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Fan Funding

Mon 18 Apr 2011 7:00am GMT / 3:00am EDT / 12:00am PDT
BusinessDevelopment

Put your money where your mouth is - gamers, the new source of development funds

Consumers are no longer just the end user for video games rather, they are increasingly becoming crucial parts of the development process.

Some independent developers, such as Minecraft designer Markus "Notch" Perssons, are leveraging gamers directly by using paid betas to fund their game's creation, while others are connecting with consumer investors through websites such as Kickstarter.com and 8BitFunding.com. This gives indies with tight budgets more options for developing their games. Rather than relying on publishers or loans for support, these companies can turn to their fans to help gather the resources necessary to produce their games

"We turned down numerous offers [from publishers]" explained Chris Hazard, president and founder of Hazardous Software, which is using a crowd-sourced funding approach for its latest game, Achron.

"[Publishers] would have taken away risks of failure, but also taken away the potential benefits if Achron were to succeed... Fan-based funding was our best option; those investing in the game truly cared about it and wanted to see it succeed without big strings attached."

The negotiations stopped when it became clear to us that we needed to hand over all of our IP and make a lousy revenue share deal.

Kenneth Andersen, Zero Point Software

For other independent studios, maintaining ownership of their intellectual properties plays a big role in the decision to tap the end consumer for financial support. Zero Point Software, an independent studio based out of Denmark, was in negotiations with several different publishers to produce its first-person shooter, Interstellar Marines. Once ZPS realised that signing a deal with a publisher meant signing over the rights to the company's game, it dropped out of any publishing discussions.

"The negotiations stopped when it became clear to us that we needed to hand over all of our IP and... make a lousy revenue share deal [on top of that]," Kenneth Andersen, producer and lead sound designer of Interstellar Marines, recounted.

"So it was time to make a new strategy. We came up with this crazy idea that our community should be able to pre-order the game years before it was finished and we haven't regretted this decision since."

And for some developers, the reason for going consumer-funded is even more straightforward: fans simply wanted to support the studios behind the games they love. This was the case for Crate Entertainment, the company behind the upcoming action-RPG Grim Dawn, which is using a combination of fan-generated funds and internal revenue to create the game.

Crate Entertainment is comprised largely of staff from the now-defunct Iron Lore, which is best known for its 2006 release Titan Quest. The game was popular with consumers, but publisher THQ maintained possession of the IP which prevented Iron Lore from producing a sequel. Without its flagship franchise, Iron Lore failed to find funding for a new project, which led to its closure.

Shortly after Crate Entertainment was formed, fans quickly began writing in to ask if they could contribute to the development of the studio's new game.

"We would have never thought up the possibility of fan-funding on our own because it seemed too improbable," admits Arthur Bruno, manager and lead designer at Crate Entertainment. "We sort of stumbled into fan-funding as a result of [the] many emails we received from fans of Titan Quest asking how they could contribute to Grim Dawn and wishing there was a way to donate. After numerous emails we finally figured 'Hey, we could really use some extra money for computers, software and outsourcing,' so if people want to contribute, why not let them?"

The notion of consumers funding games does indeed seem improbable. After all, this is the same demographic that retailers such as GameStop and Play make billions off of yearly by selling used products that are only marginally marked down from new games. Like any other consumer group, gamers are frugal with their money.

However, Zero Point Software has been blown away by the fan contributions made so far it seems many gamers are willing to put their money where their mouths are and support the games they want to see produced. Interstellar Marines has generated upward of $125,000 from more than 100,000 players, which is a huge amount of money for an independent project.

Crate Entertainment has been just as surprised by the overwhelming fan support it has received thus far. "I remember when I came up with the price points for the different pre-order levels, I set [the $48 Legendary package] to what I believed was an astronomical number that very few people would even consider [purchasing]," Bruno said. "As it turns, the vast majority of our pre-sales have been Legendary, so I guess I underestimated people's confidence in us."

Going the fan-based funding route probably added nine to 12 months to Achron's total development time.

Chris Hazard, Hazardous Software

Zero Point Software found a similar pattern more than 2000 consumers have purchases the $39 Spearhead package, while less than 200 have bought the $25 Frontline bundle.

Moreover, crowd-sourced funding creates a fan base that is even more loyal than traditional consumers. Rather than producing games for their audience, these independent studios are creating games with their audience. Consumers become a part of the development process, rather than just an idle onlooker.

"The biggest benefit [from fan funding] is the interactions you get with the community. They become involved with your game, give you feedback, create content, and help you promote it. They become investors and stakeholders in the game," Hazard explains.

Andersen expressed similar sentiments as Hazard, citing the increased community involvement as one of the biggest perks of leveraging crowd-sourced budgets. Additionally, when fans are involved so personally with a project, they essentially turn into proxy salespeople, which end up being a force just as influential as any expert reviews or marketing campaigns.

"When someone buys a product that has not yet even been developed, you not only get great salespeople, you get evangelists who will power sell your product to their friends, give you real-world feedback and even defend your product if possible," Andersen adds.

"It's all a matter of faith, so to speak. If [the fans] trust in our project enough to pay for it even though there are no guarantees that they will ever get the game in the end, it's because they have faith in us and believe that we will do our best to make it happen."

Still, while fan funding has a number of unique perks, that isn't to say it's without its drawbacks. Zero Point Software, Crate Entertainment and Hazardous Software were all quick to note there are inherent flaws with relying on crowd-sourced budgets to produce a high-quality game. First and foremost is acquiring the money necessary to create a triple-A calibre game, which can take a long time with a fan-funded approach.

"Going the fan-based funding route probably added nine to 12 months to Achron's total development time after our announcement," concedes Hazard. "The funding comes in over time" and not up front, which can be a hindrance when it comes to creating any sort of reliable release schedule, he added.

Overcoming consumer scepticism is another obstacle that these indie developers faced. It takes a lot of faith from fans to invest in a game that may never see the light of day, and each company has a different approach to managing expectations and alleviating fears. For example, with Achron, Hazardous Software launches frequent working versions of the title to early investors.

Meanwhile, Zero Point Software's designers are all active on the Interstellar Marines' community site, either showing off new art and assets or answering fan questions. The community website is only one part of the pre-release strategy for Interstellar Marines ZPS has also launched three different game "slices" that show off various game elements. For example, the Danish developer put out an in-game viewing gallery that players can interact with to learn about Interstellar Marines' universe. Before the game is published, ZPS is planning to release other game slices as well, including multi-player betas.

Crate Entertainment, on the other hand, is relying on the reputation it built with its last project, Titan Quest. Bruno goes as far to say that Grim Dawn may not have been possible without its loyal fan following. "I... don't think anyone would give us money if it weren't for the large and amazingly loyal Titan Quest fan base," he admitted. "I think teams need to either have some level of notoriety for a past game that people really liked or they need to get something playable out before people would feel confident enough to contribute money."

As games continue to shift toward being recurring services rather than stand-alone products, Hazard projects the opportunity for fan-funded projects will also grow.

"In business, there's the first-order approximation of fixed costs (one-time costs), and variable costs (costs you pay for every unit created)," he explains. "In gameplay, there's a parallel: your players' initial tolerance for shortcomings of a game and your players' expectations of more content and rich experience over time. Once the game is in a state where people like it, then you can use fan-funding for the rest."

Still, studios will need to decide on a case-by-case basis whether or not crowd-sourced funding is the ideal option for their next project. In many cases, it won't be, but when the opportunity arises, companies should consider the option as it provides a number of unique benefits that traditional budgeting can't match.

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