Video game kickstarters rarely deliver¬†on their¬†promises. For the non-video game projects I've personally backed on Kickstarter, I've seen an average delay of two months over the original estimate. For the video-game projects I've backed, the average delay I'm currently tracking is over a year, but even that is¬†tentative¬†as more projects continue to push their dates back, and others may be on the verge of failure.
To take specific examples from the most funded video game projects, these are some approximate figures:¬†Torment pushed its release date back 12 months (6 of which was called out during the campaign, due to stretch goals). Pillars of Eternity came out 11 months after its estimated date, Mighty Number 9 is targeting a date of five months after its original plan, Broken Age went two and a half years over plan to achieve a full release, Wasteland 2 achieved its full release 11 months late, Elite: Dangerous came out 9 months late, Homestruck is pushing a year overdue.
One could make the case that those examples are due to an embarrassment of riches, that a huge influx of funding and stretch goals led to feature creep, and the creators shifted¬†to a much larger project than they had planned originally. But even projects that hit their funding request on the nose (see:¬†Hero U, and Two Guys SpaceVenture)¬†have experienced similar delays.
Software is risky. When you back a project focused on tangible physical rewards, the risks are typically well-understood; the product itself may already be designed, and the biggest remaining challenge is production. On some projects I've supported, backers were covering the marginal cost of distribution on a solid design.¬†For a video game kickstarter, you're frequently backing a concept. Someone has an idea for a game they want to make, but until it exists, the actual cost of bringing that idea to fruition tends to be poorly understood. And if you don't know for sure how much something will cost, and the costs of being late are low, the easiest thing to do is over-promise¬†to attract more customers.
The point that concerns me is that systems like¬†Kickstarter and Steam Early Access are in danger of becoming lemon markets. There's a principle in economics related to information asymmetry, that argues that when sellers know the quality of goods and buyers don't, there's no incentive to sell quality goods. If buyers who want to buy cherries¬†can't tell the difference between cherries and lemons and lemons are cheaper, sellers who sell lemons will make more money than sellers who sell cherries.¬†This results in a downward spiral where each lemon sold lowers the trust of buyers in the market,¬†which in turn¬†lowers what buyers are willing to pay since they're likely to end up with a lemon, which eventually drives cherry sellers out of the market completely.
Right now I¬†expect that every video game kickstarter will arrive about a year late, which makes me less willing to sign up to fund projects at an early stage. For the sake of analogy, let's say that the video game kickstarter market has revealed itself to me to be roughly a quarter lemons. This now means that creators who actually could deliver a game in a year for their stated budget are less likely to find an audience.¬†Since no one believes they can deliver on that time commitment, they might as well over-promise.¬†Which pushes out estimates further:¬†once a year of slippage is the standard, it's easier to let a year and a half go by without batting an eye, which lowers trust in the marketplace further, and prices more projects out of the market.
From a creator's point of view, if another Kickstarter¬†is promising a¬†revolutionary earth-shattering game in six months, and you're sitting on an idea for a game you know will take two and a half years and a massive budget, you're incentivized to say you can deliver a game in six months for a modest budget, and pray your backers overfund you and live with you shipping late.¬†To quote Peter Molyneux:¬†"There's this overwhelming urge to over-promise because it's such a harsh rule: if you're one penny short of your target then you don't get it. And of course in this instance, the behavior is incredibly destructive, which is 'Christ, we've only got 10 days to go and we've got to make ¬£100,000, for f**k's sake, lets just say anything'. So I'm not sure I would do that again."
Steam Early Access is in a similar position, the more games drop off the radar without ever¬†achieving¬†their promised full release, the less incentivized buyers are to take risks on future titles.¬†If trust in the marketplace drops to zero, the only sellers who will remain are sellers who want to make a few bucks off an unpolished beta, and the only buyers who remain are the ones fine with paying for games of that quality. No one shows up to sell or buy cherries, when all they see on the market are lemons.
