Crowd Sourcing. A Kreij Editorial.

[Kreij]

Crowd Sourcing, The Good, The Bad, and The Ugly.

The Good :
Kickstarter and other forms of “crowd sourcing” have been a huge plus to small indie developers trying to produce a product on a shoestring budget. It gives them the opportunity to produce a game that would be considered by traditional publishers as being too risky, or so niche they cannot find other sources of funding to make their goal a reality.

Developers have taken different approaches to crowd sourcing. Notch (Markus Peerson), the developer of Minecraft , gave people a pre-release (alpha or beta) version of the game to play with the promise of the full version to “investors” when the game was released. He followed through on his promise and his game has been a huge success. Others offer some kind of in-game perks, access to beta tests and other incentives to entice people to sign on to help them out.

The Bad :
When someone contributes to a crowd sourcing cause, they do so with the belief that they will be rewarded, in some manner, for their monetary investment. The problem is that there is no guarantee, whatsoever, that you will get anything from your investment. The rules (if you can call them that) state that if the game does not make it to release, the people who pitched in will get a refund of their donation. While on the surface this looks good, the reality is that if the company fails and goes into administration (ie. Bankruptcy) the crowd sourcing people will not see a dime. Even if the company does not fail, there is nothing stopping them from compensating investors with previous IP, which you may already own, and is worthless to you.

The Ugly:
We are now seeing larger companies, or prominent people in the industry, using crowd sourcing to fund their projects. These people have the resources and contacts, in place, to make the project a go already. They seem to simply be using crowd sourcing as method to get people to subsidize their future products, which are many times reboots of older IP. While this is fine for a new start up, who may have obtained or already owns a particular IP, having a large studio or already wealthy developer do it just wreaks of digital panhandling.

In no way am I against crowd sourcing, and in no way am I trying to say that people should not get involved in this manner. What I do want to convey to people is that they really should take a hard look at not only what is being made available in a crowd sourcing manner, but who is doing it. The veterans in the game industry are taking notice, and you should too.

As always, any comments on the things I write are appreciated.

Thanks for reading,
Kreij

[Frick]

All I know is that Tim Schafer is making a point and click adventure thanks to it so I kinda love it. Also Obsidian is doing something new, which I also love. So I'm pretty much entirely for it. Is it risky? Well yes of course, but that is no surprise. I see it as a charity pretty much.

[manofthem]

Nice read. I didn't even know the term "crowd sourcing" before, but as usual with Kriej's posts, I come away a little more informed. Thanks for that.

[Kreij]

Originally Posted by Frick

All I know is that Tim Schafer is making a point and click adventure thanks to it so I kinda love it. Also Obsidian is doing something new, which I also love. So I'm pretty much entirely for it. Is it risky? Well yes of course, but that is no surprise. I see it as a charity pretty much.

Again, I am not trying to sway opinions. I just want people to be aware of the reality of what is happening.

I really have a lot more information on the subject but I didn't want to see a lot of tl:dr posts. lol

[Aquinus]

Great read. I haven't really been playing many games beyond Minecraft so I haven't really kept up with anything happening in the industry. It's a good reminder how good things can go bad, if you consider the alternative bad.

[Kreij]

It's not that things are going bad. Actually it's just the opposite, thing are going extremely well for a lot of companies that are using crowd sourcing.

The question is actually, "are they using these programs for innovative freedom or for risk aversion?"

Let's use Minecraft as an example. When Notch started his campaign he needed funding to continue with the development of the game. He got it. It has sold millions and has made him rich.
He used crowd sourcing to free himself from the costs and pressures of having to use a publisher and thus got the "innovative freedom" he needed to continue and succeed.

Now let's say that he comes back and says, "We are making Minecraft 2", pitch in to help.
Wouldn't you think, "WTF you've made millions, why aren't you funding the project and taking the risk yourself instead of dumping the risk of financial loss on your fans?" In this case he already has the innovative freedom (and could likely get real investor backing) and only would be using crowd sourcing as risk aversion so if the project failed he would not take the loss himself.

