Kickstarter: Corruption of Ideals?

Discussion in 'Indie Business' started by terin, Apr 4, 2012.

  1. Stropp

    Stropp New Member

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    Do you have cash and accrual accounting methods, or their equivalents, in the US?

    In Australia it would likely depend on which accounting method you used. Cash accounting means that the income counts when it is received. If I issue an invoice at the end of the financial year and it is paid after the new FY begins, then any taxes won't be due in the year the invoice was issued, but the next. With the accrual method, the income counts when the invoice is issued, even if it hasn't been paid yet.

    I suspect that for most projects, very few will be raising millions of dollars, there will be just enough income to fund the game and the donation rewards. A larger company like Double Fine will (should?) also have the level of accounting necessary to mitigate problems with overfunding. A small developer (should still have an accountant) should spend a bigger proportion on the game and have less of a tax bill.

    In any case, the best thing to do is to set aside a portion of the funding, perhaps 20%, in to a separate account to cover the tax. It's good to do this with all your income anyway.

    On the milestone issue. Rather than setting hard dates for a milestone to be delivered by, don't make it date based. Then if it takes longer than expected funding won't be pulled just delayed. Milestones should be negotiated between the developer and Kickstarter, or possibly provided by the developer to the 'investors' to approve once the project has been funded (although there are problems with doing it this way.)
     
  2. Morgan Ramsay

    Morgan Ramsay New Member

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    As the guidelines and FAQ indicate, Kickstarter does not do any hand holding. If Kickstarter measured progress, they would be accountable; Kickstarter is not accountable. Once a project's Kickstarter campaign ends, Kickstarter and Amazon take their cuts, and the rest is transferred to the project owner.

    Here's what Brian Fargo actually said, "There is a minimum pledge amount that the company establishes up front that has to be met or no money passes hands. In our case it was $900,000 dollars and that money is currently in an escrow of sorts where it will remain until our campaign ends. Once it is over then Kickstarter takes their piece as does Amazon for handling the monies and the rest comes to us."

    However, note that pledges aren't real money until the Kickstarter campaign ends. Nothing is held in any "sort of escrow." Pledges are effectively IOUs. When the campaign ends, then the backers are charged for their pledges. This is why at the end of a campaign, there is some percentage of the total that must be discounted as a result of declined transactions.
     
  3. terin

    Original Member

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    I had suspected as much. It would be weird for KS to act as a publishing agent like that.

    So in the end the users are still looking to get burned with little room for reprisal. Shall we take bets on the first 6 figure+ vaporware from kickstarter? Or would that be mean :D

    -Joe
     
  4. lennard

    Moderator Original Member Indie Author

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    I still think you are missing the point Joe. This isn't about buying the absolute perfect game - the world is filled with compelling games already. It's about funding something you believe in and feeling closer to the process. If that is the case then your $20 contribution not only gets you your backer rewards it lets you, vicariously (and seriously, none of these folks are betting their houses) feel a smidgeon of an iota of the gut churning financial risks that many game dev's take with each and every new venture. Cheap at the price.

    I'm curious why you are so invested in beating up on something so potentially valuable to game dev's?
     
  5. Applewood

    Moderator Original Member Indie Author

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    Here's a different slant. Being probably more honest than I should be, I'd have to say that a runaway KS campaign is probably a self-damaging guarantee of mediocrity tbh.

    Whilst developing games is a fun way to earn a living, it's still a business and it has to be run as such - with an eye permanently on the bottom line. A large part of what keeps me putting in the long hours to craft my next masterpiece is the prospect that going that extra mile will convert to more dosh later.

    Now if I already had three million bucks in the bank, especially whem my estimated dev costs were a quarter of that? Well, I can't say for sure that I wouldn't be spending a lot of my "development time" fishing off the Bahamas instead of sitting up until midnight putting in that extra power up. And if you're honest, you'd all think twice too.
     
