Close
Report Comment to a Moderator Our Moderators review all comments for abusive and offensive language, and ensure comments are from Verified Users only.
Please report a comment only if you feel it requires our urgent attention.
I understand, report it. Cancel

Kickstarter: Should Publishers Be Nervous?

Kickstarter: Should Publishers Be Nervous?

Tue 24 Apr 2012 9:36pm GMT / 5:36pm EDT / 2:36pm PDT
PublishingFinancial

Investor and entrepreneur Steve Dengler discusses the new publishing model

With the rise of Kickstarter and other crowd-funding sources the self-publishing route has become more and more prominent in the gaming industry. While many view Kickstarter as a bona fide method to receive the funding they need to make a great game or even a stellar tech demo, others feel that it's nothing more than the latest "hot-ticket" item that is currently the darling of the industry, given strong attention due to the self-starter feel of it all.

The truth, as usual, lies somewhere in the middle. The surge of recent Kickstarter success stories provides a glimpse into a funding scheme that could become much more than a fling, and investor and all-around gaming enthusiast Steve Dengler of Dracogen Strategic Investments believes that this model is just the beginning of something more.

Founding Xe.com in 1993, Steve Dengler has pushed his personal hobbies and wealth as an independent investor in media and gaming. With a strong relationship with popular gaming studios such as Double Fine Entertainment, Dengler has made an impact on providing funding solutions to those looking to create something meaningful.

1

Working through Dracogen Strategic Investments, Dengler has spent much of his time investing and working with inXile Entertainment, Double Fine Adventures and a myriad of projects focused on gaming and web-series creation. He extols the idea of working with tech companies through less red tape, less oversight and less micromanagement.

Through his experiences both as a gamer and as an early-seed investor, Dengler approaches the new, "lower-end" market changes as a way to not only enhance the casual gaming pool, but to create a viable method for smaller, creative teams to flourish.

Breaking the Kickstarter limit

Years from now we may look back at the early Kickstarter days and reminisce about a platform that brought us the next great game designer or AAA title, but we're not even close to that point. "It just feels like the people who are going to be the big-big names 10 or 15 years from now are just getting involved, just getting started," says Dengler. "In terms of games, the old publishing model is very complacent and set in its ways. I really get the sense that they are starting to feel that there is something really going on here, and they don't really know how to engage."

"Are you going to be able to get $15 million out of Kickstarter? Maybe someday, probably not now"

Dengler believes publishers have simply become too large to entertain the idea of publishing smaller, creative IP. They're unable to see a reason for investing in a title that won't bring in the revenue streams enjoyed by games such as Battlefield and Call of Duty.

"Can game labels go and find small things? They could, but the reality is they don't typically because it is not worth their time," he offers. "So you look at the projects that Kickstarter is servicing, Tim [Schafer] set a benchmark at $3.3 million. That's great, okay, but from a publisher's perspective that's a small game. That's not a big game at all."

"When that big kerfuffle over Psychonauts 2 happened, and Rock, Paper, Shotgun gave the impression that it might be around $4 million or something and then Notch got involved, and then Tim, myself and Markus Persson were talking (mainly Notch and Tim) ... Still for that game to be done properly, no, $4 million is not the number. Maybe $15 million is the number. Are you going to be able to get $15 million out of Kickstarter? Maybe someday, probably not now. Could you get $15 million out of a private investor? Probably not."

"There is still this top-end of the self-financing model which right now is around $3 million by precedent. So what can you do for $3 million? You can do a great game, for sure you can. Can you do a Medal of Honor or Call of Duty for $3 million? Probably not. And what Kickstarter is doing, what crowd sourcing is doing... it's kind of a pain in the butt for some people because you incur a debt to a lot of people. Now the debt isn't money, but the debt is time."

Riding the Kickstarter wave

Kickstarter offers studios a chance to pay for their game in full up-front; it then offers them a chance to gain more and more in funding for each new title, riding on successful projects.

"Really, my involvement with Double Fine is very similar to the Kickstarter model; it's just to a larger degree. I'm a fan. Why does someone kick in $500 to the Double Fine Adventure game? They're a fan..." Drawing from his experience as a private investor, Dengler promotes the idea that this new system allows a studio to basically forgo the traditional route of early seed-funding for smaller titles.

"I love it, I think it's one of the greatest things about the whole model is that this is a tangible expression of support from fans of the game. As this thing becomes larger, as Kickstarter becomes more mainstream, you're just going to have more fans to draw on. Things that appeal to those people are going to be financed bigger and better all the time."