The gaming industry is a very brutal market segment at the moment. We see studios failing left and right from a variety of issues such as poor management, higher overhead costs and a horrible economy. But is shifting the ultimate financial risk to end users' something that will blow up in their face when a huge effort that is crowd sourced fails and all the "backer" lose their money?
Will it kill the confidence in crowd sourcing for the little guys who really need to be "kick started"?

[Iceni]

I think the problem is how abuse able the system is.

Since crowd funding is in essence a non contractual agreement. Take a large developer crowd funding to rejuvenate an older line. With careful wording, fine print and stipulations you could in effect fund a different project to what you though you were funding, and in addition receive no benefit from the funding you placed into the system.

I would be looking for a few stipulations on any crowd funding project. You need to know what your investing in, How your money is going to work, and what you get in return.

The current RSI SC crown funding project provides a good clear example, You were funding a game, And in addition you got a free copy of the game and access to content as it is rolled out.

A bad example would be a developer saying they want to develop a title's sequel. You invest in the name but the fine print says you are investing in development alone and not a final product. Provided the developer puts something into the title, story boards ect they don't have to actually make a game, and legally they have used your funding as intended. Since there is no regulation on crowd funding, and you have invested without reading the fine print you could see that title then go into production on a separate private funding system, so you not only loose your money but a production company then creams the profits again.


I think Crowd funding will have it's place, But sites like kickstarter need to regulate as well as act as a funding model. Perhaps this is the way forward for the company since crowd funding can be done on a company website, Kickstarter should regulate and certify the funding model so people can use the brand as a mark of fairness and safe investment.

[cadaveca]

Thanks for voicing what I already thought, Kreij.

And yes, I know, FOR A FACT, that Kickstarter is being used for risk aversion.

I think W1zz should start a Kickstarter for TPU.

[Feanor]

Great editorial. Clear, easy to read, even for a french-canadian like me.

From the subject, i didn't knew much about, but i now know it can (as many good things) be turned against itself to be destroyed.

It is a pain, but reading the fine prints is mandatory...

[qubit]

Originally Posted by Kreij

As always, any comments on the things I write are appreciated.

Oh, terrible piece K, terrible piece. Nah, ya know I'm messin' with ya.

Those negative fears are all true and is why I've always been wary of giving to a crowdfunding project. In particular, there's nothing stopping the organizers from just defrauding the donators (I hesitate to say "investors" in this context). One day, when the money starts to dry up, they simply disappear. Yes, they could be cought, but crooks usually know all the tricks to get out of it. Anyone can put up a site of Facebook page promising the earth and then disappear. It's that easy.

I would love to read your long version in an email or PM.

[Kreij]

I don't have an official "long version", Q, but I will add some more thoughts for people to try to digest.

22Cans (Peter Molyneaux's latest studio) has recently released their game Curiosity. He promoted it as a huge, social experiment, which it is, as no one really knows anything about what's at the center of the cube, but they are willing to chip away at blocks to find out.

On day 1, the servers overloaded from something like 158,000 simultaneous players. This is not a huge number of players, but it would make sense that they would not pour money up front into infrastructure with such a wildly unpredictable "experiment".

In order to fix they problem they asked the players to pitch in. We are not talking a development need here, we are talking about players subsidizing their infrastructure costs for nothing in return other than to be able to actually play the game. Has the company no money at all put aside for an issue like this? Was this kind of potential problem not even considered?

Now there is a Kickstarter campaign to drum up $450,000 so that Mr. Molyneaux can make a reboot of the old "God game", Populous. If the studio cannot even afford to keep their current game running in an acceptable fashion without the charity of their fan base, why would I give them more money to start another? Are funds going to be shuffled between their projects however they see fit? I don't know, and neither do you.

This is the kind of questions that the "backers" must consider before shelling out their hard earned money. Don't just blindly jump in because <Insert game name> is cool. The reality is that you are basically paying for a non-guaranteed pre-order. How people feel about that, though, is ultimately up to them as it's their money.

[Morgoth]

sadly i cant make use of kickstarter, copyright/ lisance reasons

[lemonadesoda]

I don't like crowdsourcing at all. Why? Because it is leeching off the goodwill of people. Project X says to People P that they can have product Q if collectively enough P cough up enough $ up front to finance X and Q. There is no risk to X, but risk to P. In fact, there are benefits to X even if Q is a flop. They get paid salaries and whatnots during the development period.