    #25 Applewood, Apr 17, 2012
    Last edited: Apr 17, 2012
  6. James Coote

    James Coote New Member

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    Kickstarter does seem to have grown in a somewhat different direction from the art students asking for enough money to hire camera equipment for a weekend to make an indie film in their spare time

    It is no longer for artists, but for businesses? How do you make the distinction, or should you at all?
     
  7. lennard

    Moderator Original Member Indie Author

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    @Paul. Not sure that's valid. We have one example of a 3 million dollar product. Those guys were doing killer work at Lucas Arts where they were living fairly well. In their case I don't think it's about the $ and their fans have agreed.

    Some folks make games for the dollar incentive, some for the art and loads of grey in between. My point is that those guys in particular aren't looking for a meal ticket - this is what they do and now they can do so without sweating the $. I doubt they turn in crap - hope I'm not wrong.
     
  8. terin

    Original Member

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    The point was exactly as James Coote just put it Lennard - This is a deviation from the original direction Kickstarter began it's rise to fame with. I'm not saying it's bad for devs- hell, I am not even bashing it. I am pointing out a serious flaw and risk in its future that has been pointed out a number of times by many others as well as me in this thread.

    I am saying "DO IT" - Steal as much money from people as you can, make a mediocre product (or no product at all) just as Paul suggests, and pocket the difference on top of the revenue for maximum gain with minimal risk.

    My goal here is to promote thought about the big picture. KS can be a way to reduce risk and increase profit as well as increase marketing and site traffic if you do it right. Further, it is inevitable that a large scale fully funded game simply won't be made. What's wrong with pointing that out?

    Anyway, you people do what you want. This horse is beaten unconscious. We'll see next year if kickstarter's risk reduction creates the safety devs need to follow their vision and create great games or... if they'll just end in mediocrity due to not having to care quite as much about performance and/or not having a publisher breathing down your neck for the same reason. (Not that I am pro publisher either, but its important to acknowledge what little good they do)
     
  9. Davaris

    Original Member

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    Thanks for clearing that up.


    Joe, it was an interesting thread. You are the only one that has raised this issue. I expect it will go the way you suggest, until they bring in heavy handed regulation.



    What I'd like like to see is a Kickstarter, that allows ordinary people to become part owners in products. And yes I know, it is almost impossible for a startup to do.
     
    #29 Davaris, Apr 18, 2012
    Last edited: Apr 18, 2012
  10. terin

    Original Member

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    More importantly it's currently illegal under the securities act from the 1920s Davaris :D It was set up in order to stop fraudulently raising money for fake business ventures, duping the general public into investing into scams. In order to by an angel investor you need to be accredited, which if my memory serves me, requires something like a 300,000 dollar a year income or (or was it and?) 3 million dollars in trust fund assets.

    On a side note: early stage VC investments (angel investing) produce on average the highest returns of any passive investment, averaging something around 27% per year for pretty much the entire time people have been measuring it (about 10 years now). One more reason why the income gap is ever increasing in the USA, when the wealthiest individuals have access to higher performing investments. Granted, they are extremely high risk and require far more research and even work (as a board member, potentially) to get those gains... but... I do find it mildly unfair that over 95% of the nation simply isn't allowed to partake.

    The house passed a bill to legalize crowd sourcing venture capital, last I heard it was in the Senate, however, the senate and house bills are EXTREMELY mismatched in design, so it's likely to be a while before anyone reaches a consensus on how it should be done. It ranges from a MAXIMUM of 10,000 dollars invested per year in 100 dollar (max) increments (AKA: Useless) to 1 million maximum with a cap at 10,000 per investment.

    -Joe
     
  11. Morgan Ramsay

    Morgan Ramsay New Member

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    Making a promise, receiving consideration, and not delivering on that promise with no intentions of ever doing so is called fraud. Existing laws provide consumers with a means to obtain relief from fraud; however, fraud cannot be eliminated by regulation. Accredited investors, too, have been defrauded. As Kickstarter points out on its website, "due diligence" is the name of the game.