"People will look back on Wasteland 2 and Double Fine Adventure as sort of the first major projects on Kickstarter, but I don't think they'll be one-offs"

"If you sort of build up a reputation on Kickstarter, I can see studios getting to the point where they are raising $5 to $10 million without doing any publisher type games, without any support from a publisher. If those hit, if those succeed, those people won't have to do Kickstarter. If you do a $5 million title and it makes a pile of money, you won't need to go back to Kickstarter.

"You then become a sort of combo developer/publisher at that point; you can do your own thing. That will be the ultimate success story."

"If Double Fine or inXile or a couple of other people can bootstrap themselves through Kickstarter to the point they don't need publishers or anyone, they can be their own stem-to-stern content creators and distribution people. You know Steam and other platforms are set up to distribute that content. You don't necessarily need to put a box on a shelf anymore; that's 20th century, that's old school."

Kickstarter's future appears bright

Kickstarter has fast become a solid funding alternative for gaming studios to pursue, and with some projects even offering shares or equity in a company, the future of the funding platform will be very interesting. "Kickstarter is just starting to be seen as a serious thing," offers Dengler. "Give it a year or two, get it mainstream. Not just for geeks, but for mainstream people who are fans of things. Let the self-serve entertainment model run for a couple years and then you'll see some serious engagement on Kickstarter."

He adds that "People will look back on Wasteland 2 and Double Fine Adventure as sort of the first major projects on Kickstarter, but I don't think they'll be one-offs. They'll be remembered as the ones who opened the door and showed it was a real legitimate move. The move to shares and equity is going to be interesting as well."

The new publishing model is now a viable option, not one to replace the big publishers and the normal funding route, but definitely a solid route to take.

"I definitely see it as a legitimate model going forward, and an ever-more legitimate model."

Perhaps the biggest reason that Kickstarter will continue to be a go-to model for developers is simple economics. "Take an indie guy who sells 100,000 units, but he gets to keep the net revenue minus the charge of digital distribution. The actual indie guy is making the vast majority of the money. He doesn't need to sell a million units. He can sell a lot less than a million units and maybe make more than the big guy who does sell a million units," Dengler observes.

"The ultimate example of this is Markus Persson, Mojang and Minecraft. It's sort of the indie game that stopped being an Indie game; it just got too big. So these kinds of things are possible, exciting and neat, but I don't think these guys are going to knock the publishers on their rear ends immediately."

So while the market is not going to completely turn topsy-turvy overnight, the new funding approach is going to cause even more drastic change in the coming years.

"Five years from now, if you see a few more studios that are their own publishers, you will see bigger publishers start to get nervous"

"I think that end of the [lower-budget] market is going to get filled up with Kickstarter and Kickstarter-like things are going to be the biggest piece of the puzzle. Out of that low-end part of the market, you are going to see some really creative and neat things come up that suddenly start to get interesting."

Kickstarter implications to be aware of

Kickstarter may be just the vehicle to get your great game idea the necessary funds, but smaller studios must also be very careful about what rewards are being promised. Managing the physical end for rewards can be daunting and impose a bigger than expected financial burden.

Many studios are looking to give away T-shirts, the game itself and even bigger prizes, and that entire physical supply has to be managed.

"Again, you have to sit down and think. What did Tim end up with, 90,000 fans in the end? Each of those gets a reward. You've got to fulfill all of that stuff you offer. You are swapping one sort of debt for another," Dengler warns.

"If the people on Kickstarter are to keep their rewards digital, like a digital download to the game or digital download to the soundtrack, then they won't be in that much trouble. A really large Kickstarter project with a lot of physical fulfillment adds a lot of overhead in its own right. [The upside] is that Kickstarter engages the fans kind of like a super-preorder."

"You are ordering the game even before it's developed. You're saying 'I have faith in you so much that I'm going to…' and actually people have sort of criticized this. They are saying you are giving a studio carte blanche to make whatever they want."

This all is worth it though, in the long run, argues Dengler. It's yet another step in the evolution and maturation of the games business.

"Five years from now, if you see a few more studios that are their own publishers, you will see bigger publishers start to get nervous and go 'geez.' The same thing happened in music, the same thing happens everywhere."

"The industry changes, and the people that can adapt survive, and the people that don't, don't. It's nothing new."

16 Comments

Tim Carter Designer - Writer - Producer

574 317 0.6


Hello? In the film industry this happens all the time. The distributors will pre-order a film before a single frame of footage has been shot. It's called a pre-sale.

