Kickstarters and crowd-funding - return on investments?

Since the crowd is essentially funding development of the game, much like a publisher would, I wonder why the developers don't offer a return on the investment.

Let's say you pledge beyond a certain tier - you'd get a certain percentage of the post-funding sales. Anything from a fraction of a percent to a whole percent, or whatever.

Obviously, they'd have to limit this in some way - so as to ensure profit for themselves and that only a limited amount of high-tier "return" investments could be made, but it'd be a great motivator for certain games.

Am I being stupid? Legal issues? It makes sense to me, anyway.

It is an interesting idea Here and now I am not sure that it will will work in a Kickstarter setting. Whenever I support a project on Kickstarter, i do it in order to support a game being realized. It's an action of altruism, idealism, good will, and the realisation of the game is the return I hope for. In that context return of investment in the form of money doesn't sound right to me. Perhaps a "Kickstarter Professional" could be an option?

I have not made up my mind, I need time for thought, and lots of input from others for that,

Definitely an interesting topic, hope for a good discussion.

pibbur who thanks the musketeer.

if you sought for substantial investments, you wouldn't have to turn to Kickstarter... I guess.

Altruism? I guess I don't really believe in that concept when supporting a game you'd like to see yourself. Seems self-serving to me, but then again, I don't see self-service in itself as a bad thing.

Anyway, I'm not sure it would have to be a separate model - as that might be too confusing, and it would add to the already risky prospect of doing a Kickstarter. Then a developer would have to pick between two models - one of which could easily be worse than the other for the given project.

Just keep it to optional high-level tiers for people with enough money to spend.

It could be done every which way, but as an example:

(If we forget taxes and whatever local laws might be in place)

100 0.1% spots for a 1000$ pledge
10 1% spots for a 10000$ pledge

That would mean an actual profit for pledgers if the game made more than a hundred thousand dollars in revenue.

So, the highest possible amount of the post-funding sales that would go to the people pledging would be 20%.

Seems reasonable to me.

It just might lure people with more means to a project, and who really cares if it's selfish or not? If great games are made in the process, I'm not seeing the downside.

Then again, I can't claim to have thought this all the way through. I just think it would be a strong motivator for certain people to risk funding with a higher pledge.

A win-win from where I'm sitting

That said, it would mean implementing financial insight for the high-level pledgers. Not sure how hard that would be, but it seems doable.

Sacred_Path said:

if you sought for substantial investments, you wouldn't have to turn to Kickstarter… I guess.

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Then how would you explain that most seem to include high-level tiers, including 10000$ and beyond?

You don't turn to Kickstarter because you don't want a lot of money for your project, you do it because you want to focus on the game instead of pleasing ignorant business people.

DArtagnan said:

Then how would you explain that most seem to include high-level tiers, including 10000$ and beyond?

You don't turn to Kickstarter because you don't want a lot of money for your project, you do it because you want to focus on the game instead of pleasing ignorant business people.

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I didn't think of such a low entry point.

I think the obstacle is that, if you invest in something for the sake of investment (contrary to wanting to play a game) you'll want more info/ transparency than you get from your average Kickstarter campaign. I don't know if they'd set up exclusive forums for high-tier backers or something, but it's not something I'd personally do if I had money to throw away. Not without a lot of interest in the game getting made anyway.

Sacred_Path said:

I didn't think of such a low entry point.

I think the obstacle is that, if you invest in something for the sake of investment (contrary to wanting to play a game) you'll want more info/ transparency than you get from your average Kickstarter campaign. I don't know if they'd set up exclusive forums for high-tier backers or something, but it's not something I'd personally do if I had money to throw away. Not without a lot of interest in the game getting made anyway.

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I agree that they'd need to have insight into the financial aspect of the game, and some kind of clear demonstration of budget versus sales revenue would be in order.

But I'm not sure that's difficult at all, as such information would have to be in place in any case.

I don't think it has to be about investing for a return versus wanting the game to be made. Seems to me it'll be both in most cases.

DArtagnan said:

Altruism? I guess I don't really believe in that concept when supporting a game you'd like to see yourself. Seems self-serving to me, but then again, I don't see self-service in itself as a bad thing.

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Wrong word (sometimes I have problems finding the right word in English).