There are big profits to X if Q is successful but no profit to P. They will only ever get the product Q.

• The risk is to P.
• There is no risk to X only benefits during the development of Q.
• If Q is successful, the profit is to X.
• There is no profit to P.
• The profit% to X is ASTRONOMICAL because their investment was tiny.

The risk reward? All wrong.

This is why I don't like crowdsourcing.

This is why bankers and big publishing houses are jumping on the bandwagon. Zero investment on their side - abuse goodwill and franchise value - make big profit - and/or make no loss and take no risk.

IF on the other hand, just like financing movies, or cooperative investments, the people P - through their very contribution of $ to the project - also participated equally in the profits - then this would be fair, moral, ethical, and defensible.

But it isn't.

[Kreij]

When Notch put Minecraft up for sale in it's infancy, he said, "Buy this version and your money will allow me to continue development, but you will get the game right now even though it's rough around the edges and has issues."
I am fine with that, and I did buy Minecraft, and it's a great game.

"Fund our project or we won't make it" is just wrong on so many levels. I don't want the trinkets you promise with higher donations, I want a game to try when I put up the cash, even if it's completely bug ridden. If you don't have enough assets to at least give the backers something when the pony up their dollars, maybe you need to rethink your business model.

How much of the donation dollars are being diverted from development in order to fund the "trinkets"? That should be funneled into development as that's the goal, no?
Some of these companies are even spending advertising dollars to promote their Kickstarter campaigns.

[1Kurgan1]

Originally Posted by lemonadesoda

I don't like crowdsourcing at all. Why? Because it is leeching off the goodwill of people. Project X says to People P that they can have product Q if collectively enough P cough up enough $ up front to finance X and Q. There is no risk to X, but risk to P. In fact, there are benefits to X even if Q is a flop. They get paid salaries and whatnots during the development period.

There are big profits to X if Q is successful but no profit to P. They will only ever get the product Q.

• The risk is to P.
• There is no risk to X only benefits during the development of Q.
• If Q is successful, the profit is to X.
• There is no profit to P.
• The profit% to X is ASTRONOMICAL because their investment was tiny.

The risk reward? All wrong.

This is why I don't like crowdsourcing.

This is why bankers and big publishing houses are jumping on the bandwagon. Zero investment on their side - abuse goodwill and franchise value - make big profit - and/or make no loss and take no risk.

IF on the other hand, just like financing movies, or cooperative investments, the people P - through their very contribution of $ to the project - also participated equally in the profits - then this would be fair, moral, ethical, and defensible.

But it isn't.

Many things in life are a risk, as with anything, don't just blindly invest in something. Many publishers/developers are afraid to break the mold, and you might have always though, if a game came out with "X" feature I would buy it in a heart beat, but the big companies are afraid to try that out. Your best bet might be finding an investment opportunity on Kickstarter that is making something with feature "X" that you have been looking for, for a long time.

At that point, do your research, and decide, is the risk worth it. Funding them knowing that you might never get your money back, for a feature that you have been looking for, for ages? Kickstarter allows you to invest cheap, and go up, you will see many investing at the game level, and some there might be eager and not mind losing that investment, just for a shot at something different.

But as you go up and beyond that price for just the game, these are people who are the meat, these are the people who have wanted this for a long time. These are the people investing, just at a shot of having something they have dreamed of. And to these people, it's about more than the money. And thats why crowd sourcing is great, these people can show there is a need for "X" even if the project doesn't take off.

It's real simple to not get involved, just don't invest. But somethings are about more than the minor investments into these titles. And showing there is a want for something with your wallet, might help that cause, even if it doesn't succeed that first time around.

[Kreij]

You are right, Kurgan, crowd sourcing is a democratic process as you can choose to participate or not. But let's take a look at something ...

You are not investing in anything. Since this is a financial transfer, the definition of investment would be "To commit (money or capital) in order to gain a financial return". When investing in stocks or bonds there is no guarantee of a financial gain, but there are rules and regulations in place to make sure the company receiving your money is doing the best it can in order to make a profit and thus get you some dividends on your investment. There are no such rules in this case.