And get this: they will fund the ENTIRE thing! No milestone payment bullshit. The only milestone is the finished film.

That's how much they have faith in talent over there, and that's how much the filmmaking process has been matured and standardized.

And in response, statistically 99% of funded films are finished. It's almost unheard of for a funded film to not be finished.

The only risk then is whether it will be hit - but the distributors take this into account with some rough statistical analysis; though the main reason they fund is aesthetic - if they feel talent the talent is bankable. Anyway, to mitigate the uncertainty of a hit you just fire out more projects: law of averages.

Edited 2 times. Last edit by Tim Carter on 25th April 2012 4:42pm

Posted:2 years ago

#1

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
Funny. I recall around the middle or so of last year asking a few developers why Kickstarter wasn't being used in the industry to fund certain fan favorite projects and getting from a few places answers about how game funding "actually" worked. Basically, I was told that it was impossible. I guess this is a new model that's become ridiculously popular since Double Fine knocked it out of the park.

One fear I have is we may start to see too many projects that don't get fully funded, meaning some suit will use that figure to say Kickstarter is a bust, a fool's errand or whatever other negative comments they can use to drive interest toward their upcoming products instead...

Eh, maybe I just worry too much...

Posted:2 years ago

#2

Hugo Dubs Interactive Designer

163 24 0.1
My question about Kickstart is: Will this funding option for studios will become a sustainable business model or will it fade in memory as a 2012 trendy phenomenon?

Posted:2 years ago

#3

Matt Ness zzz

5 0 0.0
@Tim Carter
Producers in movie industry

Faith?
- Did you heard about dailies?

- Also: Why there's Direct Cut phenomena? Because editing guy cut it not as director imagined?

- Happy Ending? Writers/ directors often try to make movie not from Disneyland, but producers got the final word.

Now example of similar attitude in industry.
I've read interview with dev of Witcher and Poles were shocked, that American distributors forbid the nipples. Guys at CD Project had to remove them from alpha.

Edited 1 times. Last edit by Matt Ness on 25th April 2012 6:43pm

Posted:2 years ago

#4

Matt Ness zzz

5 0 0.0
I supported Shadowrun Returns on Kickstarter (3 data left). As Ben put it in article I gave developers carte blanche.

Yeah, I love Turn based Strategies/Tactics and I'm sure that SR won't beat Jagged Alliance or HoMM in playabilty, but in Weisman gathered people who 20 years ago created Shadowrun (tabletop RPG, not SEGA/SNES/X360). I've love the writing and I hope that pen and paper writers will deliver...
If not, they can have my monies as a thank you for good memories.

Posted:2 years ago

#5

Private Industry

1,176 182 0.2
There is clearly a space for kickstarter funded games but there is clearly a limit to the scope of the games that will be made that way. Once you get to mid budget and high budget games that cant be done via kickstarter because they need 10-15+ million. Factor in multiple platforms and the need for marketing for games that are at least mid budget you dont get around the need for a publisher.

Kickstarter seems to be perfect for games with a solid fan base that are on the lower end of the mid budget spectrum. Publishers bring more to the game than only money so they wont be going away given kickstar is for games that publishers wont finance in the first place.

Posted:2 years ago

#6

Hugo Dubs Interactive Designer

163 24 0.1
Maybe, but if you start funding games and that you get dividends from it sales success, it becomes an investment.

When you see projects reaching 1 to 3 M dollars, you start to think that 10 to 15 is not so far away if you manage to adapt the formula to business people.

Edited 1 times. Last edit by Hugo Dubs on 25th April 2012 9:59pm

Posted:2 years ago

#7

Private Industry

1,176 182 0.2
You will reach the limit at some point. The money of players is limited regarding how much amd how oftem they cam give. Publishers support games make money with it and invest it into more games. The players only give money but they dont make money.

Posted:2 years ago

#8

Roberto Bruno Curious Person

104 69 0.7
Kickstarter isn't going to fund big projects for some time, yet, but even today it can easily mean freedom for a small developer.
A simple but appealing project gathering a good amount of pledges, being funded and then being moderately successful on the market when finished, can turn a capable and talented studio in a successful self-funded enterprise.

This is much harder to obtain, working under a publisher, cause conditions are made to keep the developer on the leash.
Even if the game is good and it sells well, the publisher is going to reap almost all the benefits, and the developer is going to need the publisher's funds once again for its next project.

Edited 1 times. Last edit by Roberto Bruno on 25th April 2012 10:49pm

Posted:2 years ago

#9

Boris Vigec Technical Art Director, Zootfly

8 4 0.5
It's great. I've backed up several projects there.

