Crowdfunding in video games

Video game development has typically been funded by large publishing companies or are alternatively paid for mostly by the developers themselves as independent titles. Other funding may come from government incentives or from private funding.

Crowdfunding, where the players of the video games pay to back the development efforts of a game, has become a popular means of finding alternate investment routes. As a way of game monetization, the use of crowdfunding in video games has had a history for several years prior to 2012, but was not seen as viable and limited to small-scale games. The crowdfunding mechanism for video games received significant attention in February 2012 due to the success of Double Fine Adventure (later renamed as Broken Age), a point-and-click adventure game which raised more than $3 million through the Kickstarter service, greatly exceeding the initial $400,000 request and becoming the highest funded project through Kickstarter at that time. A further boost to the model was seen in July 2012 when the Ouya, a low-cost video game console to be built on the open Android system and designed to take advantage of the mobile video game trend, surpassed $8 million in funding. In 2013, almost $58 million has been pledged towards video games.[1] By 2014, more than $215 million of Kickstarter pledges had been made towards for video games and tabletop games.

Less than half of video game crowd-funded projects successfully raise their target funds.

Crowdfunding

Crowdfunding is a means to raise money for a project by eliciting funds from potential users of the completed project.[2] While no third party is required for crowdfunding to occur, web sites like Kickstarter have been created to act as an intermediate in the process: they create space for project creators to share their project, provide ways for users to pledge their funds, and then supply the pledged funds to the creators for those projects that are successfully funded.

Projects using the Kickstarter model generally create multiple tiers of support. A minimum pledge assures that the funder will get the product in some form, but higher pledges will include additional benefits. In the case of video game-related works, this commonly can include being credited in the final work, receiving promotional items like T-shirts, obtaining early access to the game, or meeting the developers in person.

History

Prior to 2012, small independent video game developers had used Kickstarter and other crowdfunding services to generate capital for developing games.[3] However, most of these were funded at small levels, typically no more than $10,000; the largest prior to 2012 was Brandon Boyer's Venus Patrol in October 2011 which gained over $100,000 in funds. Shortly before the announcement of Double Fine Adventure, another game Code Hero was able to secure more than $100,000 in funding through a last-minute push by word-of-mouth.[4]

Double Fine Adventure

See also: Broken Age

2 Player Productions, a film documentary company, approached the studio Double Fine Productions with the prospect of making a film covering the development of a game within the studio. At the time, the studio's other development projects were backed from publisher funding, which would likely have put restrictions on what could be documented. Instead, the developers opted to create a new game from scratch, deciding to use Kickstarter to obtain funding for both the game and the documentary. The studio opted to create an adventure game, a game genre that has been languishing for more than a decade, though one that Double Fine's president Tim Schafer has had an influential history in. The project was tentatively titled Double Fine Adventure, though has since been officially named Broken Age. Schafer has noted that he has tried to convince publishers to fund adventure games since the decline of the genre, but was always turned away.

The two groups set a goal of $400,000 for the combined effort, considering $300,000 for the video game development and the rest for the documentary. Within the day of its announcement, the project surpassed the goal, and by the end of the month-long effort, had raised more than $3 million; Schafer noted that this amount surpassed the total budgets that his previous titles at LucasArts had been developed for. With the additional funds, Double Fine committed to developing the game for a wider range of platforms, localizations, and creating fully voiced dialog for the English version.

The success of the Double Fine Adventure Kickstarter is said to be attributable to several factors. First, Schafer and Double Fine have an established reputation with video games players, specifically through Schafer's reputation for humorous adventure games, and Double Fine's previous fan-favorite title Psychonauts.

Expansion

Following on the success of the Double Fine Adventure, several other small developers saw the potential of Kickstarter to launch new projects. Prior to Double Fine Adventure, Kickstarter had reported about 100 new video game-related projects started each month, a number that more than doubled after February; further, dollars pledged to these projects went from around $200,000 per month to between $4 and $10 million in the months that followed Adventure.[5]

Some of these projects were based on the revival of fan-favorite intellectual properties:

Ouya game console

In the limelight of the success of using Kickstarter for video game software, a company composed of video game hardware experts initiated a Kickstarter to raise money to fund the development of the Ouya video game console; the console is targeted to be a low-cost, Android-based unit with an open development structure, allowing it to take advantage of the existing games in the mobile space. The Kickstarter began on July 10, 2012, looking to raise $950,000 for turning their existing prototype into a manufactured line; within 8 hours they had cleared this number, and within a week had surpassed $4 million in funding.[11]

Video game-specific crowdfunding

With numerous successful video game projects arising from Kickstarter, other crowdfunding sites have arisen with a specific focus on video games.

