Unintended Consequences

According to Kickstarter, they are a funding platform – nothing more, nothing less. While this is true in the broadest sense, if you spend a few minutes looking through the projects you will see a slight variation in most of the pitches of the site’s users. Kickstarter, according to the majority of it’s project creators isn’t just a funding platform, it’s become the funding platform for everything from the expected to the niche.

As with anything in life though, where there is money – especially free money – there will be unintended (but perhaps not entirely unsurprising) consequences. As Kickstarter leaves the door open for just about any kind of project, knowing that the only criteria is providing a concrete ‘thing’ as a result, the project rosters have become filled with a variety of people ranging from unknowns to internet celebrities, and garage start ups to companies that are already established in their field. Lately I can’t help but notice that the big fish are starting to crowd out some of the smaller ones in this particular pond.

Queen Games is a German euro-game company, founded in 1992. While not one of the biggest companies, having only 7 full time employees, they are regarded as producing a great product (they won the prestigious Spiel des Jahres in both 2003 and 2012). Though perhaps hard to find in the past, their products are on the shelves of most any well stocked FLGS today. Given their size, and devoted following, they certainly qualify as “indie,” but their extensive catalog, recognizable brand, and established reputation hardly makes them underdogs in this industry.

Though Queen Games is not the only company out there that has taken to using Kickstarter less like a funding platform and more like a distribution pipeline, they are in my mind the most aggressive when it comes to using this particular niche of financial ecology (and it turns out I’m not the only one to notice.)  Lets start with the facts. To date Queen Games has created 6 projects:

Of these six, all have successfully funded.  Their first two projects were funded at the same time; I didn’t even know this was possible. ‘Escape’ started funding on March 4th and ended on April 13th, while ‘Edo’ started on March 20th and ended on April 23rd. For the record, that is six projects in six months, making them the most prolific successful creative team that I have come across on Kickstarter. To date they have raised over $171,000 dollars using this model.

As I see it, this activity is best viewed in one of two ways: this new funding method is invigorating a company in tune with both it’s fan’s, and the needs of the crowd, or this company has found a way to fund its projects with significantly less risk, and a significantly higher margin. Lets explore both possibilities.

The Good

Crowd funding can fund whatever the crowd wants, be that Nike’s latest shoe, an indie comic book, or a hot tech start up. Though I doubt they ever would, I imagine that GM could fund the development cost of a new electric car with it. These are all true statements, but I can vote with my dollars as well as the next person and I prefer to give the majority of those to creators with a real need; major players can compete for my money on the shelves of my FLGS like everyone else. Best case scenario: Queen Games is functioning as an intermediary for unknown game developers, and giving it’s fan base, via Kickstarter, the cream of the crop from their backlog. On their website they say that they have over 300 promising prototypes; if this is the case, then I think they should do a couple things:

  •  Make this clear in its video and branding, and perhaps even create a sub imprint to emphasize this fact.
  • Start giving back to the Kickstarter community. To date Queen Games has received almost $200,000 dollars from Kickstarter, and backed only two projects. If they keep this up for another year, I’m sure other people will notice this story. There is no cheaper PR to manage this future problem than finding a couple good board games now and then, buying a copy, and leaving a glowing comment on that creators project; praise from a heavyweight like Queen would go a long way for any aficionado.
  • Cut your fans a break. As I deal with below – the margin on selling games through Kickstarter is significantly higher. Why sell at the same price they will be able to buy the game for after release? Reward their faith with a discount at a minimum!

I contacted Queen Games, sending them a copy of this article and asking for clarification on several points. Nikki responded, telling me that:

For us, and many publishers, Kickstarter is a way to market our games. We are beginning to publish games that are not usual for us, like Escape The Curse of the Temple, Lost Legends and an unannounced game we are also truly excited about. Kickstarter also allows us to get feedback directly from our customers prior to publishing the game. We have made changes to several components and elements before sending the games to press because of this direct feedback. We strive to make very high quality games and doing some of our more adventurous and challenging games through Kickstarter helps us to achieve this.

