Tuesday, September 18, 2012

#39: Kickstarter and the Risks Behind It

Many of the people who watch the gaming industry look at the trends and patterns of it and foresee many problems plaguing it going forward. The stock prices and profit margins for the biggest publishers in the industry are doing very poorly. AAA gaming is given ridiculous and unnecessarily high budgets that transform mild successes in terms of units sold into amazing failures in terms of profit. Lastly, a lot of the innovative elements of the industry feel stifled by the increasing oppressive environment fueled (knowingly or otherwise) by large publishers. Many great ideas and developers have had difficulty getting funding in this climate for a variety of reasons like niche appeal and risky ambition. People were getting fed up. And then something interesting happened. Double Fine studios, headed by Tim Schafer, decided to make a bold and up-until-then unheard of move: They decided to use Kickstarter to crowd-fund the studio's next project, allowing them to make the game of their dreams free of the influence of publishers. It made headlines and became very successful. This inspired other developers to place their own ideas on Kickstarter, including projects like Wasteland 2 and Ouya. Kickstarter campaigns have once again reached the headlines with Obsidian's Project Eternity.

For those of you who do not follow the industry, allow me to explain the gist of Kickstarter and crowd-funding. Kickstarter is a website that allows people to post their ideas for “creative projects” in the hopes that people will take interest in it and donate money towards funding the project. (Note: This does apply exclusively to video games. It can be any creative project that has a definite end goal and results in the creation of something.) When a project is posted, the poster sets a goal for the amount of money received through donors and the time allotted to reach this goal, usually within the span of one month. During this time, people pledge money to the project. While the money never changes hands until the very end, backers promise, as specified in the Terms of Service, to keep enough money in their account to cover their pledge. At the end of the time period, if the money pledged to the project meets or exceeds the goal posted at the beginning, then the project poster takes the money, after Kickstarter deducts its fee for services rendered, and agrees to spend it on completing the project to the best of their abilities in a binding legal contract enforced by Kickstarter's terms. If the project fails, then no money exchanges hands and the project goes unfunded. This means that the project has to set a goal high enough to theoretically cover the estimated costs of the project, but low enough to avoid falling short of its goals, providing an interesting competitive dynamic. For those with a creative mind, the concept of crowd funding can be extremely useful. Naturally, it would make sense to extend this to video game development, since it too is a creative endeavor. However, there are some unfortunate realities that we need to accept with Kickstarter.

The first thing we need to accept with Kickstarter is that successfully generating enough funds through the site is more difficult than most people would be led to believe. A successful Kickstarter campaign needs to be able to generate enough buzz and publicity to attract potential funders. This is easier said than done. The project in question would need to set itself apart from other projects by providing a unique gimmick, an interesting concept, or a pedigree that other projects would lack. We have seen this more than once. The Kickstarters that are most well known are from established developers and gaming personalities. Think of the campaigns I listed at the beginning of this article. Out of the four of them, three came from highly established brands and/or names in the industry. The last one, Ouya, was from a less established industry veteran and had the good fortune to be one of the gaming press's darlings. All of them had a bigger claim to fame than most Kickstarter campaigns have and thus attracted a larger crowd, meaning they did not have to worry about the second half of the equation. They had enough publicity and reputation to gain funding. Should another campaign come along that attracts enough people, they need to then convince those people to agree to part with their money in the name of funding a project. To do that, they need to be convinced that the campaigner and their team have the ability to actually create the game. Writing up a design document alone will no longer cut it here. It would be necessary to have a working model of the game and either a gameplay footage reel or, preferably, a demo version available for play. Funding and/or time would be essential in making this a reality, so a layman making a game from start to finish using only Kickstarter funding is highly impractical. All of this combined results in less than half of all gaming related Kickstarter campaigns earning enough to reach their goal. (Note: That statistic includes tabletop games as well as video games.)

Though that still leaves a number of campaigns that achieve the goal and get successfully funded. You may be tempted to believe that because they received money, they now have to build the game. There is a bit of a problem with that though, which leads me to my next point: We have no guarantee that a Kickstarter campaign intended to make a video game will actually result in the creation of a video game. Before anybody of my readers panic, let me make this perfectly clear, by the terms of service put forth by the folks that run Kickstarter, which all of the users agree to, all of the funding for a Kickstarter project MUST go towards that project. The person/company who ran the campaign will be held legally responsible if they take the money and instead go on a vacation in the Bahamas or do anything else with it that could not realistically benefit the project. In that sense, the contributors can feel secure in their investment. However, just like with investors and stock owners of major corporations, Kickstarter campaign donors are not guaranteed a return of investment: There is always a risk involved. While the money gained does have to go towards the project outlined on Kickstarter, they are not obligated to succeed and create what was specified. There are very good reasons (legal, practical, and moral) to not hold them responsible for the success of the project, but it is an important thing to make note of. Unlike AAA publishers who have the authority and responsibility to check-up on the project and oversee its development, possibly firing and directing staff on the project (for better or worse), Kickstarter donors have no form of oversight unless the campaigner chooses to give them one, thus the gamble is significantly higher. They are going on blind faith that the creator has the skill, knowledge, and time to complete the project. It is not a deal-breaker as donors acknowledge that they will make no profit beyond the rewards specified by campaigners and contributions are rarely high enough to cause people to worry if they made the right decision, but it is something we need to acknowledge regarding the crowd-funding model.

