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More Kick than Start?
by Tim Willison on 04/20/12 11:34:00 am   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

I'm not sure this post is going to be received well.

So let me buffer a bit. I love games. I particularly love indie games. My first experiences with a computer were making games, and that's how I figured out how to program. It was all indie games because there weren't really big publishers then. So I hope folks will take the following in the right spirit.

The Kickstarter Thing

Everyone knows about Kickstarter by now - it's crowd-sourced funding. On the surface it seems like a dream come true for indie game publishers, and lately there has been a raft of great titles revived by the people who want to play them and will vote with their money. Yay the choke-hold of the big publishers is broken!

But there is a down-side.

Recently I came across an article posted first on Kotaku, then ScrewAttack, with a link to the Kickstarter page of War Balloon, makers of Star Command. The game premise is based closely on Star Trek, and it's an RPG that will appeal to a lot of gamers. At the post, the game studio went on to reveal details of what their funding (about $36K) went towards. As it turns out, they greatly underestimated what it takes to make a game of the type they proposed.

To their credit, they acknowledged underestimating the cost of the prize-packs that fans would get by donating funds. These included t-shirts, posters and such. About $10K went to this alone. I expect most of the unexpected cost of this came not from the printing, but from the logistics - the pick/pack/ship process. As they mentioned, they were not equipped in this area.

That is all well and good. Half the success of Kickstarter  lies in the fact that it lets companies get out of their safe zone and try something different. But does this mean they should throw planning to the wind? Should they make a fancy trailer on nothing more than an idea and ask for people's money?

The comments on Kotaku and Gamasutra have lit up with people saying War Balloon got screwed by the lawyers, and I find it all too common in the indie games world for this anti-establishment bravado to fly in the face of common sense. War Balloon spent a mere $4000 on their lawyers, who would have had to do the incorporation, trademark search, trademark filing and protection, and copyright protection. Anyone who has ever had experience in this would know instantly that $4000 is a paltry sum for such work. And it's ridiculous to suggest you should launch a title without it, especially when you've received funding from backers. You're playing with their money.

Yet here's War Balloon stating straight away "What would we do different? Keep the attorneys out of it...in hindsight a nice piece of napkin paper probably would have done just as well". I'm sorry, that's just foolish. In fact, it seems like the one thing War Balloon did right is the first thing they would undo if they had the option. They quip "maybe we will get another attorney and sue them".

It's easy to cry foul at attorneys, they are an easy target for a group that prides itself on independence and living outside the rules. War Balloon is pandering to that spirit to excuse the fact that they simply don't know what they are doing. Four thousand dollars people - they paid more than that for their music, and almost that much to go to PAX. Yet neither of those things are protecting them now, or ensuring that the backers get the game they are looking for.

The truth is that far more indies have been harmed by not having good representation than have been harmed by attorneys. While it is noble of the game company to publish their experience, it's simplistic to talk about the lawyers and spark of cries of "screwed by the lawyers" from people who just don't know anything about running a business. War Balloon seems like nice people, truly enthusiastic about games. That's very attractive. But yes, nice people can screw up and they did so. They are legitimately trying to produce their game and that is admirable. But if they don't own their failures, will they remain a viable company?

But is it their fault?

The fact remains that investors on Kickstarter are not professional investors, and they are not likely to ask the questions that a venture capitalist would. That's a good thing. But it also means that indie devs don't have the benefit/plague of that critical eye a real investor will focus on their work. If the company asking for money doesn't do a good job of proving not just their idea, but their capability, then it's up to people not to put their money in!

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Comments


E McNeill
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This isn't really a post about Kickstarter, I think. Just about attorneys.

Legal stuff should be cheap for indies. NOLO can get you set up with an LLC for $100. Trademark search can be accomplished with Google and TESS (the USPTO's Trademark Electronic Search System). Copyrights and trademark rights are automatically conferred, and registration is only necessary in the rare case of legal conflicts.

For an indie who is likely never going to get sued and is just hoping to make enough cash to be able to make their next game, legal costs in the thousands are not acceptable.

Kenneth Blaney
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There is no where in the country where you can set up an LLC for $100 all said and done. However, I agree that more than a thousand is excessive in most states.

Morgan Ramsay
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The filing fee for the Articles of Organization in Colorado is $50.

Alexander Cooney
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Kenneth,

Setting up an LLC with just the filing fee is not expensive (~$100 depending on the state) and is done all the time to protect the production of low/no-budget films. Maybe you're referring to the the specific cost of preparing an LLC to bring an indie game to market?

Daniel Smith
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While I think they overpaid for the legal side (see E McNeill's post above) , I think - for me at least - this case raises some more fundamental concerns.

The article doesn't address it specifically, but where a kickstarter campaign is seriously under-budgeted (there is a very real danger that the project will simply not be completed. The developers admit they have taken on a lot of personal debt, and the fraction of their budget for "income" has ended up being very small. By having a relatively low funding target, they have more chance of it being met/paid, but run the risk of the finished game never seeing the light of day. This is, of course, analogous to game studios (or any other kind of contractor) who under-bid to win contracts (though i don't mean too imply that the under-budgeting was in any way deliberate in this case)

The game concept looks really great, so I hope it *does* get completed, but i think this article raises a very good point more generally, that a great idea is not worth much alone, if the developers are unable to deliver the finished product (whether that be for business, financial, or technical reasons)

E McNeill
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I agree. There are a lot of cautionary notes to be sounded about Kickstarter (and the online conversation is starting to get in full backlash mode), and most were not elucidated here.

