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Daily Reaction: With Kickstarter Slowing, What Does This Mean for Developers and Publishers?

March 13, 2013 Written by Dan Oravasaari

Crowdfunding has become a growing part of the consumer market, as people are now finding ways to bypass the need for major corporations to push out products. But a recent study has shown that Kickstarter has seen drop in the number of new projects, as well as a decline in the amount people who are willing to invest. What does this mean for crowdfunding as an option for independent game studios, and what does the future hold for publishers around the world? The Daily Reaction crew of Seb and Dan discuss all in their second Q&A special.

Q: Has the hype surrounding crowdfunding, namely Kickstarter, died out as funding drops?

Dan-tanion: Well if you look at the way things usually start off, especially something that has such a long turn around as crowdfunding, it only makes sense that we would eventually see a decline in the number of projects and funding. When Kickstarter first hit the public mind share, it was a new and interesting way to push out products that we might never have a chance to see hit the market, as many products could be considered too niche to go into mass production. Consumers flocked to the growing space, enamored with the ability to not only purchase something, but to invest in its future.

Now, consumers are having to wait for their investments to turn around and become a reality. This gap in time is something that should be expected, as many have already invested in projects, but are waiting to see how those projects are turning out, or they simply have not found something current to invest in. As many people probably invested in a number of projects to simply try the service out, and are now experienced enough to be fine waiting for a more enticing product, they are likely to hold off.

The drop in the number of projects being pushed is an interesting issue, as it would seem logical to have an increase in products being developed as awareness increased. I could not say for certain what is the cause, as there are numerous factors that might be taking place. Primarily, given the initial boom of Kickstarter, the number of projects from people trying to hop on and grab a bit of the buzz was a given, but now that things are cooling down, those people are moving on as well. Also, as some developers have seen a number of products fail, the understanding as to what things are financially viable through crowdfunding is becoming more apparent than ever, stopping people from trying their hand at pushing out unreliable ventures.

Sebastopol: What we saw after Double Fine raised millions for a game on Kickstarter was a flood of game submissions. Indie developers (and even some larger ones) flocked to the service to try and get a piece of the action as soon as possible.

Now that the dust has settled, the number of projects has slowed to become more rational. During the boom, many devs either rushed stuff out that they normally would have waited on, or simply tried to take advantage of all the people throwing money about. Now that the market is saturated, and people are more used to the idea, developers know that there’s a good chance that their project won’t be successful.

Equally, a lot of people who did try out the crowdfunding service with games like Double Fine Adventures are now holding off to see how great Kickstarter really is. So we’re seeing a decline in game submissions and game investors (and, of course, as less games are being submitted, there are less things for people to invest in).

But it would be downright stupid to suggest that Kickstarter is dead, or over. Not only is it still funding tons of games, inXile Entertainment’s Torment: Tides of Numenera was only submitted earlier this month and it has already been the fastest game to reach $1 million, and is currently at $2.5 million.

Kickstarter still has a long life ahead of it, although it is sure to either grow rapidly or suffer depending on the quality of some of the major games that were funded.

Q: Should Publishers be scared of the potential behind crowdfunding?

Dandelion: I think there is a significant amount of potential to be had from crowdfunding, as a substantial sum of money can be generated by having a number of people invest in a product’s development without requiring much from any single source. This is something that is a great asset for developers who are looking to produce a product without having 3rd party interests move a title away from its focus. When a publisher funds a project, there can be a number of additional requirements that need to be held up beyond the original scope of the game, as new features can be pushed on developers to make investors happy. So, for publishers to see their monopoly on the market being taken away in some small portion, it is obviously something that they should be cautious of.

This does not mean that publishers need to start closing up shop now that the masses have taken to funding a few titles. In fact, the reality of it is that the requirements to produce a major AAA title is so far from anything we have ever seen out of Kickstarter, that developers who are seeking to make these expensive games are still stuck with major publishers. Thankfully, besides the simple investment that we see from publishers, they often bring in a number of assets outside of the monetary investment to help produce or promote a title. This can be in the form of connections through advertising, or even toolsets developed by other in-house studios that can push hardware in ways that would not have been possible otherwise.

Sebmarine: Yeah, AAA games will obviously never go that route, because the amount of money raised by Kickstarter simply isn’t enough. Publishers can often also offer a lot of things Kickstarter cannot – they help with distribution, can port the game to other platforms, can do translations and can even help with game development. So Kickstarter isn’t for everyone. Then there’s the fact that a lot of the Kickstartered games would have been self published anyway, so publishers haven’t lost out on that.

The big publishers are not going to be massively impacted by crowdfunding, no matter what some hyperbolic press outlets may claim. They will lose some revenue from digital titles, but nothing truly significant. It’s also important to note that publishers are developing more and more in-house, so obviously they won’t lose those developers to Kickstarter.

If they are smart, they could instead use crowdfunding to help gauge public interest on unique genres that may have seemed risky beforehand.

Q: What are the limitations or long-term issues with crowdfunding?

Obi Dan Kenobi: As with anything that goes on with the internet and money, there are a number of things that can go wrong that many consumers need to understand. The most important issue that surrounds Kickstarter is that, once you fund a project’s development, you have no guarantee to ever see that product. You are simply funding the potential for the game to see the light of day, and have no recourse of actually being reimbursed if the project goes bust. Which means that if something like Sony’s ill fated MMO, The Agency, had been pushed through Kickstarter for $20 million, every person who invested in the game would come out empty handed.

That is the reality behind being an investor, which is what Kickstarter is all about, as you are not technically purchasing a product at all, you are investing in its future. If you do receive something for putting up the cash ahead of development, it is simply as a reward, and nothing more.

Seborrheic dermatitis: Not only is there obviously the problem with the risks of games not being made (like Haunts: The Manse Macabre, which raised nearly $29k but was never made), but there’s the also the problem with crowdfunding itself.

Double Fine’s original video for their Kickstarter talked about how they wanted to make a game that publishers didn’t think would be successful, but they thought that people really wanted. That was based on an established, known genre. However, games that are completely different, that are impossible to properly show in an early stage video, are far less likely to succeed.

Equally, most of the biggest successes have been from big-name developers and icons, who could have found funding elsewhere (perhaps not for these projects, but still would have been in business). So we’re not seeing the kind of revolution that exists on other parts of Kickstarter, where completely new individuals create things that change their particular industry.

Perhaps it’s because anyone can lie in a game video, and it’s very hard to honestly convey what your game is, so users only end up trusting, and investing in, big names. Whatever the reason, it’s a fundamental flaw with the crowdfunding of video games, and means that it isn’t leading to the content revolution that it aspires to.

Have you ever used Kickstarter? Do you think it is the future of game funding? Or is it a bubble? Let us know by shaking your money-makers the comments below, donating to our Twitter accounts at Seb and Dan and emailing us your credit card details at DailyReaction@PlayStationLifeStyle.net.