    A successfully backed project that fails to be completed is very different than a successfully backed project that was started to defraud backers. The Star Command project could eventually become an example of the former and illustrates many of the ailments that affect startups. War Balloon spent most of their Kickstarter funds in the wrong areas, misappropriated funds to nonproject expenses (e.g., incorporation, and conference exposure despite not having a game), paid exorbitant prices for legal aid and the production of backer incentives, paid shipping costs, and misplanned their campaign. At the end of the day, they found themselves $50K in debt. How do we solve these problems? That's what's important.

    Every meaningfully Kickstarted developer becomes their own publisher. That includes Double Fine, Harebrained Schemes, and inXile Entertainment, as well as the smaller and new developers who have relatively little experience with publishing. The anti-publisher stance is meaningless rhetoric and is, in fact, damaging to the overall "indie" community. Successful publishing requires competencies in several domains to which most developers have not even been exposed. Kickstarted developers who have not thought about what becoming a developer and a publisher means will experience serious and probably fatal difficulties, as they find themselves merely breaking even or, worse, operating at an unsustainable loss.
     
  12. terin

    Original Member

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    Obviously Morgan I am not actually in favor of defrauding customers outright (Just to be perfectly clear). Finally you and I have some common ground here. Absolutely a project that was intended as fraud to begin with is a different story: But the results are the same. Frankly, you can't PROVE that Star Command made legitimate mistakes on their budgeting. Maybe they just wanted to live their dream of going to Pax and have some secret clandestine deal with the lawyer. I don't believe it, of course, but the point is: Mismanagement and fraud are not all that dissimilar and the results are basically the same. As indies we need to be aware of Star Command's mistakes to not repeat them - so once again I point out the importance of this thread, not as a knock against indies or kickstarter, but as an identification of the risks involved with this so called 'free money,'

    And once again we find common ground: Not all indies are good at handling their publisher roles. I would say this is the second most common point of failure for indies on these forums. The first being simply not being able to get the game done with the level of polish needed to compete (or not done at all). The good news of that is if Kickstarter helps with the complete+polish phase more focus can be brought to the publishing role.

    That said, very, very, few publishers I have worked with have been worthwhile value additions to a game and no worldwide publishing deal I have experienced ended up benefiting the developers more than it cost them. Most of the good ones are for specific tasks or territories with cash paid against royalties and/or a couple are cash paid to complete the product (against royalties).

    But obviously you need someone working on promoting the game and securing distribution deals. It can be someone in house (which costs you time) a professional (like me, who costs you money and potentially some royalties) or a publisher (who costs you a royalty amount). Still has to get done and be budgeted!

    -Joe
     
  13. LiquidShock

    LiquidShock New Member

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    I looked into starting a campaign on KS but decided against it for one reason that I can't believe has not been brought up.

    Small indie dev shops are usually limited on the number of people working there and once you have a funded campaign besides game production you also take on a new role of order fulfillment. Depending on the perks you offer you may have now just become a T shirt, Poster, and any other tangible good you offered maker. It is fine for the name in credits, beta tester, pre order, etc because those are part of the development process. But now you have to design a T shirt have it made and ship those out the same with any other tangible item you offer. I for one don't have the extra time or desire to add that to my collection of hats that I already wear.
     
  14. lennard

    Moderator Original Member Indie Author

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    Not looking to start a fight but this is the crux of why your thread rankles me. I have taken a huge financial risk to become an indie and Kickstarter helps me get the word out and get funding in one swell foop. You are not an indie as far as I can tell. You are selling a service - one that Kickstarter competes with. You are within your rights to "defend the consumer from the evil and fraudulent indie" but it's a bit bizarre to me that you are coming onto this site to do so. The consumers aren't here and we are the crowd for whom KS (and it's variants) can be a real lifeline. I don't know why consumers like to fund KS projects - I expect the novelty is wearing off - but since games are now usually free or a whopping $0.99 to $6.99 I'm not too concerned if the end consumer decides to kick in $25-$50 in 2012 money into somebodies indie. campaign. I was spending $49.99 back in 1982 to buy Atari VCS cartridges...
     
  15. bantamcitygames

    Administrator Original Member Indie Author Greenlit

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    Kickstarter FTW!
     

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