Crowded House

Crowdfunding may seem like a curiosity now - but it's a glimpse at the future of creative industries

A little over ten years ago, the team running SETI - the Search for Extra-Terrestrial Intelligence - found a groundbreaking solution to an enormous problem. The team's efforts to secure data feeds from radio telescopes had been immensely successful - too successful, in fact, to the extent that SETI was inundated with vast amounts of radio data which it had no way to analyse. The organisation was running on a minimal budget, and the kind of computing power required to search that much data for potential signals would have been too expensive even for a much better funded effort.

The solution reached by the SETI team at the University of California, Berkeley, was SETI@home - a distributed computing effort which sent out packets of radio data over the Internet to volunteers who gave up the unused power of their home computers to the processing efforts. The result was that SETI was able to tap into hundreds of teraFLOPS of processing power (stop sniggering, that's how it's measured) at minimal cost - buying a supercomputer capable of that would have bankrupted the organisation.

SETI@home wasn't the first distributed computing effort of this type, nor is it the most successful, but it was the first to really capture the imagination of Internet users. As such, it's not a bad place to stick a flag in the dirt and say, "here was born the crowdsourcing idea".

Crowdsourcing has come a long way since then, and the concept is still difficult for many people. It's easy to understand how the computing power of tens of thousands of normal PCs can be combined to outperform a supercomputer using some clever software. What's not quite so easy to understand is the sheer power which can be brought to bear on an enormous range of problems by applying the same principles of distribution not to computers, but to the people sitting at them.

"Two pairs of eyes are better than one, people will say when they're offered help in searching for something - but what about 100,000 pairs of eyes?"

Two pairs of eyes are better than one, people will say when they're offered help in searching for something - but what about 100,000 pairs of eyes? The reCAPTCHA service asks web users logging into websites to identify two words taken from scanned documents, which computers have failed to recognise. The input of thousands of users generates startlingly accurate results. When Wikileaks released thousands of documents last year, the Guardian engaged internet volunteers in combing the documents for crucial information - a task that would have taken the paper's journalists months if not years, and was completely beyond the comprehension of even the most advanced computer software, but could be accomplished through crowdsourcing in hours.

These are simple examples. The extent to which crowdsourcing has impacted the world we live in is extraordinary, and growing. Each of us in the developed world walks around with an Internet connection, a surplus of computer power and a high resolution camera in our pockets. The leveraging of that power using the paradigms created for distributed computing has the potential to overturn entire industries - perhaps even to topple governments.

What I want to talk about more specifically, though, isn't toppling governments - but it might be something even more profound. It's a logical progression from crowdsourcing which, somehow, almost nobody seems to have foreseen - and whose eventual impact, I'd argue, still isn't fully understood.

Earlier this week, veteran developer Tim Schafer announced that his company, Double Fine, wanted to make an adventure game - a genre often lamented as being dead before its time - but that it wanted to secure funding for the game through unconventional means. Schafer launched an effort on Kickstarter, a funding site, aiming to raise $400,000 from the company's fans to fund development. At the time of writing, the effort has far exceeded that figure. Double Fine has the money to make its game, extracted entirely from the company's own fanbase without the slightest bit of involvement from traditional funding sources like publishers or venture capitalists.

This is crowdfunding - the logical evolution of crowdsourcing. What began as an effort to aggregate the spare computing power of volunteers and expanded into the aggregation of their spare brain power has posed a new question - can we aggregate the spare money in their bank accounts? The answer, it would seem, is yes.

Crowdfunding poses absolutely enormous questions not just for videogames, but for the entire structure of our economy - particularly our creative industries. Of course, Schafer's success is a fringe case, and it's worth noting that another equally ambitious crowdfunding effort, which hoped to raise $300,000 for the development of a sequel to the Nexus space combat game, recently failed to hit its targets by quite a significant margin. It's not time for game developers to burn their bridges with publishers and VCs just yet - but all the same, there's a seismic shift in the landscape occurring here which is important to consider.

"Crowdfunding asks the Internet audience to put their money where their mouth is and pay for the development of something they'd like to enjoy."

Publishers - and to a certain extent VCs - have different functions depending on which perspective you view them from. Financially, they are investors, picking projects which are likely to succeed and throwing backing (financial and otherwise) behind them in the hope of making a return from the project. Creatively, though, they are gatekeepers. They are, for better or worse, in the business of finding things which they believe they will be successful and permitting those things to be made - and thus, by act of omission, preventing other things from being made. In this, publishers rely on their own instincts and market research; no mechanism has existed up until now to effectively test what the market will actually pay for.

