Video Games Stalling on Kickstarter?

Alternative finance has been a pretty big deal for a lot of industries over recent years, and video games have certainly carved themselves a decent slice of that pie chart. Crowdfunding platforms have changed the game for pretty much everyone. So why are we seeing such a sharp drop-off in major successes on Kickstarter? With over 10,000 games funded on the platform so far, the latest figures are a lot less impressive than a couple of years back. 2016 hit a 5-year low point, for instance, actually dragging the whole of Kickstarter down with it as a result.

Part of the problem seems to be the fact that we’ve seen some high-profile projects crash and burn. Some have self-destructed in a spectacular flame-out right from the gate, while others have tragically attempted to limp to the finish line dragging their own mangled wreckage behind them. Either way, those incidents have left potential backers a little wary. There’s also the way the market in general has caught up with what people seem to want out of crowdfunded projects.

The platform’s early successes were often offering things that gamers hadn’t seen in many years from conventional publishers. Throwback point-and-click adventures were arguably almost dead before Broken Age rocked Kickstarter with a $1 million first day. Demand that wasn’t being answered out in the wider industry suddenly found itself taken seriously – but that inevitably led to the danger saturating a committed, but fairly limited, market. Some of the big success stories on Kickstarter didn’t fare so well once people started comparing them outside of their niche audiences, which probably knocked a few dents in backers’ confidence after a while, too.

This element of distrust creeping into Kickstarter video game projects coincided with a couple of other developments taking place in the industry. Steam’s Early Access system, for instance, led to a shift in backer expectations. Instead of paying for a project to get off the ground and produce something down the line, Early Access gave you something at least partially playable straight away. Those Kickstarter promises of cool games you’d eventually get hold of suddenly looked a lot less appealing than an admittedly incomplete experience you could play right now.

Obviously, no one expected Kickstarter to be the last big idea in crowdfunding – and, naturally enough, it wasn’t. Newer platforms like Fig, for instance, are already going places that Kickstarter tends to steer clear of. A specialised system designed just for video games, Fig is a lot more selective about what gets seen on its platform. More importantly, it offers backers a very different relationship with the projects running on it. Fig backers have the option to be more like full investors, buying more than the traditional promise of an eventual tiered “reward” for their money. By buying Fig Game Shares in a project, those backers actually get a stake in its profits, meaning dividends if it does well. While this is old news to people familiar with conventional financing models, it was a pretty big eye opener to increasingly sceptical crowdfunding fans.

At the end of the day, it doesn’t look like Kickstarter projects are going to die out entirely any time soon. In fact, some of the more modestly ambitious funding target brackets are actually still growing. The platform certainly isn’t the only game in town for alternative financing any more, though. It’s worth noting that HMRC is paying close attention to developments and trends in this field – and that becoming a victim of your own success is still a very real possibility. A lot of people still don’t seem to realise that the money they make from crowdfunding projects is taxable income. Suddenly becoming eligible for VAT could come as a nasty shock for the unwary, for instance, particularly given the complexities thrown up by things like VAT MOSS and Brexit.

Of course, the other side to that is to remember that you’ve got expenses that can significantly affect the amount of tax you owe. There’s Video Games Tax Relief (VGTR) to consider as well – a specific scheme for British games developers that’s far too often overlooked, particularly in Kickstarter projects. Smaller developers are often the worst hit by losing out on the tax relief they qualify for. In an environment where even wildly successful projects seem to disintegrate under the weight of cash flow blockages, getting a large chunk of your development costs back can be a legitimate life-saver.

Talk to RIFT about VGTR. Whatever your game, is our specialist teams will help you take it to the next level.

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