Another description of this would be, "To commit (money or capital) in order to receive a product." This is called "buying something". But in this case you aren't buying anything as that "something" does not exist yet, and perhaps never will. At least when you pre-order a game in the normal sense you have a reasonable expectation of getting it because the game already exists.

So we are left with, "To commit (money or capital) in the hope that at some undetermined point in the future you will get something for your money even though there is no concrete evidence that this will occur." If we are going to call it investing, then this would be my textbook definition of blind investing. Add to this the fact that they tell you it will never happen if enough people do not pony up their cash. You are no longer betting on the developers ability and promises, you are betting on the fact that there are enough people who are willing to fund the project.

Another thing is, "why are the game companies getting away with this?" No other industry would ever be allowed this leeway. If you went to your local car dealer and they had a big picture of a concept car on the wall and said you can have one if you pay for it up-front AND enough people do so too, we will make them. If not, you may or may not get your money back. Would you do that?

A big thanks to all for the great discussion !!

[lemonadesoda]

Nice example Kreij. DeLorean tried that with cars:

In the years before his death, DeLorean planned to resurrect his car company, and gave interviews describing a new vehicle called the DMC2. In an effort to gather funds for this venture, he designed and sold high-end watches via the internet under the name DeLorean Time. Made of what appeared in promotions to be injection molded stainless steel (ie very cheap to manufacture), the watches sold for $3,495. By purchasing one you were placed on a waiting list for the chance to buy one of the first DMC2s when they became available. None of the watches seem to have ever been built or delivered to customers before DeLorean's death.

Kurgan. I think you have hit the nail on the head with your comment. Yes, there are people who are ready and willing to make a financial commitment for some future product. However, my point is that (from any basic finance course), these are the guys who are actually making the investment risk. BUT SOMEBODY ELSE will take the reward of any profits from this venture. The original investor gets the product, but the Project Company takes all the profits of every product sold to investors and also non-investor customers.

Karl Marx would have something to say against that.

So would any MBA or finance graduate.

So would a regulator.

So would an ethics professor.

[Kreij]

Would you all like to see me do more editorials in this manner when I find something worthy of your attention?
I do my best to present the original article in a factual way and try not to inject any bias so that you can respond based on what those fact represent to you.
I may show a little bias on any follow-up posts as I pull from my personal opinion, but I still try to phrase what I say as a question to you, not as a directive to try to get you on my bandwagon.

Your feedback mean a lot to me, so please speak your mind.

[lemonadesoda]

[MT Alex]

Originally Posted by Kreij

Would you all like to see me do more editorials in this manner when I find something worthy of your attention?...Your feedback mean a lot to me, so please speak your mind.

I have always considered you to be a voice of great equanimity. I'm not sure if that answers your question, but it's the first thing that comes to my mind.

[FrankWest]

Fully agreed! For every Kickstarter projects that anyone wish to back, it is vital to know the developer better.

For instances, you need to know:
Are they making valid objectives?
How big is their development team?
How far are they in their development cycle?
How much money they wish to raise and where do they spend them?

I have backed 3 Kickstarter projects so far and let's take a closer look at them.

1st. Zombicide by Guillotine Games

A zombies board game by former employees of Rackham Entertainment. They are a small group that already had experience making boardgames and miniatures. I watch some of their videos and know that they have already finished an engineering sample along with precise details of the game's miniatures.

They showed a small tutorial of the game's setup, character progression, rules etc. Of which I find it very close to completion. With the tile boards and the help of online community, there the possibility to increase the amount of playable scenarios infinitely.

Having completed my inquires and found them fitting to my interest, I decided to back that project and pledged.

2nd. Strike Suit Zero by Born Ready Games.

I found this project after watching Roberts Space Industries Kickstarter introduction. After watching several gameplay videos including their Gamescom 2012 gameplay on youtube. My verdict is they are very close to game completion.