I'll try to explain what I mean. I backed the upcoming Torment game, because I want it to be made. I wanted to encourage a developer taking (I believe, could be wrong) a fairly huge risk. My reward is getting the game, but I pledged much more than what I would have had to pay for the game upon release (The extra benefits for the pledge level wasn't that important). So I would say it's a mix between self-service (which I agree is not a bad thing) and something else.

pibbur

pibbur who said:

Wrong word (sometimes I have problems finding the right word in English).

I'll try to explain what I mean. I backed the new Torment game, because I want it to be made. I wanted to encourage a developer taking (I believe) a risk. My reward is getting the game, but I pledged much more that what I would have had to pay for the game upon release (The extra benefits for the pledge level wasn't that important). So I would say it's a mix between self-service (which I agree is not a bad thing) and something else.

pibbur

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I do the same thing myself, but I consider it to be self-serving.

For instance, I've pledged around 300$ to Star Citizen - and I'll likely end up pledging at least 1000$ before it's released.

I do that because I believe in the project and I believe in supporting bold visions that just might work.

I could tell myself I'm being a "good" guy and that the amount of money directly reflects the amount of "good" that I'm doing.

But I just see it as spending money to support my own interests as much as possible.

If I was really a good guy, I'd be spending that money to help people in actual need without the slightest consideration for my own interests - which I rarely do.

That's me, though.

DArtagnan said:

I do the same thing myself, but I consider it to be self-serving.

For instance, I've pledged around 300$ to Star Citizen - and I'll likely end up pledging at least 1000$ before it's released.

I do that because I believe in the project and I believe in supporting bold visions that just might work.

I could tell myself I'm being a "good" guy and that the amount of money directly reflects the amount of "good" that I'm doing.

But I just see it as spending money to support my own interests as much as possible.

If I was really a good guy, I'd be spending that money to help people in actual need without the slightest consideration for my own interests - which I rarely do.

That's me, though.

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I hate to admit it (actually not) but you've convinced me, I have to agree with you here.

pibbur

DArtagnan said:

Altruism? I guess I don't really believe in that concept when supporting a game you'd like to see yourself. Seems self-serving to me, but then again, I don't see self-service in itself as a bad thing.

Anyway, I'm not sure it would have to be a separate model - as that might be too confusing, and it would add to the already risky prospect of doing a Kickstarter. Then a developer would have to pick between two models - one of which could easily be worse than the other for the given project.

Just keep it to optional high-level tiers for people with enough money to spend.

It could be done every which way, but as an example:

(If we forget taxes and whatever local laws might be in place)

100 0.1% spots for a 1000$ pledge
10 1% spots for a 10000$ pledge

That would mean an actual profit for pledgers if the game made more than a hundred thousand dollars in revenue.

So, the highest possible amount of the post-funding sales that would go to the people pledging would be 20%.

Seems reasonable to me.

It just might lure people with more means to a project, and who really cares if it's selfish or not? If great games are made in the process, I'm not seeing the downside.

Then again, I can't claim to have thought this all the way through. I just think it would be a strong motivator for certain people to risk funding with a higher pledge.

A win-win from where I'm sitting

That said, it would mean implementing financial insight for the high-level pledgers. Not sure how hard that would be, but it seems doable.

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Problems at see at a quick glance.

1. Why give up 20% when you don't need to.

2. giving up 20% for 200,000 isn't worth it. Basically after 1 million in sales you would be paying out more money than the 200,000 that you raised. For instance 2 million in sales would be a 400,000 payout for the 200,000 you raised.

3. I assume you mean 20% of profit and not revenue. Revenue would be gross sales. Meaning that if the game had 2 million in sales you'd have to pay out 400,000. If out of that 2 million only 500,000 was profit then you'd be giving up 80% of your profit.

sakichop said:

Problems at see at a quick glance.

1. Why give up 20% when you don't need to.

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The assumption is that some games need to motivate people to pledge.

So, it's to get your game funded. More precisely, to increase the chances of getting a bigger budget for your game.

Try not to think like a businessman, and try to think like an artist trying to get a dream game made, and it should be easier.

2. giving up 20% for 200,000 isn't worth it. Basically after 1 million in sales you would be paying out more money than the 200,000 that you raised. For instance 2 million in sales would be a 400,000 payout for the 200,000 you raised.

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If the alternative is not getting funded - or getting a smaller budget, then you're saying earning a profit isn't better than either not making a game and not earning a profit, or making an inferior game with less profit.

So, I guess I don't agree.