Crowdfunding approaches that from a novel perspective. Rather than putting a group of people into a room with some free biscuits and asking them if they'd theoretically spend some theoretical money on a theoretical game at some theoretical point in future, a scenario from which the only reliable data that can be extracted is related to the group's preference in free biscuits, crowdfunding asks the Internet audience to put their money where their mouth is and pay for the development of something they'd like to enjoy.

There are multiple ways to approach this. Kickstarter is the most popular at present, and simply says, "invest, and you'll get a copy of the finished product; invest a bit more and we'll give you some goodies as well". Capitalists have criticised this on the basis that the investors don't get any return on their investment - if the product does stunningly well, the people who funded it don't get anything back. (Crowdfunders would probably respond that capitalists might enjoy their lives more if they didn't measure every damned thing in coins, and observe that most of the history of human creativity has been funded by patrons using their wealth to pay for artists to create things for them, not by suited executives shepherding creative talent into building marketable "product".)

That's where the second crowdfunding model comes in - essentially crowd micro-funding, in which the crowd donates little or large amounts, with a view to taking home a share in any eventual profits from the venture. If this sounds like it's the stock market being reinvented, then that's because, in essence, it is - it's the emergence of a grass-roots stock market in creative projects, growing up in the shadow of the completely bastardised and arguably unfit for purpose stock market in corporate shares upon which our economy rests (and often, slips off).

Needless to say the latter model creates all manner of legal problems, because the laws governing funding and finance have been created to enshrine stock markets as the beating hearts of national economies, and it's going to take a long time for governments to twist their heads around the idea that individual people might want to take that power into their own hands on some scale. The legal problems, however, may not matter - people are going to do it anyway, and the law will have to sort itself out in the wake of progress, as usual.

What does this mean for game development? It means doors are opening. Few of those doors will be remotely as large and wide as the one through which Tim Schafer and his crew sailed this week, but the model which he has used is hugely illuminating - especially once you start to consider what else might legitimately be considered crowdfunding. Minecraft, for instance, started out selling 10 Euro copies of a very unpolished alpha to loyal fans in order to fund further development - if that's not crowdfunding, what is? If that's not a radical new business model (build something rough and see if people love it enough to pay for you to build a better version), then what is?

"What does this mean for game development? It means doors are opening."

Sure, Tim Schafer is famous and has a huge following - but Markus "Notch" Persson wasn't. Besides, not every developer needs to make $400,000 to build their game. Not every developer needs to raise funds before doing the groundwork for their game. Variations of this model can work for smaller amounts of money, for games at various stages of development (right up to being finished - lots of projects on Kickstarter have successfully sought money for physical publication of completed digital products), and with various incentives for investors, from the warm fuzzy feeling of being a patron of the creative arts up to the potential for a genuine financial return.

Think this is a flash in the pan? Think again. Consider the foundation of nation states - the world's most powerful entities in spending terms, built on the simple economic principle that if a whole lot of averagely wealthy people contribute a little bit, they can outspend the most wealthy elites without breaking a sweat. Now consider that principle applied to the free market economics which exist in the creative industries - and while you're at it, remember one more thing.

The success of effectively crowdfunded efforts like Minecraft and Double Fine's new game comes at a time when the world is in the throes of one of the toughest recessions in decades, when disposable income is at a premium for many. Consider a future, five years down the line, where the economy is growing again, disposable income levels are rising - and crowdfunding is well established and trusted as a way to patronise and influence the arts. In the long run, perhaps the 20th century will come to be seen as a difficult transition period for the arts - when for just a moment, the cold hand of capitalism had to be grasped, in the gap between the patronage of the wealthy and the patronage of the crowd.

Latest comments (20)

Dave Herod Senior Programmer, Codemasters6 years ago
Great article, Rob. Anyone concerned that the "investors" don't get a return on their money, could really just look at the funding as an exaggerated pre-order. I don't expect a profit share from Double Fine because all I'm doing in my mind is buying a game, same as I do regularly. In the traditional model, where you buy the finished game, I don't expect to get given some money back if the game is a huge success.

