ($3,000)
  • Leaving $6,000 for development. Which was taxed, leaving $4,000.

So out of $36,967, only $4,000 went on development. I’m not picking on Warballoon: I think it is great that they shared their data. More than that, they spent their Kickstarter money on things that cost money (like music and attending events), not on things like coding which doesn’t (it costs their time, which is very valuable but is not cold hard cash).

The Warballoon team had a successful Kickstarter project, raised in the days before Double Fine, but they didn’t raise enough money to make the game if they needed to fund the salaries of everyone involved.

The Molyneux Effect

The second issue I see is what I am terming the “Molyneux effect.” Peter Molyneux is a creative game developer who inspires players and game makers the world over with his thoughts on what the games medium can deliver.

He also makes promises he can’t possibly keep. In the early days of his projects, Peter used to get so excited that he would start thinking about the things he was imagining before the practicalities of technology, time and budget started to cut into his dreams. (That was before the Microsoft machine got its hooks into him. Maybe it will start again now that he is independent again). Fans would then get furious that the grand promises at the start of development did not make it into final release (as thissatirical news piece shows.)

Now imagine that you paid for the game at the start of the process, because you believed in the grand claims, not at the end of the process, once you had a chance to read the reviews and see what is actually in the game. This time, fans will actually have entitlement, not just a sense of entitlement. The Internet will reverberate with their fury.

Can They Deliver?

I am convinced that Tim Schafer and his team at Double Fine know how to deliver a game (mostly) on time and (mostly) on budget. Brian Fargo too. Is that true for all 314 of the current Kickstarter projects?

What about the projects which get started but never finished? If publishers like LucasArts can cancel games that are almost finished or like Codemasters can pay for a game it never saw, what certainty do pledgers have that the game that they have paid for will ever see the light of day?

We Are Still In The Euphoric Phase

We are still in the early days of our Kickstarter relationship, the early days of falling in love. Everything our partner does is wonderful. We gloss over the risks, we ignore the downsides, because the glory of falling in love is everything.

I think we have about six months left of that period. Towards the end of this year, some Kickstarter projects are going to start slipping. Some will see their teams collapse amidst bicker recriminations. Some pledgers are going to start getting very angry.

Don’t get me wrong. I love Kickstarter. I love the way it allows fans to spend as much or as little they want on supporting projects that they love (or think they will). I love the way it gives people with different spending appetites different amounts to spend. I don’t think Kickstarter will replace publishers but it will enable games that appeal to niche (as defined by mega-publishers) audiences to get made and played.

Which is great. Just don’t expect the ride to be smooth from here on in. Listen for the screams.

 

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • https://plus.google.com/112879998616209951634/posts David Barnes

    Micro angel investment is a powerful concept. Kickstarter shows how powerful it could be, but I don’t think it’s got the formula right yet. Too focused on getting projects funded.

    A platform that enabled people to make informed angel investments with small amounts of capital would be world changing.

  • http://www.gamesbrief.com Nicholas Lovell

     Sure, but then it wouldn’t be Kickstarter :-)

    I think we will see some of those things happen. But then fraud, and consumer protection, and miselling will come to haunt it.

    Kickstarter for projects is awesome. In same ways, *more* awesome because there is no possibility of financial return from it.

    There will be other investor style crowdfunding initiatives. I think they will be much tougher to make work