He Who Pays First, Laughs Last: The Rise of Crowdfunding

About six months ago, I got into a Skype chat with an old friend I hadn’t spoken to for some time. He’s working as a programmer in Texas, and generally consumes himself with geeky things like role-playing games, impossible long-distance relationships and making more money than me. He told me to check out the website for a game he described as “really cool.” As befits our mutual interest in games, I followed up on this, discovering that the “game” in question was actually a game idea in development.

That idea was SpyParty.

For those who don’t know, SpyParty is a project in development by Chris Hecker, based on the premise that one player is the Spy who must blend in at a party whilst surreptitiously completing certain tasks. Meanwhile, his opponent is the Sniper who sits across the street, scoped in on the party and watching all attendees to figure out who is really the Spy. It’s a pretty awesome idea, and awesome ideas have a way of spreading.

Just as intriguing was the funding model for this independent project. The game prototype has been shown and tested at a few public events, but beyond that, no one currently has access to the game. Hecker encourages interested visitors to sign up for a future public beta of the game, on the basis that, when the beta is launched, these users will become contributors, paying $15 for the privilege of beta-testing the game, with a guarantee of a free copy when the game proper is launched.

This is an example of crowdfunding. It’s funding provided by many people, usually in the form of small donations, in order to create a product that does not currently exist. Sometimes it also results in additional subsequent benefits for those early contributors, such as a mention in the game credits, a free T-shirt, or an in-game badge.

Crowdfunding isn’t just a curiosity on the fringe of indie games development, though – it’s a burgeoning phenomenon profoundly linked to the new ways in which consumers and developers alike are thinking about video games.

One need only look at the domain name registrations. quirky.com and kickstarter.com, both generic product crowdfunding sites, were of course registered in the 90s, due to their dictionary-word status. More obscure profounder.com was registered in 2004. Warming up a little, indiegogo.com, which does include games as well as other creative ventures, was registered in April 2007. Rockethub.com, a varied site which hosted the extraordinarily successful fund to pay for shoulder surgery for Extra Credits artist Allison (more on this later), was registered in August 2009. Indie-fund.com was set up in 2009 by successful indie developers who wanted to fund future games by indie studios, but is not itself a crowdfunding site.

Finally, it’s not until November 2010 that the first games-dedicated crowdfunding site was launched – 8bitfunding.com. Hot on its heels are Japanese site playism.jp in February 2011, gamesplant.com in May 2011, and desura.com’s AlphaFunding project in September 2011.

It’s clear from this timeline that not only is crowdfunding a model that’s increasingly prevalent, but that in independent games in particular, we have reached a point of exponential growth where one games crowdfunding site has turned into four in the last year. That’s not counting the Indie Fund. Nor is it counting the effort from the Extra Credits team I mentioned earlier. After their artist Allison experienced a career-threatening shoulder injury, the team organised a fund-raiser for $15,000 surgery costs on rockethub.com in June 2011. Instead, they raised an astonishing $103,814. The community had spoken – and it made itself heard. James Portnow and the Extra Credits team decided to put the excess contributions toward another indie-fund.com-like entity that would fund and publish indie games that otherwise could not be made. In September they launched another rockethub.com project seeking another $10,000 in funding for this new publisher, and with 68 days to go, it’s already past $17,000.
The Humble Indie Bundles are another success story – pay-what-you-want collections of games that allow contributors to control the split of their contribution between the game developers, bundle promoters, the Electronic Frontier Foundation, and the Child’s Play charity. In another example of ‘the power of (ostensibly) free’, the developers discovered that by allowing contributors to pay whatever they wanted for the games, they ended up making, for the three bundles, $1.25m, $1.8m, and $2.17m. And these were all games that had already been previously released on the market. A new bundle was announced in September 2011.

There have been many predictions of the so-called “microtransactions economy” that would revolutionise the way people and companies interact online, creating a stream of charitable donations or small contributions that would fund online (or real-world) innovation, good deeds, and creativity. The theory that this pool of billions of contributions of a few pennies would surpass the advertising funding model has not so far proven accurate. This is arguably due to the clumsy nature of existing payment systems and the costs that banks impose upon cash and credit transfers, which are passed down by companies like PayPal. It seems that the most micro of payments achievable today are those we make in Apple’s App Store, with a minimum of about a dollar or so.

But these success stories from crowdfunding tell us that in slightly bigger $2, $5, $15, $50, or even very occasionally $500-dollar chunks, online altruism is alive and well.
Why? What is it about crowdfunding that causes a tech-savvy slice of consumers who could easily be downloading pirate copies of other media online – be it TV, films, or music – to not only pay for these games, but to pay for games that don’t even exist yet?