Posted:2 years ago

#10

James Gallagher Marketing Planner, Futuremark Corporation

29 12 0.4
I am curious if the people at Kickstarter are worried that their biggest successes have been reboots of decades old games? An old game idea + new graphics is not really something I can get excited about, though the legions of fans supporting these projects says I am on my own here!

These reboots seem to be overshadowing the brave teams who are trying to create new game experiences - "games that publishers will never make" rather than "games that publishers don't make any more". I hope that as the platform matures, the more creative teams and game ideas get a chance to shine too.

Posted:2 years ago

#11

Rolf Moren Freelance Marketing Consultant

36 22 0.6
People tend to forget what publishers do. Sure they fund and order games from developers, but their real work is the whole chain of bringing the game to the market. Funding is one part, but actually telling the world that the game exists is something that they are actually good at. Bringing the game to the market is much more difficult that most people think and takes a lot of time and effort.

Try collecting a list of the most influential journos out there, find the key people in each and every one of them. Then try writing a fun and interesting press release, sending it out together with the right marketing material, images and films. Then its time to do the follow up, call each and every one of them, saying the right things, asking the right questions. Try setting up a press event, fixing all the transports, hotels, doing the stage show and a whole lot of things more that are on a marketeers checklist. For boxed games its then all about dealing with resellers and getting shelf space and all that stuff. Publishers wont die, actaully their job will be much easier when studios can fund their own stuff since the publishers won't have to risk the developing costs.

Self publishing might work for those who has an already established brand. If you don't it actually is a rater low chance dice roll.

Posted:2 years ago

#12

Roberto Bruno Curious Person

104 69 0.7
#@James Gallgher: Considering what kind of audience many new games are targeting, remakes of old games sound *extremely* appealing to old "core gamers".

And please, who's actually trying to create "new experiences"? Where?
The market today works with titles aimed "to everyone"... But the sad truth is that when a game is aimed to everyone it doesn't actually aim to anyone.

What's so exciting in "new stuff" which is new just for the sake of it, exactly?
I would probably pick a spiritual successor of "old and obsolete" games like Ultima VII, Baldur's Gate or Jagged Alliance 2 over any "new and exciting" casual game.

I honestly miss the '90s, when the industry was already old wnough to go beyond simple action games and still young and "ingenue" enough to allow developers to work on the games they would love to play, instead of making the games that they thought would sell well.

Posted:2 years ago

#13
"Five years from now, if you see a few more studios that are their own publishers, you will see bigger publishers start to get nervous and go 'geez.' The same thing happened in music, the same thing happens everywhere."

Of course it does; it is natural for those who have embedded themselves as middle men to want to postpone things, but what is naturally optimal is to remove middle men (anyone who is not creating wealth or paying for wealth but merely controlling the channels of distribution). With companies finding new excuses to cut their staff and justifying it as good business, we would be wise to continue finding ways to remove the need for the bloat that has no creative or technical talent to contribute to the products that society gains from our work.

Imagine if the wealth that goes to publishers, retailers, and platform holders was split between developers and consumers by lower cost products with higher cuts going toward devs. We need this to truly have a free market, and I believe that in another century a more rational society will view such meddlesome distribution channels as naively wasteful with similar disgust to how we view sacrificing humans to imaginary gods in more primitive times. There will be resistance, of course, so be prepared.

@Tim I believe the fact that such up front trust is coming from crowdfunding is meaningfully different from the film industry, but the difference in respect and trust that talent receives in the two industries is definitely interesting. Something anyone tired of crunching for no royalties just to be laid off when a title fails for reasons beyond your control leaving you with nothing but a few years closer to death should be interested in cultivating.

Posted:2 years ago

#14
"Basically, I was told that it was impossible."

For the most part, when someone tells you something is impossible they are not trying to claim a truth; they are trying to make one. Fortunately for us, the more creative of our species have constantly done the "impossible" (the thing that hasn't been done yet), or we would never have progress.

I often find it enlightening to study what naysayers would lose if the "impossible" happened :).

Posted:2 years ago

#15

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
By the way (some of you): Kickstarter is NOT only for funding reboots of classic video game projects, so don't worry about what happens to the company once this particular fad dies out in a few years. They were around before and will be around afterward, as a huge amount of people in other creative industries use the site to generate interest (and funding) for their projects.

Posted:2 years ago

#16

Login or register to post

Take part in the GamesIndustry community

Register now