What bothers me is that they somehow mismanaged their Kickstarter tiers. If they plan to launch this game with a price tag of ~30$. They should have create a 40$ tier with more bonus content, and beta pilot reservation should be put in a 40$ tier not to mention more amount of beta invites(5000 at least). Cause once the 1000 beta seats ran out, there's no more incentive to pledge 50$ and beyond.

Those bundled Logitech Extreme 3D Pro Joysticks is a bit hard sell too, there's simply not that many space sims with joystick support nowadays. And the game looks like it can be play keyboard+mouse or a gamepad similar to xbox 360 project Sylpheed.

A bit disappointed for those tiers but still decided to fund the project.

3rd. Star Citizen by Cloud Imperium Games Corporation.

Like countless people, I have played Wing Commander series, a bit of Strike Commander and finished Freelancer. When Mr Christ Roberts mention Wing Commander and Privateer like gameplay, I have pretty good idea of what to expect. From interviews and announcements we know the game is already 1 year in development.

After closer inspection, the game really caught my interest and I feel comfortable to get involve into supporting the game.

What really amazes me is RSI run a very successful announcement campaign. At each progression of pledges (2 mil,3 mil, 4mil etc...), there's a very nice clip showing ingame mechanics, AI Formation, large battles etc. Additionally, the stretch goal are very well defined with respect to the amount raised. From that, we know what will the money be use and how the game would evolve.


And there you go. The 3 projects that I've backed through crowd funding. My advice for anyone interested in backing projects:
-Know the people behind the projects.
-Find out how complete their ideas was and how much progress they've done to bring that idea to completion.

Here a short video from Extra Credits.
Extra Credits: Crowdfunding An explanation of how crowdfunding works and their dangers. Must watch, I find it very informative.

Hope this helps.

[Chevalr1c]

The only time I contributed to a crowd sourced project, was when Minecraft was in beta 1.4.

[Frick]

Originally Posted by qubit

Those negative fears are all true and is why I've always been wary of giving to a crowdfunding project. In particular, there's nothing stopping the organizers from just defrauding the donators (I hesitate to say "investors" in this context). One day, when the money starts to dry up, they simply disappear. Yes, they could be cought, but crooks usually know all the tricks to get out of it. Anyone can put up a site of Facebook page promising the earth and then disappear. It's that easy.

Which would be suicide. It is a risk, but there's a lot of people who are actually in the businness (Double Fine, Obsidian and Wasteland 2 for instance) who couldn't afford doing that if they wanted to stay in the business.

Originally Posted by lemonadesoda

I don't like crowdsourcing at all. Why? Because it is leeching off the goodwill of people. Project X says to People P that they can have product Q if collectively enough P cough up enough $ up front to finance X and Q. There is no risk to X, but risk to P. In fact, there are benefits to X even if Q is a flop. They get paid salaries and whatnots during the development period.

There are big profits to X if Q is successful but no profit to P. They will only ever get the product Q.

• The risk is to P.
• There is no risk to X only benefits during the development of Q.
• If Q is successful, the profit is to X.
• There is no profit to P.
• The profit% to X is ASTRONOMICAL because their investment was tiny.

The risk reward? All wrong.

This is why I don't like crowdsourcing.

This is why bankers and big publishing houses are jumping on the bandwagon. Zero investment on their side - abuse goodwill and franchise value - make big profit - and/or make no loss and take no risk.

IF on the other hand, just like financing movies, or cooperative investments, the people P - through their very contribution of $ to the project - also participated equally in the profits - then this would be fair, moral, ethical, and defensible.

But it isn't.

I don't see the problem. They are pretty much begging, it's the entire point of it. They are pushing the risk to the customers, yes, but there's no hidind that.

[qubit]

Originally Posted by Kreij

Would you all like to see me do more editorials in this manner when I find something worthy of your attention?
I do my best to present the original article in a factual way and try not to inject any bias so that you can respond based on what those fact represent to you.
I may show a little bias on any follow-up posts as I pull from my personal opinion, but I still try to phrase what I say as a question to you, not as a directive to try to get you on my bandwagon.

Your feedback mean a lot to me, so please speak your mind.

I'm always interested in your editorials, K.

And I don't mind analysis/bias put into it, either. Gives it an edge.

There you go, you have one fan.