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.