How Video Games Are Killing Crowdfunding

Are you enjoying my hyperbole?

Every  video-game designer loves crowdfunding nowadays, it’s a chance to break free of publishers, give small ideas a big chance and a risk-free way to assess your market.

Thats all amazing stuff, but have we considered the consequences?

Fostering Expectations

Video-games are perfect to be crowd-funded.

They are digital products, so production- and distribution cost is minimal or non-existent, they provide a solid product that can be sold and they benefit from communities like no other product.

With technologies like torrents you can even mitigate distribution cost to an absolute minimum. Generating CD-keys for your game is similarly almost cost-less.

Crowdfunded movies or web-series don’t have this benefit, the lack of efficient DRM for video prevents them being distributed via torrent and with web-series you will need a streaming-service that lets you monetize your content properly.

Sure, you can slap it on Blip or Youtube, but the monetization options are rather…uneconomical.

For crowdfunding, beyond getting a bit of traction and exposure, it’s all about the rewards.

And video games can provide their product at a discount price as a reward and still make a “profit”.

As an example, lets take the recent Project Eternity Kickstarter by Obsidian Studios, currently at 2.899.159$ (264% of the goal)

The first tier of rewards is a 5$ pledge that essentially counts as a “tip” for the development team, it has currently 240 backers.

The second tier offers the game as digital download for 20$, it’s sold out at 25000 backers.

The third tier offers the game as digital download for 25$ and holds currently ~14500 backers.

The fourth tier offers the game as digital download as well as a digital download of the soundtrack and a PDF book with concept art for 35$, it has ~7400 backers.

There are more, but they all include a digital download of the game and some other digital junk up to the 65$ mark, where the -first- physical product is offered, a boxed copy of the game + digital download (~2700 backers).

You can immediately see, that the rewards for the digital tiers entice far more backers than the physical tiers, because the cost/gain ratio is superior.

If we do a bit of math and tally up the digital-only rewards and backers, we end up at ~1.270.000$;  only a little more than the project goal (1.1 million USD). It’s safe to say, that the complete early funding was almost certainly secured by digital only products.

All these rewards for the digital-tiers, have a production cost of nearly zero. Bundling up your soundtrack into MP3s and converting your novel (which you will sell in bookstores as merch anyways) into PDF isn’t exactly hard work or expensive to produce, neither will the distribution once you slap this on Steam or maybe even GOG, but even if you don’t, torrents could be used for a no-cost hosting of the content.

What this all means, and my point, is that nearly 100% of the necessary funding received will be available as funds for Obsidian.

Video games can give away content almost for free, and it fosters the expectation that -other- crowdfunded projects should offer the same quality of cost/gain ratio for their reward-tiers. Not only that, but the expectation is that this is a purchase, a pre-order of sorts, and the image of crowdfunding is skewed to mean -buying- not -pledging-.

Nothing Can Compete With Digital

Video games, or video game related projects are amongst the most funded and most successful on any crowdfunding platform, and my educated guess is that it’s precisely because of the amazing rewards.

Imagine, you get a full AAA game for 20$ when it will be sold at ~50$ retail AND almost 100% of that money is available for the developer to use! That’s a win-win for the consumer and the developer.

A physical product campaign can’t compete with this because it has manufacturing costs.

When I was promoting my card-game campaign on the net, the first criticisms against the campaign were directed at my rewards that were “disappointing” and many deemed it “not worth it”. I will lift the curtain just a bit to show you the backstage economical calculations I made preparing for the campaign.

My manufacturing cost of a starter-set box of my card-game runs around ~11$ (everything depends on volume for printing), this is not including shipping, which will clock in probably another ~10$ depending on region  and again, depending on volume.

So essentially a copy of my game, with a zero profit, will cost me at minimum ~20$ to even get to a backer.

My first tiers up to 20$ are digital where you get printable PDFs of cards, a plugin for Lackey CCG and other digital items (wallpapers, etc.). Above 40$ I had physical items like a starter-set or a double-starter + t-shirts, etc.

For a 40$ starter, half of the pledge is my production cost, that means, that one pledge at 20$ of digital tier #4 gives me the same amount of net money to use as a 40$ pledge on a physical tier. Thats why I limited physical tiers to a certain amount to prevent runaway production and distribution costs.

I simply can’t offer you my game at 20$, I wouldn’t get any money from the pledges to actually MAKE (/finish) the game.

A lot of my player-base, actually, scrap that, ALL of my potential player base intersects with the video-game industry. I even advertise my game as a pocket Alpha Centauri. The expectations of the video-game funding mentality carry over to my player-base. Everyone expects me to “sell” the game at “competitive” pricing in my campaign.

CrowdFUNDING not CrowdPURCHASE

Crowdfunding is a -funding- platform, not a pre-order or buy-games-cheap platform.

I’m asking for help with my project, not for customers (at least not in the sense of immediate purchase). If I wanted to sell the game, I would, I wouldn’t be on a crowdfunding platform asking for goodwill -donations- to -fund- my product to get made.

Unfortunately it’s this mentality that is being fostered by video game crowdfunding. It’s not about funding, help or donations anymore, it’s about discount purchase/pre-order.

Crowdfunding in principle is a great way to realize your dreams, but it won’t work if the backers think they are entitled to your product at a discount in the campaign. Kickstarter has become a way to scout out the best “deals”.

Yes, crowdfunding is asking for charity, it’s nothing less than asking for paypal donations on your website, and thats precisely the way that it should be. It should distribute the risk of investment, and help small projects succeed by drawing from an almost endless pool of peoples disposable income.

A crowdfunding campaign isn’t for getting a cheap deal, it’s not a purchase-agreement, it’s not a pre-order and it certainly isn’t a store.

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2 Responses to How Video Games Are Killing Crowdfunding

  1. Nice post. A number of new Investment Crowdfunding options will soon be available to help small projects and investors alike succeed.

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