It Is OK For Large Companies to Use Kickstarter

Paul's picture

As a small company that uses Kickstarter on a semi-regular basis, I am very invested in the continued health of the crowdfunding market. There is a lot of debate these days about whether or not it is acceptable or desirable for large companies to use Kickstarter or other crowdfunding venues. The “con” side of the argument seems to rely heavily on the assumption that crowdfunding is a zero-sum game and that, once a company becomes large enough that they no longer require Kickstarter, continuing to use it as a funding source for projects takes money away from the smaller, indie companies that “really need it”. There also seems to be an implication that crowdfunding is not “for” big companies, and should only be used by small start-ups or hobby projects.

I find these arguments to be flawed for several reasons:

The game is not really zero-sum.

If the pool of “crowdfunders” were fixed, crowdfunding would eventually approximate a zero-sum game once the number of interesting projects grew large enough that a would-be crowdfunder was forced to avoid backing a project they would otherwise prefer to back due to a lack of funds. However, the total number people who have ever backed a project on Kickstarter (~5 million) is still a tiny percentage (~1.6%) of the US population (~316 million) and is continually growing. What is more, the majority of Kickstarter backers for most projects come from the fan-network of the project’s creators, not from within Kickstarter itself [citation]. At the very least, these facts imply that the current state of crowdfunding is very far from the fixed-population problem mentioned above that would create the conditions necessary for a zero-sum game.

The game might actually be positive-sum.

Since the majority of backers on a particular campaign come from the fan-network of the project's creators, and large companies typically have a large fan-network upon which to draw, it stands to reason that a Kickstarter campaign run by a large company will, if successfully run, bring a large number of first-time backers to Kickstarter. Looking at Kickstarter's statistics, it appears that the ratio of "multiple project backers" to "total backers" has remained roughly constant over time at 1 to 5, even as the number of total backers has rapidly grown. It therefore stands to reason that any project that brings a large number of first-time backers to Kickstarter is likely to increase the total number of multiple project backers, thereby increasing the potential pool of backers available to other projects from within Kickstarter.

Now, as I have said before, the number of backers that reach a project from within Kickstarter is smaller than the number reached through external fan-networks. However, Kickstarter-sourced backers still provide some revenue to any given project, and the larger the pool, the stronger this effect will be.

Launching novel products is very risky, even for big companies.

Crowdfunding is just as critical for certain projects from large companies as it is for small companies. Even a company with a significant revenue base can find themselves in severe financial difficulty if they invest capital in launching a product which fails to attract the attention of the market. This makes it much less likely that novel products, or products which might only appeal to a niche market, will be produced and sold. Crowdfunding helps solve this problem by reducing the unknowns. A project can demonstrate the interest (or lack thereof) in a given product before a company invests significant capital. Consequently, by using crowdfunding, large companies can justify bring novel or niche products to market that they would otherwise avoid.

All of the points I have made rely on the assumption that it is desirable to maximize the number of novel, innovative products available to consumers. There are certainly alternative assumptions which could lead to different conclusions. Nevertheless, as a consumer and a publisher of tabletop games, I believe that the entire tabletop game industry, including both the customers and the publishers, is better off with a larger number of interesting and novel games, and that the number of interesting and novel games is only helped when all publishers, large and small, make use of crowd funding.

Comments

PlatinumWarlock's picture

I think part of the perception against large companies using KS comes from the overall publicity of large companies' KS drives.  Not only does Kickstarter itself feature highly successful or lucrative drives more prominently, but more assets are available on the company's level to devote towards the drive's success.

When I ran my KS drive for Cold Steel Wardens, I had a few pieces of rough concept art, my text in Word files, and a few friends who were helping me with editing/development services.  My intent was to use the KS monies to fund art, layout, and copy editing.  However many larger companies already have individuals whose entire job description is one aspect of those.  When faced with a corporate-supported, highly developed KS drive, the feeling for a 'one man band' such as myself is very much one of envy:  it's just me and my game "against the world", while some of these companies have entire teams on their side.

I had significant issues with Pinnacle Entertainment's drives, particularly.  Within a very short span--6 months, if memory serves me correctly--they Kickstarted Hell on Earth Reloaded, a Deadlands miniatures line, a Deadlands comic book, and Deadlands Noir.  While I love PEG, Savage Worlds, and the Deadlands line, this felt like they were just milking the cash cow till it ran dry.  All of their drives were wildly successful, but I could not justify supporting all of these.

That said, anything that benefits one company in the gaming community is a net gain for all gamers.  We're a small enough niche that when a new game appears and does well, it gets people interested and excited to look at other projects, either from that company or from others.  In this era of print-on-demand, self-publishing, and print-partnership agreements, it's easier to put out a game than any time in history.  Exciting times indeed!

Paul's picture

Yeah, I totally understand that sentiment. From the perspective of a small company that is bigger than the one-man-band stage, its seems to me that, while Pinnacle might have been milking their fans over and over for money, I am of the belief that, if they are hurting anyone, it is just themselves (by pissing off their own fans) and are actually probably helping other game companies, since if even a small fraction of the massive fan bases that they drive to Kickstarter through their huge advertising budgets stick around and back other games, everyone else is better off because Pinnacle decided to sink tons of effort into their campaigns :)