This statement, in of itself,  doesn’t address the main points I tried to raise, however, she went on to say that:

You mention one of the campaigns we ran, Ruhrschifffahrt. That actually is not our game but one from the independent publisher Spielworxx. Spielworxx games are usually very hard for folks outside of Europe to obtain, and we helped the publisher in an effort to make his excellent games more widely available. This is part of a new effort we are making to help independent publishers in Europe and North America reach larger markets. As for backing projects on Kickstarter ourselves, we generally do not back campaigns as a company, we back them as individuals. I myself have backed far too many campaigns, but haven’t regretted a single one. We believe in Kickstarter’s business model and feel it can be beneficial for everyone involved.

The Bad

The above quotes help soften the ideas that Queen Games is in it for the money, and has launched campaigns with an eye to help both fans and other game companies. This is great, and I hope they do more to communicate it in the future. However, I still worry that if the likes of Queen Games, Fantasy Flight and a few others decide that preselling their latest titles on Kickstarter is a good idea, then they will crowd out the actual start ups that need crowdfunding to get off the ground.

There are a couple points that I think work against some of statements made by Queen’s official representative above. Lets look at it like this: If you go to your FLGS to buy a $50 euro-game tonight, you should know that the store is making about $25. On average stores pay about half the price from the distributor. Queen Games sells the product on the other hand to the distributor and gets the better part of the remaining $25 dollars (minus the distributor’s cut). On Kickstarter though, Queen has seen fit to charge its backers, presumably some its most loyal fans full price, effectively doubling their profit margin. The only ‘funded’ game, Escape, currently scheduled for release is likely to MSRP for the same price that it was put up for on Kickstarter (I can’t seem to find an exact number) but preorders from reputable online dealers go as low as $35. This is not rewarding your fans (or the stores that stock your products) – it’s a revenue stream.

I like Queen Games. I own both Alhambra and Fresco, and have also purchased copies as presents for friends. I think they make great games, and their latest offering looks great. It tempts me terribly, but as good as it looks I don’t care much for this trend. I’ve backed a couple projects by established companies but if they attempted to do a serial launches like this I wouldn’t support them either.

So what do the rest of you think? Is this okay, or am I way off base? Will the adoption of crowdfunding by big names turn the grass roots support of Kickstarter to astroturf, or will it’s collective fan base take the movement to a new level?

The Wardenclyffe Horror -- Kicktraq Mini

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This entry was posted by David Winchester.

18 thoughts on “Unintended Consequences

  1. I think you are a bit off base. Big name companies can only “crowd out” smaller companies if people choose to put thier money behind one project over another. As such, I don’t think it is a big deal that Queen and others are using kickstarter. We all still have to make choices with our dollars. Even if Queen isn’t on kickstarter, the Queen games on the shelf of your LFGS are still competitors to the startup game publishers on kickstarter. There you buy knowing that you will actually get the game. Today, even! Backing a kickstarter does not hold the same guarantee of delivery.

    The other problem is the way you are approaching profit margin. There are so many variables around production cost that you aren’t really taking into consideration. Now, I cannot say exactly what their margin is, and my personal preference is for kickstarter projects to offer some sort of discount for backing, but your FLGS profit margin calculation is based on the economies of scale of the typical production run. Assuming a company wanted to fund a project entirely through kickstarter, the backers would need to provide the money for the entire print run, not just the copies they are receiving. In other words, to make up some numbers, if the backing contribution level is only 50% of MSRP, the publisher may only be able to produce exactly the number needed for backers and not have any left over for retail sale, even though the typical producer profit margin on a normal run would have only been 25% of MSRP.

    In other words, it may be that the kickstarter levels need to approach MSRP to fund the economies of scale that allow the MSRP to be what it is. The company will still probably make more money in the end, but it’s probably not a big up-front profit but rather not having a big up-front loss followed by a normal profit on retail sales.

    Unless kickstarter decides to forbid some companies from using the site, I see no reason why it’s unreasonable for them to use it as it is, in some ways, an improved funding model for them.

    Also, the flip side of all of this is that many startup board games on kickstarter are truly awful. While there have been a handful of generally well received “indie” games funded on kickstarter, I can’t think of one that was or is worth my money. I am much more inclined to back a company with a known track record for producing quality games that I enjoy than to throw my money at something random and hope that it sticks.

    • All fair points. I considered most of what you said as I was writing this. I don’t believe that Kickstarter SHOULD block companies from participating on their platform as long as they abide all appropriate rules.