There's another failure mode of a marketplace like this that concerns me. Hero-U is a project that estimated they would need an $800K Kickstarter for their ideal development. They didn't think they would get that much, so they decided to ask for $400K, planning to cover the difference with loans and deferred costs. Without a buffer, they ran over. To quote their campaign: "Should we have asked more than $400,000 in October 2012? The funding campaign would have failed, and we'd have gotten zero.¬†I just read an interview with Brian Fargo about the upcoming Bard's Tale IV Kickstarter. They will be asking for $1.25 million and expect to spend at least that much from their own funding in addition. The only difference with us is that we are returning to Kickstarter to raise additional funding instead of looking for venture capital."
Their chosen strategy has been to launch a second Kickstarter to save the first. Full disclosure: the Hero-U project is the entire reason I joined Kickstarter in the first place. I was a¬†fan of the Quest for Glory series, and I saw the platform as a means to let this project succeed. But almost three years later, I've come to realize that the project now means less to me than the platform does.
There's another principle in economics called the penny auction, where both the winning and losing bidder pay out the most recent amount they bid. You start off bidding five dollars on a hundred dollar bill, and someone else bids ten dollars. Realizing you're already invested for five, you decide to jump to $15, realizing that even as your upside potential has dropped,¬†you'll still make more if you win, while losing is a dead loss. Eventually the bidding reaches $100.¬†You now realize there's no way for either of you to turn a profit. However, if you lose the bidding now, you're out $100, while if you jump to $105 and win, you'll only be out $5. You find yourself in a situation where your level of commitment is perpetually escalated, with every step seeming like the rational one to take.
Similarly, let's say having a car is worth $1000 to you. You decide to pay $500 to replace one of its parts, before realizing that you need another $250 in repairs. You're still weighing the $1000 value of the car vs the $250 in repairs, so you decide to continue. After that repair, you get told you need another $500 in repairs. The fact that you've already spent $750 makes you realize you should have stopped earlier,¬†but you can't help thinking that now you only have to spend $500 more, and you get the full $1000 worth of benefit of your car back.
Roughly six thousand backers pledged $400K to Hero U, to deliver a game in October 2013. We're now being told that the developers need another $100K to deliver a game in March 2016. From the campaign again: "More than half of you (3300 of 6100 total) backed at the original $20 level. Check out the math - As a numbers guy, I think it‚Äôs pretty cool. 3300 x $20 = $66,000. That leaves about 2800 backers. Each of you kick in just $10, for 2800 x $10 = 28,000. Add those together and you get $94,000, and the new campaign is nearly funded. It doesn‚Äôt take a painful amount from anyone - All it takes is a community and a commitment to this game."
If having Hero-U released is worth anything higher than $10¬†to me, there's a sense in which it seems worth it to buy in again. The situation I'm in now is that I was just told my car actually needs more work, having already paying for repairs. If I had known the real cost two and a half years ago, I might have spent my money differently. But since what's done is done, what do I do now?¬†¬†(to be clear: I could also be a free rider in this situation.¬†If the other backers bail out the project and it eventually succeeds, I would still get the rewards originally promised)
The real cost of this project to me isn't the delays, or even the funding ask. It's knowing that every time I pledge to a campaign, I may be told a year later that the campaign needs my support one last time¬†to push them over the edge, as the creators go back to the well to the people most invested in their success. If a project claims they need $20 to deliver the game, I should now expect there's a decent chance they may come back and say they need a bailout to deliver what was originally promised. The project may make it in the end, but my level of trust in the platform takes another hit.
The risks taken by Kickstarter backers are one-sided. If I back the Oculus Rift and the creators use that funding to make billions, I don't see any of the benefit. We don't earn equity for our investments, or interest on our loans; money is donated in good faith. Faith is the currency of Kickstarter, and my fear is that¬†as it continues to depreciate, the platform will end up being far less than it could be¬†and¬†deserving projects¬†will be unable to raise funds.¬†The end state of Kickstarter may be an advertising platform¬†where the funds raised and the deadlines promised bear no relation to the actual budgets and schedules of the games involved, it simply becomes a marketing tool to assess the level of interest in a product. What else do you do when life gives you lemons?