I think the attitude with Double Fine is that people care about games as things they enjoy and want to pull down the barriers to new ones getting made. The great thing about this is that it's kicking out the "money men", the irritating marketing types who don't really give a damn about the games themselves, they just care about how much profit they can milk out of them.
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Brian Smith Artist 6 years ago
Great article. An even better way imo is the way CARS is being developed. They are actually profit sharing their development of a race game for serious racers. Same type of crowd-sourced finance with way more input possible from the crowd. I really hope both these projects do fantastic. They are both being financed by the players that will want to play them and both are project that publishers would have 'filtered' out.
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Martin Shannon-Smith Motion Designer 6 years ago
As far as I'm concerned I just paid Tim Schafer $30 to make me a game that costs (at the moment) closer to $1.3 million. I'd say that's a pretty big return.
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Show all comments (20)
James Boulton Owner, Retro HQ Ltd6 years ago
Strikes me as a brilliant idea. People are paying for what they want directly to the people who are going to make it. Your end user already exists and has paid for the development, so there's no risk factor at all for the developer. It's a fairly specialist thing I guess, but if you have the right IP, it's going to work...

I may well pay my 15 buckazoids (ahhh, only if it were the next Space Quest) and see where it goes. Always been a big fan of the old point-n-click adventures. Well suited to iOS, though, so hopefully with the extra $900k they can afford to port it to that too!
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Daniel Leaver Creative Director, Ambient Studios Ltd6 years ago
I think this is an amazing week for the games industry and adventure game fans. However, what happens if a developer of lesser ability than Double Fine crowd-funds their game but ultimately fails to ship it? Sure, the first batch of funders will probably shrug off that £10 or whatever and say "Ah well, I knew the risks going into this thing". But how long will that attitude last when the 2nd or 3rd games fail to ship?

We'll find out soon enough I'm sure. Either way, it's all very exiting!
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Andy Payne Chair/founder, AppyNation6 years ago
Rob. Spot on as usual.
Love this line
'The legal problems, however, may not matter - people are going to do it anyway, and the law will have to sort itself out in the wake of progress, as usual.'
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Tim Carter Designer - Writer - Producer 6 years ago
Yes, because as we all know, there were never large groups of people doing things on a volunteer basis before the Internet.

Another example of the young generation's narcissism.

Edited 1 times. Last edit by Tim Carter on 10th February 2012 6:22pm

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Lol Scragg Co-Founder & Director, Binary Pumpkin6 years ago
Excellent piece, but I have to agree with Daniel Leaver - we were discussing this very thing in the office in questioning what would happen when the rogue elements of the industry decide to try and do this - and rip contributors off. We all know it will happen because if we have worked in this industry for more than a few years, we all know someone who is likely to actually try it.

It's already a revelation that we are no longer subject to the whims (and sometimes crazy decisions) of the Publishers and crowdfunding could mean that even larger scoped projects could come to fruition. But I worry that people will turn against the idea once a few rogue projects are setup with the pure intention of taking the money and running...
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Johan H. W. Basberg CEO / Lead Designer, Gatada Games6 years ago
Couldn't rogue projects be prevented simply by incremental payouts by Kickstarter?

The uncollected money could simply be transferred to new projects, by the supporters themselves, while Kickstarter keeps the interest generated until they do.

Seems like a win-win to me.
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Richard Vaught Studying B.A. in Game Design, University of Advancing Technology6 years ago
I have always been a fan of this, and have donated to the development of a number of games I considered worth, such as Dwarf Fortress. This is a true example of what the free market is supposed to be about. People controlling the market by choosing where their money will be spent. Hat's off to Tim and the guys at Kickstarter. Regardless of whether this succeeds or fails it gives me, a game design student looking forward to getting into the industry, some hope for the future and growth of the games we all love.
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Jack Lee Studying Internet Marketing, Virginia Commonwealth University6 years ago
Very good article. A quick point for reference: Kickstarter specifically (I'm not sure about other crowdfunding sites) is not an investment opportunity. You are not allowed to offer incentives like potential profit or ownership, or even lottery chances or raffles. You pay your money, you get a thing (be it a copy of the product, acknowledgment in the credits, whatever), and that's it. It's for patronage and supporting creative projects, not business investments. Anyone who paid Double Fine $15 or more will get his copy of the game, the documentary in some format, and any other bonuses promised, but you will never see a monetary return on your investment, which is how it should be in my opinion.
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Marcus Feital Front End Developer 6 years ago
About the rogue projects (if I understand it right), I hardly believe this would be an issue. As pointed out in the article, it is not every project that get this kind of support, there a lot of trust and empathy related to something like this, not to mention a well known know-how of those involved. A big name trying a "last-act" of cash-in and rushing some crap out of the door or running away? No, don't believe. Besides, as I recall (I read kickstart docs a long time ago, so things might have changed or my memory might be playing tricks) the money are not given all together, is a kind of milestone thing. Anyway, a lot of those who pledge probably had bought bad adventures - or any bad game - before, and yet don't find any problem funding an adventure that they trust, so don't see it as an issue.