      If you haven’t found one board game worth backing on Kickstarter though, I would say that you haven’t been looking hard enough. Though some of them certainly lack quality/realistic goals – there are many with real promise. That said – if you want to stick with a company you trust, that is certainly your right.

      • Well, I like Puzzle Strike 3rd Edition/Shadows, but that is closer to the Queen model than the startup model. I have looked at several other board game kickstarters and I have owned/played a few, but I am a very critical gamer and most of the things I have seen on kickstarter are more deeply flawed than the major publisher offerings (which generally aren’t that great either). That’s just my personal point of view. If you enjoy the games coming out of kickstarter then that’s great for you.

  2. There may contractual reasons, legal obligations, for why Queen Games charges MSRP through Kickstarter. Heck, it just might even be plain ol ‘good sense’. After all, their standing business relationships are with their distributors and retailers, not the gamer buying a single copy of their game. Undercutting the people they do the most volume with seems like a good way to ensure you don’t do much business with them in the future.

    I know, I know, you thought of that.

    • I feel like this conversation is about to tie in with the digital comic book price/FLGS conversation we had a couple weeks ago.

      Its a good point you make, but if that was true, then wouldn’t developing a whole new distribution model (regular use of Kickstarter as preorders) amount to the same thing in terms of its impact the business relationship?

  3. On the one hand, yeah. It’s the “same”. But it’s not the equivalent.

    It’s expected for any manufacturer, publisher, or provider to have a “direct sales” channel, regardless of whatever their typical distribution method is. It is my opinion that Kickstarter is an evolution of that.

  4. I asked the guy behind Kicktraq whether he saw any trend that larger projects crowded out the smaller ones. Quite the opposite, he said: When there’s a super-project (like, say, the Bones miniature project) all projects do better, presumably because of the increased attention and traffic to Kickstarter.

    So we shouldn’t assume that the big crowd out the small on Kickstarter. Especially not now that it’s in a phase of growth and acceptance.

    Also, as you point out yourself, although to us fans Queen may seem a weighty operation, it’s really just a small company. Lots of Kickstarter projects in other domains are run by significantly bigger companies, yet it’s clear they’re doing is for sound reasons, and they really are doing things they wouldn’t otherwise be able to (think of Double Fine, for instance. There have been many attempts to re-launch adventure games as a genre in the current day, but very few success stories. )

    • I have no doubt that is the case, though I don’t think the trends that Kicktraq is seeing has much to do with a major company – just a successful campaign. The same behavior happened during the Ouya and the Pebble as Reaper and Doublefine after all. It is more about throughput. I rising tide lifting all boats, and all that.

      If Queen wanted to pitch direct to its fan a single great game or two, I wouldn’t mind; quite the opposite, I would contribute in all likelihood. It is the trend that disturbs me. I understand your traffic argument, but I don’t see Queen Games doing a lot of outreach to bring traffic to the site (their profile has never once made a comment on a project other than their own).

      I just don’t see putting up Queen Games, or whoever else and their professionally polished products by full time artists against passionate first time developers with rough prototypes and print and play demos ending well.

