In this article we explain why Kickstarterhas changed the gaming market and how this change is negatively affecting game stores. We calculate the margins of a crowdfunding campaign and see why many publishers prefer to use Kickstarter as a sales channel.
Kickstarter is a crowdfunding platform created in 2009 with the purpose of “helping to bring creative projects to life“. It is based on the fact that a person who has a project can obtain financing to carry it out through the economic participation of the users, who become sponsors/backers of this project. This is great because if you have an idea, instead of going to the bank to ask for a loan, you can show this idea to the thousands of Kickstarter users and ask for their help to raise the funds. Kickstaster uses an “all or nothing” system: If it turns out that in the end the project doesn’t like it and you don’t achieve your economic goal, then nothing happens because nobody loses anything. Of course, this is not the case with the bank; Once he gives you the loan, you are in debt.
As you see only this is already a very important advantage. In the world of games, this and other advantages that I will now explain, have not been overlooked by publishers who prefer to use kickstarter as a sales channel. But this has dire consequences for stores.
REFERENCE POINT: EXPLODING KITTENS, THE MOST-BACKED GAME
Exploding Kittens is the board game with the most backers in the history of Kickstarter. He had 219,382 backers. And attention because they asked for 10,000 dollars to finance the project and raised nothing more and nothing less than 8,782,571 dollars, more than 8 million dollars !!!! Currently it is also available in stores and on Amazon from 20 dollars.
SALES CHANNEL MUTATION
Let us be realistic, publishers are business activities that seek a lucrative objective. They want to make a living-way with the gaming business. It is natural that if a new sales channel appears that can give great economic results, publishers value it between the traditional sales channel and the new Kickstarter sales channel:
TRADITIONAL SALES CHANNEL
Traditionally, in general, the commercialization of a board game follows this line: Manufacturing> Distribution> Stores> Consumer
First, the publisher has to invest money (often with own funds or requesting a loan) to make the game. Then he delivers it to his distributor who will be in charge of the logistics and delivery to the stores, distributing 50% margin between them. And the consumer pays the total price of the game.
Assume 1,000 units of a game that costs 4 dollars to manufacture and sells for 20 dollars. Total sales 20,000 thousand dollars – 50% distribution 10,000 dollars – manufacturing investment of 4,000 dollars = Profit for the publisher of 6,000 dollars (150%). Not bad, although there are risks because what happens if not all units are sold? If so, start subtracting.
KICKSTARTER SALES CHANNEL
Now imagine that the same publisher, instead of ivensing money to make the game, decides to start a crowdfunding campaign on Kickstarter.
The general line would be: Campaign> Manufacturing> Consumer
The cost of the campaign depends on each crowdfunding platform but Kickstarter charges 5% of the funds, only if the project is founded.
Following the previous example, suppose that 4,000 dollars are requested to manufacture the 1,000 units at a rate of 4 dollars / unit. You get 1,000 backers who purchache all your games. That is: Total sales 20,000 dollars – 5% campaign commission 1,000 dollars – manufacturing investment 4,000 dollars = Profit for the publisher of 15,000 dollars (300%). It is much better, especially considering that there are no risks because if you do not get the founds needed you lose nothing.
Wait a minute! Before you get too excited I will tell you that these have been very simple examples: more variables would be needed to be included, such taxes, advertising expenses, discounts and rewards for backers, etc. Making a successful crowdfunding campaign is much more complex, but that is the subject of another article. But it seems very reasonable that publishers consider “selling” by Kickstarter.
PUBLISHERS WHO “SELL” ON KICKSTARTER
Before we have seen that Exploding Kittens got more than 8 million dollars out of the 10 thousand they asked for. Surely they will have got a lot of room to invest in many other games, don’t you think? But why do it if you can use Kickstarter again? This is not a subsidy that can only be requested by those who have few resources; Kickstarter is open to all. If Kickstarter worked well for you, why not repeat? And that’s why the creators of Exploding Kittens “explode” again with Bears vs. Babies collecting another 3,215,679 $ of 10,000 $.
(Bears vs Babies availabe on stores and on Amazon from 25 dollars)
CMON GAMES (Zombicide, Arcadia Quest, Blood Rage, Rising Sun, Cthulhu: Death May Die…), Alderac Entertainment Group (Smash Up, Instanbul, Thunderstone Quest…), Stonemaier Games (Scythe, Viticulture, Wingspan), Funforge SARL (Tokaido, Monumental), Eclipse Editorial (Ratland, Skull Tales, The Waylanders) are examples of some publishers that started or chose Kickstarter at some point.
CONSEQUENCE: STORES LOSE CUSTOMERS
Kickstarter projects are aimed primarily for private consumers, who pay directly to receive the game. It is similar to buy online paying in advance. The consequence is that if the consumer “buys online” the game on Kickstarter, then it is sales that stores lose.
Following the Exploding Kittens example, most (if not all) of the 212,382 backers have not gone to the store to buy the game again. Not to mention that, as a general rule, the stores do not have copies of the game until later that the backers have received it. In many cases the games are Kickstarter exclusive and can’t be find them at stores.
Cancer is a disease caused by a cell in the body that mutates and escapes from the system control, corrupting and killing other cells of the body until it finally collapses. With Kickstarter we have gone <from what was a “help create lucrative projects” of those who needed money and have no way to get it let’s see if someone helps them> to <dear partners, let’s sell on Kickstarter that we will earn much more money>. Many stores are having a bad time because of Kickstarter, but this is just a symptom: in my opinión Kickstarter is out of control and has many more negative effects: hundreds of projects that compete with each other, exaggerated amounts of advertising and agent commisions to be able to publicize your project, projects that do not comply with the agreement, helplessness and lack of legislation, compulsive purchases of games that then don’t are played … are “degenerating the hobby” causing it to end up collapsing.
Personally, unfortunately I know very closely the effects of the disease and also of Kickstarter. But I don’t lose faith; I’m sure we will find the cure.