3. I assume you mean 20% of profit and not revenue. Revenue would be gross sales. Meaning that if the game had 2 million in sales you'd have to pay out 400,000. If out of that 2 million only 500,000 was profit then you'd be giving up 80% of your profit.

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As far as I know, revenue is income based on sales - but I could be wrong. If I understand the model correctly, the entire development is funded by the crowd, meaning that any post-release sales should be pure income, if we ignore taxes, which I believe I mentioned.

Maybe distribution, marketing and support isn't part of the initial projected budget? I thought it was.

Maybe I don't understand the model, though.

But it doesn't really matter.

These are just random numbers and ideas from the top of my head, and they could be adjusted every which way.

It could be 5% or whatever, but then there'd be less incentive.

The point is to give up something to gain more in the end. It's not really about monetary profit.

If I was a developer looking to focus on making money, I'd be going to suits for the initial investment and create the usual shit we've been seeing a million times over.

But then I'd never be a developer in the first place.

DArtagnan said:

Since the crowd is essentially funding development of the game, much like a publisher would, I wonder why the developers don't offer a return on the investment.

Let's say you pledge beyond a certain tier - you'd get a certain percentage of the post-funding sales. Anything from a fraction of a percent to a whole percent, or whatever.

Obviously, they'd have to limit this in some way - so as to ensure profit for themselves and that only a limited amount of high-tier "return" investments could be made, but it'd be a great motivator for certain games.

Am I being stupid? Legal issues? It makes sense to me, anyway.

Click to expand...

And who is going to track all that? Ill pass

Buldorzer said:

And who is going to track all that? Ill pass

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The people who already track it?

Unless you don't think they have people who know the budget and who're tracking sales

They could simply make it sales after 1 year - or sales each year.

It's not hard when you already have all the necessary data.

They could also make it a percentage of an amount UP TO a certain ceiling, so as to ensure a limited payout.

Once again, there are many ways to handle it.

But I guess it does take a little imagination to see the potential of such a model

It sounds reasonable to me that a return on investment could be a backer incentive. I'm guessing developers have already thought of this, but don't want to share the profits or create a precedent that people start to demand of all kickstarters.

DArtagnan said:

Since the crowd is essentially funding development of the game, much like a publisher would, I wonder why the developers don't offer a return on the investment.

Let's say you pledge beyond a certain tier - you'd get a certain percentage of the post-funding sales. Anything from a fraction of a percent to a whole percent, or whatever.

Obviously, they'd have to limit this in some way - so as to ensure profit for themselves and that only a limited amount of high-tier "return" investments could be made, but it'd be a great motivator for certain games.

Am I being stupid? Legal issues? It makes sense to me, anyway.

Click to expand...

Legal issues are the first and foremost. That violate more security laws than I can count in both the US and the EU. There have been some changes in the US that now allow a company to raise, I believe, up to $1M every 2 years or something and allow non-accredited investors (IE non rich people that shouldn't be taking too much risk with the money they have) to invest. There is a limit to how many things you can invest in yourself like this and there are still a lot of legal issues to be worked out, so it hasn't really caught on.

This relates to what I was rambling on about in the other thread. I can understand why someone might put a couple of hundred dollars towards a game they really want to see, and would be unlikely to be made unless enough funds are raised. However, if a studio finds great success in their first venture (which Larian did, at least enough to require a new studio in Canada) then making the same request second time round seems a bit harder to justify.

I can see the difficulties that backer profit-sharing might entail, but I do think they need a better argument than "the more you give us, the better it will be", once they have a viable commercial property on their hands.

blatantninja said:

Legal issues are the first and foremost. That violate more security laws than I can count in both the US and the EU. There have been some changes in the US that now allow a company to raise, I believe, up to $1M every 2 years or something and allow non-accredited investors (IE non rich people that shouldn't be taking too much risk with the money they have) to invest. There is a limit to how many things you can invest in yourself like this and there are still a lot of legal issues to be worked out, so it hasn't really caught on.

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Are you saying there's a law against investing in something like this in the EU? I don't know of any. Do you have some kind of source?

http://venturebeat.com/2015/08/18/b...tarter-competitor-built-for-games-and-equity/

I'll never "invest" in a game, mostly because I don't have money to throw away. I simply hope the crowdfunding scene won't get split indefinitely - I hope all Kickstarter backers transition to Fig, or none do.

Interesting. They seem to have taken the point!