The last thing I wanted to point out with the trend of Kickstarter funding is that not every game would work as a Kickstarter campaign. In fact, the games that would potentially benefit from this method of acquiring funds cover a very narrow spectrum. An ideal Kickstarter game would have a budget out of reach for most people and small, start-up companies normally. However, they cannot be too big or they would never be able to acquire enough funding. This would mostly cover games along the lines of indie games, two-dimensional platformers, isometric Role Playing Games, and others along those lines. Games like that would only require a couple of thousands to one or two million dollars in funding. While many people would scoff at me for saying “only a few million dollars,” keep in mind that most games in the AAA market cost several tens of millions dollars or more. Even in the PS2 era, some games cost around ten million dollars or more to produce. Getting that much money through a Kickstarter would be next to, if not outright, impossible. The only semi-reliable way to acquire that kind of cash is through the financial backing of large publishers like Ubisoft or EA. Rarely do we see a group of people or a business that has the savviness to remain independent while funding and making consistently good games. It is much more difficult than it sounds, which is why publishers are still around. As much as we dislike companies like Activision and EA, they do serve a purpose. I feel like this is common sense to a degree, yet I do find that people on the internet sometimes seem to forget this simple fact.

I applaud this use of Kickstarter to begin funding projects that might not otherwise see the light of day. However, we do have to acknowledge the limitations of crowd-funding. Our industry is one that is fundamentally fueled by high-risk, high-reward investments that consume tons of money. While we can debate the necessity of AAA budgets being as high as they are (I am very outspoken in my own opposition), they are a thing in this industry and fuel many of the gameplay advancements we have seen. Until a decent conversation can be had about the fundamental nature of the industry, such as it is, Kickstarter will be far from feasible as a suitable alternative to the current business model. Even after we reevaluate AAA gaming (considering the state of the industry, it is inevitable that somebody comes in and changes how it gets run), I remain unconvinced that Kickstarter could do very much beyond small start-up projects. It would simply require far more money trading hands than would be feasible through crowd-funding. So while I do praise this wave of innovation, I urge you to remain level headed regarding the use of Kickstarter and realize that it is not the great new way to fund video games that many people make it out to be.


Jarenth said...

First, some spelling errors: you have a 'comapny' and a 'deal-braker'. Because I care, that's why.

This might be because of our differing Internet circles, but I haven't really seen many people claim that Kickstarter is now the end-all of video game development. I wouldn't be surprised if they exist, though, but for the most part people seem to be remarkably level-headed about the whole thing.

Similarly, I don't know many people who'd willingly claim that the supermassive AAA companies like EA and Activision have no place in the gaming landscape. The principle reason people rail against these companies is because they seem to be really bad at what they're doing.

Jarenth said...

Also, I loathe Blogspot's commenting system. This is largely unrelated to the matter at hand, though.

newdarkcloud said...

Can't believe I missed those errors. Thanks, Jarenth.

You'd be surprised at what people say on the internet.

Unknown said...

I believe that the video game success rate is actually lower than 43%, Kickstarter recently released figures that separated the categories. Video Games bring in more money, but tabletop games are more likely to succeed. I guess it comes from different funding goals. It is cheaper to make a small run board/card game than it is to make a video game.

newdarkcloud said...

That's pretty interesting. I knew the fact that tabletop games were included would skew the results, but I had no idea to which way. It makes sense. A board game takes less to develop as there is nothing to program and you don't need to make sure there are no glitches.

Aldowyn said...

Also envirnoment, fundmentally.. fundmental... You need an editor, apparently. Your word processor hates you.

ANYWAY. I'm pretty sure "most" games don't cost "several hundred million dollars or more". That link said $40 million for ME3, and TOR, which was specifically said to be ludicrously expensive, was about $300 million. Tens of millions is probably more accurate for most games. Don't get me wrong, that's still a ton, but several hundred million is exaggerating a bit.

Kickstarter works as a way to fund games that publishers don't want to, either because they're too small, unlikely to be a smash hit, or whatever. Anything significantly bigger than the current Project Eternity is... unlikely to get funded. That said, it's a good way for small-to-medium games to get the money to get made. Indie games that need a bit more money that most, especially from companies with a success story or two, are probably the most likely candidates. And things from people like Tim Schafer and Obsidian are pretty much guaranteed to succeed...

newdarkcloud said...

Updated to reflect what I meant to say! :(
Do you know of another good, free Word Processor? This is getting old.

Edited. You're right, I just pulled from the wrong data.

Vellan said...

Good article, thanks.

However, I'm not sure that I agree that AAA budgets (and by extension AAA games)"fuel many...gameplay advancements". It seems to me that new and interesting things are tried by indie games first - and if they work, the concepts are used in mainstream games (eg: Narbacular Drop became Portal).

I normally associate AAA titles with playing it safe, not innovation.

newdarkcloud said...

I can see what you mean by playing it safe, but we've also gained tons of new and creative ideas from the AAA space that Indies wouldn't be able to.

Stuff like Mirror's Edge, Assassin's Creed, LA Noire, and the like would only be possible through AAA. It definitely has more than it's fair share of safe bets and clones, but there is at least some degree of innovation coming from there.