Kickstopper: Developers need to understand the cost of their projects, or risk alienating the crowdsourced crowd

Kickstarter is at something of a crossroads. Gamers (and developers) have seen the dizzying heights that are possible when crowdsourced funding is invited for projects which capture the marketplace’s imagination. Tim Schafer’s Double Fine project exceeded fundraising goals overnight. Wasteland 2, aiming for $900,000, comfortably raised over $3m before the fundraising deadline. For the right projects, it is clear that Kickstarter (or other crowdsourced fundraising platforms, as they become available) is a viable alternative to traditional methods of financing game development.

However, Kickstarter’s very public successes have increased developer attraction to the platform. And with the increased developer activity, the number of failures and cancellations has increased also. While projects such as Police Warfare being cancelled are not an inherently worrying sign (after all, it is the developers choice whether or not they choose to crowdsource funding), the failure of some projects once their funding objectives are met is a sign that the crowd assumes certain levels of risk when they fund projects through Kickstarter – levels of risk that are not necessarily well understood.

Are some Kickstarter projects looking more and more like bank heists?

I’ve written before about how I expect the projects which will be most successful on Kickstarter will be the projects from developers with a track record of producing fan-favourites. And sure – my prediction is wholly based on the fact that the massive successes that Kickstarter has seen already fit into that category, but there’s a logic that suggests that will continue to be the case. The crowd is, to at least a partial degree, aware that it assumes some risk funding a project at such an early stage. This funding activity is not the same as buying a completed game. The development might fail, either partially or totally, and the crowd is aware of that possibility.

So, projects which give few details about development timeline and scope, having been set up by development teams that the crowd doesn’t recognise (or trust), are unlikely to receive serious attention. Any project set up by someone that the crowd already knows and loves (particularly Tim Schafer) will receive very serious attention indeed. This naturally adjusts crowd-enthusiasm (and therefore levels of funding) for a project to track project-risk, to some degree. We trust Tim Schafer with our money because we have seen him make games before. Really good games. That trust lowers the risk inherent in donation, making the donation more attractive, given the promised returns.

However, what about projects that look great, and then turn out all wrong?

Star Command is such a project. The witty, professional video on the project’s Kickstarter homepage gave the crowd the impression that development for an exciting new space-exploration RPG would be possible for $20k (a small ask, by most games’ standards). However, even having exceeded their funding requirement by c.$16k, the team has run into financial problems, which they have documented on their project page. The developers have admitted (having used the funds generated through Kickstarter) that they were not aware of the costs involved in satisfying the rewards as they had described them to their micro-investors, and were equally unaware of how high their basic operating costs would be.

Star Command have started providing digital rewards, rather than the initially pledged physical ones, because of unexpected levels of cost

Aware of their inexperience, the team has made their expenses very visible to the crowd responsible for their funding, and problems with their operating cost model are apparent to any reader. Although satisfaction of Kickstarter rewards were more expensive than anticipated, after all Kickstarter-related costs are considered the company was left with $22k ($2k more than the investment requested). However, the spending that followed, when itemised, does not suggest a mature project with clearly scoped milestones for development. With $4k being used for basic business start-up costs, registration and accounting, it would be safe to say that the developers, despite having an excellent basis for a game, were not well organised or well prepared to receive funding. While Kickstarters have not criticised Star Command’s development team for “wasting” crowdsourced funds, most of their Kickstarters will probably be surprised by the candid account of inexperience and loss. This project is an example of how apparently “low risk” projects can be marred by inexperience, and how excellent ideas will attract funds, but not necessarily deploy them well.

The crowd is becoming aware of the problem:

An interesting thread has appeared on Reddit (r/gamedev), where readers are discussing the trend towards more speculative Kickstarter projects. Although game developers may be attracted by the Double Fine levels of funding available from the crowd, the growing use of Kickstarter by poorly-scoped or only partially considered projects has not gone unnoticed.

One contributor rightly mentions the natural risk-adjustment process that funders apply to projects, checking them for detail and prototypes, saying “Kickstarters without a prototype or trailer of the prototype and ones without devs with a history of getting things done won’t get invested in”. However, Star Command is a good example of projects that can seem to have prototypes (based on the video screens), and that achieve fundraising objectives by requesting lower amounts from the crowd. However, despite strong game development potential, these projects may not be able to deploy their funds well. In the case of projects like Star Command, the developers simply may not know how much it costs to develop a game commercially.

Kiva offers an example of how microfinance does it differently:

Kiva, the online microfinance portal, takes a slightly different approach to Kickstarter, crowdsourcing small loans for small, charitable projects. It has field partners, which have a more intimate knowledge of potential microfinance beneficiaries in different regions, and can give a more accurate representation of the level of risk taken by Kiva’s small loan providers (the crowd). For “riskier” project, the field partners will make the crowd aware, and loan repayments and defaults are tracked. Kiva make their loans providers much more aware of the levels of risk taken when funding projects than Kickstarter.

Given the creative nature of Kickstarter’s projects, and the long times between funding collection and final product release, it may be less obvious how “repayment” could be tracked, but it does seem that the only information currently available to the crowd of funders is information provided by the projects themselves, leaving the system open to a level of abuse. Kickstarter does not look to provide a level of due diligence from its projects, and no clear breakdown of costs is required (it is only assumed that more detailed project descriptions will increase fundraising chances of success).

Kickstarters must improve business cases, or the platform will suffer:

The discussion taking place at r/gamedev is an indication that funders of Kickstarter projects are becoming aware that the platform is open to abuse, if it is not already being abused by speculative developers with poorly-considered projects.

Without suggesting that fundraising platforms emulate microfinance portals (after all, Kickstarter is a platform for donations, not investment), important questions are being raised about the accountability of developers, which warrant a considered answer. One could imagine a Kickstarter-like platform with a higher barrier-to-entry for a project (a clearer business plan or cost-breakdown requirement perhaps), or with higher accountability requirements once project fundraising objectives have been met (to protect funders from being left out in the cold).

Until Kickstarter (or similar platforms) are able to provide a higher level of funder protection (either before or after the project receives funds – ideally both), worthy projects may struggle to raise funds from risk-conscious funders, as people avoid “getting burnt”. The failure of speculative, weak projects will likely exaggerate this trend.

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