That does not mean that the idea does not have it problems:
- First one is that kickstart is available to us citizens only, due to the nature of the laws the article mentions that might be adapted some day (hard to believe on that case). If you're not, like me, you have to try a local equivalent, which does not have the name and trust of kickstart. What if some local sites goes bankrupt and leave donors and project owners with no money? What will it mean to the business as a whole?
- Secondly, most of the transaction is base on trust, trust not only on the project but in the name behind the projects, I think. What if you pledge some money based on a art director that you like and he leaves at the middle of the project for a better job opportunity that appears, or for whatever reason? Or some views change in the middle of the development, due to whatever constrains it appears? So many variables.

My take is: I do believe in the model. It will need to be tested and proof, it will have highs and lows, but due to the open nature of the approach - and some personal experiences - it will succeed in the end, at least to some point. Will it be the dominant model for games? well, this is another discussion... :)
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Philip Mayes Founder and Director, Mighty Kingdom6 years ago
@Daniel The reason why Double Fine had so much success was because they are well known an trustworthy. A shady dealer that has just popped up for the purpose of stealing some cash is going to struggle to reach that level of funding, so it might not be as big a problem as you think.
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The bigger the name, the bigger the following - and the more money they could source. Id be really curious to see what happened if say "Miyamoto & Nintendo" tried to crowdsource the next "Zelda" game (for example) (and not that they actually need the cash, they have it...)... $10m? $50m? It might just technically turn into the biggest game-preorder in history...
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Geir Aaslid Producer, Virtual Game Worlds As6 years ago
This: 'The legal problems, however, may not matter - people are going to do it anyway, and the law will have to sort itself out in the wake of progress, as usual.' does not tell us all that we need to know.

The legal problems prevents Kickstarter from touching projects involving Non-US studios or citizens. And last time I checked, the vast majority of gamers lived outside the US. Most studios are also based Likewise, one of the UK kickstarting operators also restrict themselves to UK citizens. This means we have an iron curtain along many (or most?) geographic borders preventing gamers worldwide from connecting with most studios wanting to crowdfund their game projects.

However, the solution "Notch" chose by selling early alphas, is a blend of both worlds. Until the legal problems are solved, this is for many based outside the US, where the solution is to be found.
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Manoel Balbino Programmer, Playlore6 years ago
The parallel to wealthy patrons of bygone eras paying artists to produce things for them is spot on. It's spot on.

A group of people want to experience a game that nobody in the market wants to offer. It's completely in their right to "hire" someone to make such game for them.

Edited 1 times. Last edit by Manoel Balbino on 13th February 2012 3:58pm

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Paul Trowe President & CEO, Replay Games6 years ago
Extremely well written. Good job, Rob.
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Jonatan Crafoord Neuron, That Brain6 years ago
A note on the worries of canned crowdfunded projects... One of the great things about crowdfunding is exactly that it is "commissioned" work, not work that is done in the hopes of turning a profit. A crowdfunded project doesn't have to have positive return projections to see continued development, there just needs to be money left in the fund. Where a regularly funded project can be cancelled before release because the projections say the sales won't pay for the marketing, crowdfunded products already have customers who have paid for the product. These customers should have it delivered in whatever form the money allowed it to take, and hopefully this is also how it will work.
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Tim Carter Designer - Writer - Producer 6 years ago
Kickstarter is fine, up to $3 million (that's the SEC's limit on how much you can make per year using "crowdfundiong").

Essentially "crowdfunding" is a donation system taken to the internet.

For investment beyond $3 million, the stock market is has been doing "crowdfunding" for well over a hundred years. The difference here is that it is heavily regulated for a pre-Internet age.
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Rick Cody PBnGames-Board Member 6 years ago
Fantastic article!

I think people here missed something. Crowd funding is like small-scale capitalism. A project must be good to deserve money. Plus, a group's reputation precedes them.

A startup expecting as little as $50,000 can't have high hopes they'll actually get the money. But if they get it and fail I imagine few are severely hurt by the loss. More important is insuring that this failure goes on a person's (or group's) reputation. A legal online identity is crucial.

Edited 2 times. Last edit by Rick Cody on 20th February 2012 8:26pm

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