Chuck Bartholomew
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I see this as a cautionary tale for anyone considering kickstarter as a means of funding their game (or any other project, for that matter). If you are serious about getting your game made, and you need to ask someone else for money, the very first question in your head should be "how much?" The answer to that question should not come out of your imagination! Do some research. Get some estimates. Think about what you need to pay for to make the game happen and find out what those things cost.

Here are some examples of things to consider for including in your budget:
- Starting a company
- Content you can't make yourself (art? music?)
- Software you need to complete the project (engine? dev tools?)
- Hardware you need to make the game (target platform? dev kit?)
- Marketing / events (you DO want to sell your game once its made, right?)
- Payroll for the dev team
- Costs for access to the target platform

Once you decide what it will cost just to make your game, consider these too:
- Add in reward fulfillment costs (figure this out for each reward to be sure it nets positive)
- Factor in Kickstarter's share of the proceeds

Its not at all a straightforward process. It takes a lot of time, planning, and patience to arrive at a realistic estimate of what it will cost to make your game. Keep in mind that all of the above presumes you know the scale and scope of the finished game and how much work it will take just to build the game itself. If you don't have that nailed down pretty early, your budget is going to be way off.

Morgan Ramsay
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In the Kickstarter FAQs, the company states, "Kickstarter is not a place for soliciting donations to [...] general business expenses." The community guidelines continue, "A project is not open-ended. Starting a business, for example, does not qualify as a project."

Spending Kickstarter money on "general business expenses" such as incorporation, accounting, and marketing violates the community guidelines and the trust that backers have placed in project owners. Expenses unrelated to the subject project that are paid using Kickstarter money are misappropriated funds.

Jacob Germany
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@Morgan Starting a business is not a project, but developing a game under the umbrella of a business that only exists for the sake of that first game is, by that definition, a project. Thus, the costs of starting that business in order to develop that game are legitimate.

Kevin Reilly
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I am an attorney and to be quite blunt no one put a gun to the developer's head to hire a lawyer. Could they have set up a company, drafted operating agreements and filed trademarks on their own? Sure, there are plenty of low cost options offered to noobs all over the internet. But if they screwed it up, then they would certainly have to pay more later to fix it, but I digress.

If I backed this game, I would be a lot more upset to find out that 1/3 of the budgeted funds went to printing posters and another large chunk went to travel to PAX East without a finished game! I hope these guys turn it around, but the danger of Kickstarter is that a lot of unseasoned developers are woefully underestimating the cost of making a game. Ah forget it, let's just blame the lawyers!

Robert Boyd
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I think they spent too much on the legal stuff, but I agree that misjudging how much the rewards would cost and spending money to advertise at PAX (instead of using that money to make the game) were even more grievous mistakes.

Jack Lee
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This is only marginally relevant, but people might find it interesting. Before the Double Fine Kickstarter explosion, I was a fan of a podcast that had their own Kickstarter project to get up and running. It was the crew from the old Gamespy Debriefings, and after employment issues and whatnot forced that podcast to end, they decided to go to Kickstarter to fund their new podcast, The Comedy Button. It was very successful, outstripping their meager expectations (something like $6,000) by a longshot to around $40,000.

Early on in the new podcast, they had a frank discussion about what happens with Kickstarter money. they went over how much research into the model they did, and how they used honest-to-goodness MATH to budget out how much the donor prizes, equipment costs, Amazon and Kickstarter fees, and even taxes would cost them, as well as how much time they needed to budget to fulfill all the prizes. It was fascinating, and ever since listening to that discussion, I've been struck by how much it seems that a lot of Kickstarters don't take this stuff into account. People offering fancy shirts for a $20 backer level? I wonder what the margin on that will be; I wouldn't be surprised if, after 10% fees, more in taxes, production and shipping fees, etc. they only pocketed about $5-8 to put towards the point of the project. It worries me to see such cavalier-seeming attitudes towards the site and funding method.

Of course, maybe a lot of the studios have done the math and it works out fine. I obviously haven't, so my numbers are mostly conjecture. It's just interesting.

Ferdinand Joseph Fernandez
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You have a link on that particular podcast episode?

Tim Willison
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Thank you for your comments everyone. It gave me a lot to think about.
I can't speak for the U.S., but in Toronto it takes about $2500 to do all the incorporation papers with an attorney, issue shares, set up the director, treasurer, etc. I've done this. Trademark searches cost about $900 alone, before any trademark filing. It's kind of a get-what-you-pay-for thing. Sure, you can do it cheaper, but then you don't get the help later, like with your yearly filing, or if you need to defend your IP. And that is just for a domestic filing, it gets more complex with international filing. (I'm no lawyer, so I count on some good ones)
But I digress, sorry. My point was that it is very important to go through all the planning process, or get someone who is good at it and listen to them. That sort of gets pushed on you if you look to traditional financing, but Kickstarter doesn't necessarily make you do that.
I didn't have room for much more about crowd-sourced funding here, the post was getting long. But maybe a followup article is a good idea.
Again, thanks for your comments.

Michael Hartman
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Can we please stop wearing out this ONE example of ONE company that:

1) Got hideously ripped off by a lawyer to the tune of about 1,000% :(

2) Somehow grossly underestimated the cost of creating physical goods and shipping them.

3) Somehow didn't understand this was income, not investment.

A lot of indie companies have enough business acumen not to do any of the three things above.

This one example is getting WAY too much traction and coverage on the internet. It makes it sound like the problem is worse than it really is.

I will say this though: customers looking to choose a Kickstarter project right for them should look at:

1) How long the studio has been around. Longer = better.

2) How many published games they have. More = better. None = risky.


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