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How Much of the Kickstarter Funds for a Game Are Lost on Rewards?

I’ve been looking through the games listed on Kickstarter lately and find myself rather surprised at the rewards listed for the pledgers. Some of them, in fact many of them, imply expenses of up to a significant portion of the amount pledged, meaning that the actual amount raised for the game itself is significantly lower than what’s listed. The impact of this may be lower for the few games that raised very large amounts, particularly if they did so with the help of a very large number of people pledging small amounts, but it can be staggering in case of those that aimed low, barely reached the goal and/or have received large amounts from a relatively small number of pledgers instead.
Of course, this most likely affects the other categories of projects that use Kickstarter just as much, and likely even more so in case of those that focus strictly on creating or manipulating physical objects and therefore have significantly fewer realistic options for offering digital rewards, but I haven’t looked at those and at the moment I don’t find myself being interested in them, so I can only write about what I know.

If you’ll pick a game and look through the rewards listed on the right, you may see that they start tamely and fairly enough, possibly from as little as a few desktop wallpapers or a digital copy of an early portion of the game, somewhat similar to what used to be made available for free in the days when the shareware model was popular. Then you may see the full digital version of the game being made available for those who pledge a certain, slightly higher, amount, followed by digital bundles that also include additional content such as the game’s soundtrack, artwork and so on, essentially turning such pledges into preorders. That’s still perfectly fine, as is offering those who pledge a certain amount access to the closed beta and likely even equating the pledges past some other amount with preorders of a physical copy of the game, with or without additional content, and therefore offering that as a reward, whether instead of or in addition to the digital copy. However, once you get past this point, I’m starting to raise my eyebrows more and more.
What you’ll see if you keep going through the list of rewards is that some developers are choosing to send additional items to the pledgers, such as t-shirts, art prints, badges or even actual replicas of items that can be found in the game. And let’s not even mention the top tiers, which may well include meeting with the developers, with them paying for the plane tickets, possibly luxury hotel room, food and so on. The more costly of these rewards are obviously meant for those who pledge hundreds or even thousands of dollars, but they may end up costing hundreds or even thousands of dollars as well, and when you add this to the fact that the less expensive ones may even be obtained for $50, and sometimes perhaps even less, you’ll easily see that all of these rewards may well end up costing a significant portion of the pledged amount and therefore have a notable negative impact on the amount of money left for actually developing the game. As such, all of this hardly seems like a good deal for someone who’s trying to fund a project!

Of course, the developers may factor in these expenses on top of the 5% fee charged by Kickstarter and the other fees charged by Amazon Payments, which is currently the only acceptable payment method, when they determine the funding goal, but many will certainly be tempted to pick the lowest possible goal instead, hoping to at least obtain some money instead of risking not to obtain anything at all, which is what happens if the goal is not reached. In addition, they have no way of knowing how many people will pledge a specific amount and the current way of setting how many rewards are available on each of the tiers is insufficient to mitigate this issue, and in fact some don’t even make use of the option to set such limits for the less expensive physical rewards, despite the fact that even those can generate significant expenses if they’ll need to be sent to a large number of pledgers.
When you put all of it together and also add the fact that the pledged amount is only taken from a pledger’s credit card at the end of the funding drive, which may add some more to the losses in case people won’t actually have that amount available and won’t solve the problem within the seven days that Kickstarter is willing to grant them to do so, you’ll see that those who have barely managed to reach the stated goal, and particularly those who aimed low in the first place, probably actually fell short of it. If the goal represents the actual minimum amount needed by the developer in order to complete the project, then getting anything less than around 150% of it probably means that they’ll still need to cut corners, if they’ll even be able to complete it at all.

Then again, such specific rewards that have no impact on the game are potentially far less harmful for the project itself than those that allow the pledgers to have a say in the actual development process. Even the simple “vanity” rewards, such as allowing those who pledge at least a certain amount to name an NPC or to have a character designed to look like them, may cause problems when the name or the look simply won’t fit with the rest of the game. Of course, as a person who has a terrible time coming up with names for anything, I can also see how offering such rewards may actually help the developers, but it’s a pretty big chance to take. And yet some even go beyond that and allow those who pledge large amounts, usually in the thousands of dollars, to have an even greater influence, such as writing quests, helping design areas and so on, all of which may easily break the game. Admittedly, they may also improve it significantly, as in some cases the players may well have much better ideas than the developers, but I have this suspicion that the amount of money usually required to obtain this privilege just about rules out anyone who has the time and the willingness to carefully analyze the game and come up with the idea that’s likely to do the most good.

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