Part of the answer is simple. People respond to true, meaningful stories, and the story of a small indie developer engaging in a labor of love against all the odds can be compelling – a lot more compelling than the story of the risks taken by huge corporations like Activision.

But the larger part of the answer is not charitable, and it doesn’t relate to responding to a “good cause”, although of course it ties into that impulse. It is about being involved in a community, and being part of the development process itself. When you, a developer, crowd-fund your project, you don’t have to worry about whether the potential fan-base will be “invested” in your project – because they literally have invested in it. Equally, as soon as you, a contributor, make that payment toward the developer’s costs, you feel a degree of ownership in the project commensurate to your contribution. The project becomes an extension of your own ambition and identity, something that you root for, that you tell people about, that reflects back on you – and it is hard to make a stronger connection than that.

So the perks of contribution, whether they be a free copy of the game, a mention in the credits, or a Big Boss named after you, are just that – perks, but not the fundamental reason you engage with the idea.

In terms of the wider future of crowdfunding in games, it’s hard to see how it could apply to larger publishers. In a sense, of course, this phenomenon has always existed within the enthusiast community that pre-orders games and hypes upcoming games. These customers pay for the game early, usually at a discount, and often get insider options like early beta access, special in-game items, deluxe editions or, occasionally, even a slightly earlier release date. The Portal 2 potato Augmented Reality Game was another example of using that community energy to hype your upcoming game, while selling other products and engaging with the enthusiast community. But because of the nature of big releases, traditionally publishers need a blockbuster opening week of sales with a strong critical and public reaction in order to recoup their investment. This simply isn’t the case with indie games, which rely on long-tail sales, slowly growing word-of-mouth, and a long build-up to the game based on an exchange of ideas with the community.

And from a marketing perspective, crowdfunding offers another important opportunity to developers. In the glut of new, small mobile and social games, there are many exciting opportunities, but it’s also very easy to be lost in the shuffle. It’s very hard to predict what return you will get for your investment in creating the game, and much of your success may rely on factors outside your control, such as website review schedules, or which games Apple selects for their featured categories in the App Store. It’s hard to market a small game in a way that will make it stand out from all the other new releases every week.

Crowdfunding, especially in a paid beta programme like SpyParty‘s, lets you effectively set a price before the game is released. It conveys the value proposition of the game, strengthens its position as a desirable product, and enables the developer to judge market interest in that product before committing too many resources. Probably more important than any of that, it gets people talking about the game – and that’s something most marketing departments have to pay for, not get paid for. Plus, if the market is interested, development can then be funded as it goes, not retroactively after launch (and only then if you’re lucky).

So for crowdfunding, indie games are pretty much where it’s at. It’s easier to innovate and experiment in a smaller-budget game made by a smaller team; and in correlation to this, crowdfunding is more likely to succeed when the idea is so striking, so original, that punters want to pay just for it to be made reality. In that sense, indie developers and the community have always been natural partners; and crowdfunding is just an extension of that.

One conceivable risk of the growth of this movement is that there is a limited number of small developers with a limited number of ideas – and a limited number of people who can contribute. With the increase in the number of crowdfunding venues, we’ll surely reach a stage where there is no longer the funding to fill the projects for all these websites – or where the projects themselves are distributed thinly between them. Market forces will take their toll on this initiative as surely as on any other, and the system will have to rebalance itself many times.

Hecker tells me that so far there have been 9,378 emailed re-confirmations for joining the SpyParty paid beta when it launches. He’s hoping that at least 50% of those will turn into actual payments when the beta is launched, and cites Minecraft as yet another example of a successful beta pre-purchase system. Personally, I believe that the percentage of confirmed beta-testers who actually end up paying will be much higher than 50%. The success of all other well-organised crowdfunding initiatives tells us the market is there.

So, yes, there is probably a limit to the efficacy, and the potential, of the crowdfunding movement. But we haven’t hit it yet.

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David Midgley is a freelance Narrative Designer. He cut his teeth as a game designer on the doomed ‘Battlefront III’ for Free Radical Design, before moving into a writing role on ‘Driver: San Francisco’ for Ubisoft, and has recently written the script for the upcoming Zindagi Games title, ‘Medieval Moves: Deadmund’s Quest’, to be published by Sony. He can be found musing on gameplay of ‘Sonic the Hedgehog’, the story of ‘Left 4 Dead 2’, and other assorted odds and ends on his blog at http://www.davidmidgley.net.