Thursday 19 March 2015

If you think that crowdfunding is only for small fry games, think again

For those of you who think of crowdfunding for artistic endeavours in terms of modest amounts, a million or so dollars at the most, the report in the February 14th issue of The Economist, “The stars are the limit”, is certainly an eye-opener. The article describes the fundraising that has accompanied the development of a new video game by Cloud Imperium Games (CIG), entitled “Star Citizen”, set for release in 2016. According to the report, this game has attracted aggregate investment of more than $72 million dollars, which amount puts it on a par with several of the most expensive game development budgets ever, such as the iconic series “Grand Theft Auto”. The magnitude of this amount can be seen by comparing it with the second largest amount invested via crowdfunding, $18 million dollars for a Bitcoin-related publishing platform called Ethereum. This makes the current aggregate investment in Star Citizen four times larger than the next largest crowdsourced amount ever invested.

It is not merely the amount that has been invested in Star Citizen which is remarkable, but the number of investors who have participated in the funding of the game’s development. The article reports that over 750,000 people have pledged to invest in the game, with the amount of the investments ranging from $36.00 to $18,000. What do these investors expect to receive in return? If you think that the answer is equity, or a share of any profits, you would be wrong. Instead, the investment in the Star Citizen project is perhaps the leading example of what is called “reward crowdsourcing.” In this context, it means, in the words of the article, that the investors receive “virtual spacecraft to use in the game, early access to unfinished versions, T-shirts and so on.” As such, the motivation derives more from a certain commitment to the game itself and the collective desire to see the game successfully published.

The article suggests that this type of investment, as opposed to seeking more conventional sources of funding, enables the developer to connect with the population most likely to become users of the game once it is launched. As such it represents the use of social media in the dual role of product development and product marketing. Thus CIG is releasing the game in stages, in part to reassure investors about the viability of the project, as well as to elicit their feedback regarding the game itself. The ultimate goal is to instill “rabid devotion in fans” long before the actual launch. It is crowdfunding that makes possible this integration of funding with pre-launch marketing. That said, the question remains whether this form of engagement of small investor-cum-user can be generalized to other video games and the like, or if the Star Citizen project is a one-off success.

No comments: