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Kickstarting crowd-sourced funding

Thu 23 Feb 2012 2:22pm GMT / 9:22am EST / 6:22am PST
BusinessDevelopment

An expert panel debates the significance of Double Fine's Kickstarter windfall

With 19 days to go until deadline, Tim Schafer's Kickstarter initiative finally seems to be losing momentum. More money will no doubt pour into the Double Fine coffers before then, adding to the $2 million already raised, but after the incredible growth of the first few days it's now possible to make a reasonable guess at what the final amount might be.

Let's say $3 million; perhaps more if the press whips up a bit of last-minute enthusiasm. By any metric, Schafer's decision to pass around the virtual collection plate has been a roaring success, to the point that industry figures like Obsidian's Chris Avellone are already probing their social graphs, getting a sense of their own stores of consumer confidence.

Ultimately, what Double Fine has accomplished proves nothing more about crowd-sourced funding than a media savvy individual doesn't already know. This is Radiohead releasing In Rainbows for voluntary donations, this is Kevin Smith going city-to-city with Red State. To a large extent, this is about selling pedigree, and that makes it difficult to position as some kind of milestone. Very few independent developers can top Double Fine for sheer goodwill.

At the BAFTA-sponsored Question Time event earlier this week, a panel composed of UKIE's Dr. Jo Twist, Rebellion's Jason Kingsley, Jagex's Mark Gerhard and Frontier Developments' David Braben discussed the role organisations like Kickstarter could play in the industry's future. Indeed, it was the very first question from the audience.

Hopefully it will expand, but it's not the golden goose that's going to solve everybody's funding problems

Jason Kingsley, Rebellion

"It's such an exciting area," Twist said, pointing out that UKIE recently called for the government to amend legislation around crowd-funding in the UK. "It shows that, where there's an existing fan-base for a property then there's a real chance to harness...new ways of accessing money, particularly for independent developers."

At present, regulations designed to protect people from pyramid and Ponzi schemes prevent investors from taking a share of sales, but Twist believes that only "very, very minor tweaks" are required to "open up the potential of crowd-sourced funding."

"Now, I'm not saying that people will want to do that, but just making it so much easier for anybody - in any industry, in fact - to use crowd-funding platforms without any legislative barriers in order to get the money they need to make the games that they want."

Jason Kingsley took a broader view, playing down UK legislative wrangling as small beer when the best-case scenario amounts to, "the democratisation of investment in creative products."

"Let's face it, the UK is only a small part of the industry," he said. "We're talking about this democratisation across the whole world, so if I've got fans in Mongolia or fans in Estonia or fans in the UK...they can actually contribute to getting something made."

1

For Kingsley, though, there are too many unanswered questions. The vast majority of Double Fine's coverage has started and stopped with that ever ascending dollar amount, but right above it is another, potentially more important, figure: 62,655, or the number of people responsible for that $2 million.

"There are issues over ownership, there are issues over who owns what, and there are issues over, what if you actually don't deliver? What happens to the money? So while it's a very exciting area, and it's being looked at in other areas and hopefully it will expand, it's not the golden goose that's going to solve everybody's funding problems."

For Kingsley, each one of those contributors - "at their heart" - is a game designer, and they will likely expect some degree of influence over the direction of the project. As someone who has to make decisions that upset a proportion of his workforce all the time, the prospect of magnifying that "100,000-fold" does not seem conducive to creativity.

"Maybe 40,000 people think you're completely wrong, and 60,000 people think you're right. And that's how wars start," he said. "You can enthuse people and add them to the creative force, but as professionals we have to extract the value out of that and not have it crowd-designed."

We're already crowd-sourcing funding for games because people pay for them. It's just a case of them paying by pre-orders

David Braben, Frontier Developments

Mark Gerhard offered a similar brand of tempered enthusiasm. The Jagex CEO was as full of admiration as anyone, but in his view the issues Kingsley described should not be ignored. Gerhard claimed to have, "never seen a good game that was designed by a committee," while he openly questioned how many companies would be willing or capable of emulating Double Fine.

"Do I think we'll see it from a big studio? No, I think it terrifies them. Will it work for everyone? No," he said. "I think you need to have a reputation like Double Fine, you need to have something that's already there and known to drive the energy, or a proven team that's done something cool before."

For Braben, however, it's really a matter of perspective. "In terms of whether it's effective for big studios, actually, if you think about it, investment is just crowd-funding anyway - it just has to be regulated by the FSA," he said.

"When you go for a project, you don't know - and it's the same for the publisher, of course - whether the commitment is going to be there. Let's face it, we're already crowd-sourcing funding for games because people pay for them. It's just a case of them paying by pre-orders."

5 Comments

Emily Rose
Freelance Artist

81 34 0.4
Very nice article, especially important is the last part. We are paying for preorders, and you would only do that with a company you trust to deliver.

The "pay what you want" strategy that's so prevalent in crowdsourced / indie titles is really quite appealing :)

Posted:2 years ago

#1

Tim Carter
Designer - Writer - Producer

538 224 0.4
Perhaps more than $3million?

The SEC has placed a limit on the amount that may be raised in "crowdfunding". That limit is $3 million per year.

Edited 2 times. Last edit by Tim Carter on 24th February 2012 9:39pm

Posted:2 years ago

#2

Tim Carter
Designer - Writer - Producer

538 224 0.4
Also, investment isn't "crowdfunding".

Crowdfunding is a *donation* system - not an investment system.

Posted:2 years ago

#3

Eric Boosman
Creative Director

14 7 0.5
@Tim: it's true in kickstarter's case that it's donation based, but not strictly true of all crowdfunding options, such as [link url=http://www.appbackr.com.
]http://www.appbackr.com.
[/link]

"Backrs participate in the success of the best new apps. Backrs help promote apps through social networks and profit 25% to 50% for every app sold."

Unless we understand "crowdfund" to have different definitions.

Posted:2 years ago

#4
@ Tim: The SEC has not actually endorsed "crowd-funding" as a tool for raising capital in exchange for equity: [link url=http://www.reuters.com/article/2012/02/01/us-sec-capitalraising-idUSTRE81027K20120201
]http://www.reuters.com/article/2012/02/0...[/link]

The $3M limit you are referencing is likely related to an exemption under current law that allows small amounts to be raised from unaccredited investors without filing a SEC registration statement or providing other disclosures in a private placement memo. There is legislation in the House of Reps to relax current standards to exempt crowd funding platforms, but it would be a fairly limited exception (not more than $1M).

Kickstarter and most of the other crowd funding sites I have seen explicitly state in their terms that owners cannot offer shares or profit participation on their platforms. Gambitious is the only one that I have seen promising shares of profits. It will be interesting to see if it gains acceptance from regulatory bodies.

Posted:2 years ago

#5

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