  5. Ok, being a FLGS owner, I couldn’t pass the opportunity up to say a little something here. . Let’s start with where I stand on Queen Games. I love their products. I personally own Cable Car, Fresco, Colonia, Shogun, Alhambra and Kingdom Builder. (I know I’m a game junkie). Having said that, I also find their games very high quality both in art and in durability.
    On to the subject at hand. Yes this is MUCH like a discussion previously held regarding digital comic books, so I would like to break down the potential for retail disruption step by step.
    1. Queen continues in this fashion to crowd fund their R&D by offering copies of the game to consumers – leads to consumers owning the game pretty much around the same time distributors get them or at best the day a retail store has it on the shelf. BAD IDEA – Why? Well if I can have my copy mailed to me before the FLGS has it on its shelf for the same price, I wouldn’t bother going to the store to get the copy a week later. (not me personally as I would never buy direct from ANY game company that puts out product to brick and mortar) but I’m speaking in terms of the internet purchaser here.
    2. Distributors lose out a little bit, but not a whole lot. I would really like to talk to one of my old pals at a game distribution center to get their take on this, so I will reply once I get word from them, however they will not see as big a backlash as a retailer would, for the simple reason that all market areas differ, so in some locations, internet sales and backers are more prevalent than in other places, so they might make up the difference in the areas where people are die-hard FLGS loyalists.
    3. Retailers – Here’s the real loss. Every copy that gets sold outside of the FLGS is community money lost. I would love to hear opposition to this, but having owned a store for 9+ years there is nothing worse. There was a slight scare when iPad decided to digitize stuff like Catan and Smallworld, but in the end the experiences were amusing at best. . board clean-up and rule disputes were about all you got out of the apps (aside from the fact you could play on a plane with your friend and not make a mess) So the app worry faded quite fast. This is a completely different issue. This is taking the physical copy and putting it directly into the hands of the consumer. As a retailer, one would have to offer some type of incentive to get people to buy in-house. The incentive can’t be you’ll have it the day it comes out, too late for that Queen beats ya to it. . it can’t be price, Queen is setting it at MSRP AND you don’t have to drive anywhere to get it. On that note if they began to discount it to backers all hell would break loose and would necessitate a completely new post for that topic alone.
    4. Community – In the end, the real heart break for a store owner is watching a regular customer walk in to the store and sit in the play area with a board game they purchased online, play it with their friends ,and telling them what a great experience it was to get the game from a kickstarter project while a copy continues to sit on the shelf and gather dust. . . almost insulting. I know customers don’t see it that way, but trust me the owners do.

    • Well, as I proud local shopper, I resonate and agree with almost everything you said. Would you be willing to think on this a bit more, and offer a guest post for the blog? Perhaps on the larger impacts on Kickstarter on Local nerdiness timed for the start of the Christmas Shopping Season? Maybe even black Friday? I think your observations might be invaluable for some Kickstarting enthusiasts.

  6. You point out Queen Games and $171,000. What about Steve Jackson Games (a larger and more profitable company) doing the deluxe Ogre and collecting almost $1,000,000? There is a situation where they should be able to make the project happen without Kickstarter. SJG are way more well established in the US than Queen.

    http://www.sjgames.com/general/stakeholders/

    • Is the main thesis of your argument that both are in the wrong, or that one did it so it’s okay if the other one does too? I can’t tell.

      I am less concerned with a known company trying out something new a single time, and more concerned about a company going back to the trough on a monthly basis. Did Steve Jackson Games need Kickstarter money to produce Ogre? Very doubtful. I saw the project and I didn’t back it, but I didn’t get worked up about it either. You can be sure that if they go back for a new deluxe version of Illuminati or Hackers though, that I will write an article protesting that behavior as well.

      • “Did Steve Jackson Games need Kickstarter money to produce Ogre?”

        Yes. they did. The key with the Ogre project is that they wanted to produce a deluxe edition of a game for fans of the game, and they ultimate price they wanted to sell the game at is much lower than would be financially reasonable at retail. $100 for what is in the Ogre package is barely profitable for SJG — the amount of stuff in this game should be something that is ~$150-200. The box contains 25lbs of paper with 40 square feet of printed material.

  7. No, I see no problem with either company doing what they are on Kickstater. But in my opinion, Queen Games has not made large waves in the Kickstarter pond. I’ve backed 4 of their campaigns and am really happy with the results of what I’ve received so far. The additional expansions for both Edo and Escape are great and I would never have seen them if it weren’t for the Kickstarter campaigns, so I feel I have received value for what I’ve paid to back those campaigns.

    I see many other projects in the tabletop games category doing much bigger business (Cool Mini Or Not as another example) and they don’t seem to need it either. But I have learned about all of these games through Kickstarter. It’s a nice what to get a great presentation about new projects, some very small, and others very large. And in finding those games I find campaigns for other projects I would never be exposed to in many different categories. So in that aspect, the larger campaigns are exposing me to stuff I’d never find.

    Pointing fingers at folks using Kickstarter is not really the issue. Kickstarter needs to sharpen their focus on what projects should be on Kickstarter, and I don’t see that happening any time soon, they are a business, making a lot of money doing exactly what they are doing right now.

  8. Pingback: Front-running FLGS’s « Caffeineforge

  9. Pingback: An RPG Classic Turns Up on Kickstarter | Caffeineforge

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