UKIE calls for relaxation of crowd-funding regulations

Financing method could prove invaluable to nation's industries, says trade body

UKIE has issued a report calling on the government to reduce the restrictions and regulations surrounding crowd-funding in the UK, arguing that it could prove invaluable for the development of not only the gaming industry, but many others besides.

Currently, UK financial regulations exist which are intended to protect consumers and investors from dubious methods of investment such as pyramid or Ponzi schemes. However, crowd-funding is also covered by this legislation - something which UKIE feels should change.

Whilst the report, available in full here, calls for some restrictions to be loosened, it does recognise the need for limitations on the system, preventing investors from would-be scams and over-exposure.

The following are the five key points of UKIE argument, as laid out in the accompanying literature.

  • Crowd funding to be permitted generally:  Although this report primarily looks at crowd funding for the interactive entertainment industry, the recommended changes can have many benefits for SMEs from other sectors and wider community based projects throughout the UK.
  • A "light touch" regulatory regime:  Allowing for fast moving investment in businesses and projects whilst maintaining an appropriate level of protection for potential investors.
  • No requirement to issue shares to investors:  It should be possible to effect crowd funding projects as collective investment schemes and therefore without the need to issue shares to individual investors. 
  • No limit on what can be raised per project:  There should be no limit on the amount that can be generated by crowd funded collective investment schemes, provided that a fund that is seeking to raise over €5 million would have to produce a prospectus (this derives from the Prospectus Directive).
  • An investment limit per person per project:  It is important to have a limit to reduce the possibility of any individual investing too great an amount in a project that is unsuccessful. 

The impetus for the push comes partly from the recent success of Tim Schafer's Double Fine Productions, which crowd-funded a project extremely successfully recently. The new project, as yet un-named, aimed for investments of $400,000, but ended up clocking up over $1,000,000 in a single day. The total now stands at around $1.8 million.

"Having Double Fine's Kickstarter project raise over $1.8 million has shown the huge potential of crowd funding to benefit games and interactive entertainment businesses," said UKIE CEO Dr Jo Twist.

"We need the UK to be able to take full advantage of crowd funding to allow video games businesses, community projects and SMEs from all sectors to raise much needed investment. We have produced UKIE's Crowd Funding Report as part of our pre-budget submission to government, to outline exactly what needs to be done for this to be possible. We'll be working with government over the next few weeks to push for inclusion of our recommendations in the up-coming Budget."

Seeking to reduce financial restrictions in the current economic climate may seem something of a fool's errand, the process of decentralisation may be one which appeals to Whitehall, along with the ethos of promoting SMEs and encouraging small investors.

Currently, most US projects use the Kickstarter service, which allows project owners to set their own targets, investment increments and rewards. Generally, the higher the investment, the greater the reward, ranging from credits on the final product to shares and guaranteed ROI.

Related stories

Nintendo inspires improved January sales for UK retail

Monster Hunter is January's No.3 best-selling game after just a week on sale

By Christopher Dring

UK Charts: Call of Duty back at No.1 and Digimon in the Top Ten

It's a quiet week for physical games sales

By Christopher Dring

Latest comments (9)

Thomas Dolby Project Manager / Lead Programmer, Ai Solve6 years ago
I don't think anyone could have predicted this kind of massive surge of interest in crowd funding a month ago.

I kind of feel that we should wait to see whether this can actually work / be more cautious, rather than run aboard the bandwagon just because Schafer's project got a lot of money.

UKIE seem to be pushing this as a viable business model already, but is there actually a successful crowd funded game out there at the moment? I don't count Schafer's project as successful quite yet just because he got a lot of money.
0Sign inorRegisterto rate and reply
Martyn Brown Managing Director, Insight For Hire6 years ago
I think its a little unrealistic to think that every developer is as charismatic, deeply respected and well loved as Double-Fine/Time Schafer. Sure, there are 15-20 studios that could likely raise decent amounts for projects, but few are held in such cosy esteem.

Its great to see this working and the energy surrounding it, but it's not a viable long-term solution for many.

My 10c.
0Sign inorRegisterto rate and reply
Andy Payne Chair/founder, AppyNation6 years ago
I think we owe it to the UK industry to scope what can and can't be done under UK law and what Government can do to help make the UK a competitive place to make and sell games. This is a step in the right direction and will resonate with many in Government. Most games need some element of funding, currently in advance. But models and methods of working are changing and crowd funding (with its 3 sub sets) starts to democratise the process. Banks are not lending. Indeed they rarely understand what we do . So the market has become one of VC and Angel Investment which presents both solutions and challenges to game creators.

This is part of a whole body of work that UKIE and TIGA are doing with Government - we also need to get a level playing field with the likes of Canada and France in terms of production tax credits. We had this 2 years ago, but it was snatched back on the 22nd June 2010 by the Coalition government. Since then growth has been flat, the creative digital industries have been seen to be even more important and the work done by the Next Gen Skills Campaign following on from The Livingstone Hope Report has highlighted the need for more science and technology skills being taught in schools. In short we are far more joined up as an industry than we were 2 years back and this can only help us to be seen as a leading industry for growth and jobs for UKPLC.

I am very proud to be part of the UK games and interactive entertainment industry which will be part of our working futures and hopefully our children's futures.
0Sign inorRegisterto rate and reply
Show all comments (9)
Anthony Gowland Consulting F2P Game Designer, Ant Workshop6 years ago
I could see maybe Braben crowdfunding a new Elite, but yeah - for most cases devs are going to struggle to raise the awareness and good will needed.

When you look at the list of successful Kickstarer game projects, there are not a lot of high scorers.
0Sign inorRegisterto rate and reply
Martyn Brown Managing Director, Insight For Hire6 years ago
Andy - I've zero argument with any of that, I just don't think high profile success doesn't necessarily open the floodgates on crowd-funding for all.
0Sign inorRegisterto rate and reply
Andy Gahan Managing Director, The Pixel Bullies6 years ago
I agree with you Martyn, We're experimenting with this at the moment and we're not doing quite as well as some others :)

It's definitely an interesting model though.
0Sign inorRegisterto rate and reply
Graeme Struthers Project Manager 6 years ago
In terms of floodgates or a silver bullet that enables funding, I doubt UKIE or anyone else thinks that this solves everyones needs but from my little corner, it is kind of nice to see that someone is trying to make this an "easier" option for games creators to access should get a big hearty slap on the back.
0Sign inorRegisterto rate and reply
Graham Simpson Tea boy, Collins Stewart6 years ago
Investors still need to be protected. Questions are at what point does someone invest and what are their expectations. And how does the law of the land protect that. Else you'll get a load of Russian and Nigerian shysters taking everyone to the cleaners.

0Sign inorRegisterto rate and reply
Barrie Tingle Live Producer, Maxis5 years ago
Kickstarter is clever in how they show their popularity.
If you search for video games for example, every one of them on the first page of results is "FUNDED". If you dig a bit deeper there are plenty that don't even get out of the $100 mark.

Bad sales pitch? Perhaps
Bad marketing to get visitors looking at your project? Perhaps
Poor game idea? Perhaps

Schafer obviously has a lot of following so can generate buzz around his project by merely mentioning it. Wannabe indie devs might not have that same luxury.
0Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.