Gamesplanet Lab offers a framework for crowdfunding, but becomes more involved in the pre-selection of projects that qualify for its site, and provides services to help assure the quality of successful projects as delivered.[12]

Gambitious is an equity crowdfunding mechanism, where those that invest in an offered project can receive dividends for the project successfully meeting its publication goals.[13]

Hybrid crowd funding

More recently, Kickstarter and other crowd funding services have been used by developers who have gained potential financial commitment from investors, and use the crowd funding mechanism to demonstrate the potential demand for the video game. Such examples include Bloodstained: Ritual of the Night,[14] which successfully sought at least $500,000 in crowd funding to secure 90% of the development funds from investors, and Shenmue III which also obtained the required funding through Kickstarter to gain financial and development help from Sony for publishing the game to the PlayStation 4.[15]

Brian Fargo of inXile Entertainment, Feargus Urquhart of Obsidian Entertainment, and Tim Schafer of Double Fine Productions, all whom have had significantly large crowdfunded projects as listed above, helped to found Fig in August 2015, a video game-centric crowdfunding platform that, in addition to the typical backer funding, also enables development investment so that they can earn part of the game's profit on release.[16]

Other arenas

Electronic Arts announced support for crowd-funded video games by offering free distribution of these games on their Origin software delivery service for personal computers.[17] Borrowing from the reward structure of the crowdfunding model, Namco Bandai has announced an incentived plan for their upcoming game, Ni no Kuni, that the rewards for those that pre-order the game will improve with the number of pre-orders that are received.[18]

Reaction

On Kickstarter, 43% of game projects (including tabletop games) successfully complete their funding, a slightly better average than all projects on the service.[19] According to Kickstarter's 2012 statistics, more than 900 of about 2,800 video game-related projects were funded during 2012. Games (including tabletop games) were Kickstarter's most popular and successful category in 2012; successful gaming projects generated over $83M in funding across 1.38M pledges.[20] Despite reports of "Kickstarter fatigue" - a sense of community apathy towards the platform, Kickstarter revealed that as of August 1, 2013, $64.7M had been pledged towards games project that year, showing growth over 2012 figures.[21] In March 2014, Kickstarter announced it had achieved over $1 billion in pledges, with more than $215 million of that dedicated for video gaming and tabletop gaming projects.[22]

Investor motivation

A survey conducted by a research team at the University of Cologne examined the motivations of Kickstarter backers who pledged for video game projects.[23] It found that the prime motive of a vast majority of respondents was to encourage creation of games in genres the backers perceived as under-supplied, and warned game developers against "following the bandwagon" by trying to fill the niches that have already been saturated by earlier crowdfunded projects. Beyond that, the study grouped backers into three categories, based on other motivations they displayed (from most to least numerous):

Both "supporters" and "influencers" perceived video game developers as being "strangled" by the established conventions of the industry and the mainstream market (such as video game publishers), and while most backers wanted to be kept up to date about the development and features of the games they backed, few were interested in directly influencing them. The researchers concluded that "backers are first and foremost consumers, and the main effect of reward-based crowdfunding is that it closes the information gap between the developer and the customer."

The study also examined what influenced a backer's decision to pledge more or less money to a particular project, and found that "supporters" generally tend to pledge smaller amounts of money to fewer projects than both "buyers" and "influencers".[23] It identified three factors that influenced the pledged amount:

Crowdfunding risks

There are risks of such crowd-funded games, including the inability to complete the funding successfully. In one example, the development of the game Alpha Colony fell short of its $50,000 goal by $28, rendering the project unfunded as per Kickstarter's regulations.[24] In other cases, the delivery of the product after a successful fundraising campaign may be left unfulfilled. A notable case is that of Code Hero, which had secured $170,000 during its Kickstarter in early 2012, had initially expected to be shown at the August 2012 PAX convention but failed to materialize. Further lack of updates through December led some of the Kickstarter backers to investigate the state of the project, finding that Primer Labs had apparently used up the funding and had yet to finish the game. Primer Labs' Alex Peake had stated that they are looking for more investments to continue developing the game and still commits to releasing the game in the future.[25] However, due to lack of communication and failure to provide any of the claimed rewards, backers are looking towards legal options to recover their funding, though are limited by some of the terms of agreements set in place by Kickstarter.[26] An update in early February 2013 included a message from Peake, breaking down the use of the Kickstarter funds and promise to provide refunds and back pay to his developers once the game was released, and took responsibility for the failure to meet the stated goals.[27]

Another example of such risks is Godus, a god game developed by 22Cans, with the genre's pioneer Peter Molyneux at the lead. The game was successfully funded in a 2012 Kickstarter campaign for about $800,000, and the team delivered a mobile version for iOS systems, and a Windows version that was developed through Steam's Early Access program. However, in early 2015, many supporters began to doubt if 22Cans was going to finish the title and complete the additional Kickstarter stretch goals such as a Linux version, as Molyneux had begun talking about the next game his studio would produce. In response, Molyneux stated that they were moving on from Godus and turned over most of the development to one of the campaign's backers while Molyneux and 22Cans will still provide overarching guidance. Supporters expressed concern in that they had bought into the Kickstarter based on Molyneux's creditials towards the god game genre, and as such the final game may not reflect the product they actually had expected.[28]

See also

References

  1. ↑ Pearson, Dan (2014-10-01). "ICO Partners report suggests Kickstarter is in decline". GamesIndustry.biz.
  2. ↑ Prive, Tanya (2012-11-27). "What IS Crowdfunding And How Does IT Benefit The Economy". Forbes. Retrieved November 27, 2012.
  3. ↑ Waananen, Lisa (2012-04-30). "Three Years of Kickstarter Projects". The New York Times. Retrieved 2012-07-20.
  4. ↑ Crossley, Rob (2012-02-22). "Last-gasp triumph for Code Hero Kickstarter". Develop. Retrieved 2012-07-20.
  5. ↑ Strickler, Yancey; Benenson, Fred (2012-09-12). "The Year of the Game". Kickstarter. Retrieved 2013-02-11.
  6. ↑ Dutton, Fred (2012-04-02). "Kickstarter funding drive for Leisure Suit Larry remake". Eurogamer. Retrieved 2012-04-02.
  7. ↑ Nunelley, Stephany (2012-06-16). "Tex Murphy – Project Fedora exceeds Kickstarter goal". VG247. Retrieved 2012-07-14.
  8. ↑ Valdes, Giancarlo (2012-07-14). "Hidden Path Entertainment places the fate of Defense Grid 2 in the fans’ wallets (interview)". Venture Beat. Retrieved 2012-07-20.
  9. ↑ "Star Citizen by Cloud Imperium Games Corporation". 2012-11-19. Retrieved 2013-06-16.
  10. ↑ "Roberts Space Industries". 2014-05-28. Retrieved 2014-05-28.
  11. ↑ Stevens, Tim (2012-07-17). "The Engadget Interview: OUYA CEO Julie Uhrman on taking console concept to reality". Engadget. Retrieved 2012-07-20.
  12. ↑ Minotti, Mike (2012-07-07). "New gaming crowdfunding site Gamesplanet Lab vets projects for quality". VentureBeat. Retrieved 2012-07-15.
  13. ↑ Takahashi, Dean (2012-06-04). "Gambitious creates crowdfunding just for games". VentureBeat. Retrieved 2012-07-15.
  14. ↑ Kuchera, Ben (2015-05-12). "Bloodstained's $1.4 million Kickstarter isn't a revolution, it's business as usual". Polygon. Retrieved 2015-06-24.
  15. ↑ Kuchera, Ben (2015-06-22). "Shenmue 3 needs $10 million to 'truly have the features of an open world'". Polygon. Retrieved 2015-06-24.
  16. ↑ Hall, Charlie (August 18, 2015). "What if Kickstarter let you profit from a game's success? Fig found a way, launches today". Polygon. Retrieved September 3, 2015.
  17. ↑ Caoili, Eric (2012-05-18). "EA's Origin attracting crowdfunded projects with free distribution". Gamasutra. Retrieved 2012-07-20.
  18. ↑ Caoili, Eric (2012-07-20). "Crowdfunding inspires Namco Bandai's preorder experiment". Gamasutra. Retrieved 2012-07-20.
  19. ↑ Caoili, Eric (2012-06-11). "Less than half of Kickstarter's game projects have succeeded - report". Gamasutra. Retrieved 2012-07-14.
  20. ↑ John Koetsier (2013-01-08). "Kickstarter’s best of 2012: 2.2M backers, $319M raised, 18K projects funded". VentureBeat. Retrieved 2013-08-30.
  21. ↑ Kris Ligman (2013-08-02). "Q&A: Catching up with Kickstarter". Gamasutra. Retrieved 2013-08-30.
  22. ↑ Alexa Ray Corriea (2014-03-03). "Kickstarter has received $1 billion in pledges to date, over $215M into games". Polygon. Retrieved 2014-03-04.
  23. 1 2 Dr. Norbert Steigenberger (27 January 2014). "On the Motivation of Backers in the Video Gaming Industry – Research report" (PDF). Reward-based crowdfunding. University of Cologne. Retrieved 25 March 2014.
  24. ↑ Makuch, Eddie (2012-12-03). "Kick starter game misses goal by $28". GameSpot. Retrieved 2013-01-09.
  25. ↑ Trips, Seth (2012-12-13). "'Where did the money go?' ask Code Hero devs". Develop. Retrieved 2012-12-17.
  26. ↑ Conditt, Jessica (2013-01-08). "Code Hero's buggy Kick starter has backers preparing to draw legal lines in the sand". Joystiq. Retrieved 2013-01-09.
  27. ↑ Tripps, Seth (2013-02-04). "Code Hero devs come clean on Kick starter funds". Develop. Retrieved 2013-02-04.
  28. ↑ Moore, Bo (2015-02-11). "Peter Molyneux’s God Game Is Looking Like Yet Another Disappointment". Wired. Retrieved 2015-02-12.
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