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Rolling for Initiative--A Brief History of Kickstarter

Column by Scott Thorne

Published: 09/09/2012, Last Updated: 09/10/2012 01:36am
Rolling for Initiative is a weekly column by Scott Thorne, PhD, owner of Castle Perilous Games & Books in Carbondale, Illinois and instructor in marketing at Southeast Missouri State University.  This week, Thorne gives an overview of Kickstarter and a major problem with the site.

After writing about the success of Giant in the Playground and Reaper's Kickstarter projects last week, I decided to do a little more research on the subject of Kickstarter, since it is getting so much attention and use in the comic and game field.

Kickstarter launched in 2009 out of frustration co-founder Perry Chen faced when he ran into difficulties promoting a concert and turned to the Internet for funding.  Finding lots of interest among internet users wanting to support creative types, Kickstarter started as a way for those interested in art and music to provide support to the artists creating it.  Kickstarter supports the company by taking 5% of the proceeds of projects that successfully fund.  For those of you that don't like Amazon, grit your teeth when you fund a Kickstarter project as Kickstarter uses Amazon to process pledge payments, with Amazon taking another 3 to 5% of the contributions for the handling.  Since launching, Kickstarter has had about 61,000 projects posted to the site and processed over 215 million dollars in pledges but didn't hit its first million dollar funding until this past February, when a proposed solid aluminum iPod dock , originally looking for $75,000, raised $1.4 million.  The most successful Kickstarter campaign so far has been for the Pebble, a watch with programmable faces.  Pebble Technologies originally sought $100,000 to produce 1,000 of the watches and wound up collecting about $10.3 million, selling about 85,000 watches, enabling the company to add 6 people to its staff within two weeks, tripling the company's size.

The attention garnered by successful Kickstarter projects such as these, and the Reaper and Giant In the Playground projects, obscures  the fact that posting a project to Kickstarter is nowise a guarantee of success.  In fact, according to Kickstarter, roughly 9% of all projects posted to the site receive zero pledges.  Less than 35% of game projects and 32% of publishing projects successfully fund (the most successful category:  theater.  Over 60% of theater projects launched on the site have successfully hit their funding levels).  Very few Kickstarter projects reach levels that attract the attention of the media, with only seven so far breaking the $1 million mark, as far as I can find.  The most successful Kickstarter projects fall into two categories, 1) they come from companies that already have a base of support for the project and are able to drive support for the project by pushing it relentlessly to that fan base or 2) technology blogs or other media sources find about the project, view it as novel or innovative, and start talking about it, creating awareness of it among potential funders.

There is also the problem of what happens if a project funds but never gets produced.  In the early days of Kickstarter, projects were typically musicians seeking funding from fans so they could produce another album.  Today,  a Kickstarter project is much more likely a developer seeking funding by preselling a product before producing it.  According to the terms of service on Kickstarter, if this happens, the creator is supposed to refund all money to the backers but the company provides no method for doing so on the Website.  Since Kickstarter never has the funds for a project, operating solely as a facilitator between creator and funder,  the company's position is that it does not  give refunds and all negotiations must take place between creator and backer.

According to a recent story on NPR the designer of PopSockets, an iPod case and cord designed not to tangle while dancing, raised about $18,600 from 520 backers last February.  Now, the money is gone, spent on legal and manufacturing fees, with no PopSockets to show for it, none likely to appear, and a host of unhappy backers.  Creator David Barnett eventually refunded about $1,300 to 40 of them, which only made the 480 unpaid backers even unhappier.

The problem, really, is that Kickstarter is not set up to police itself, similar to eBay in its early days.  The site only does cursory investigation of projects before allowing them to post and, while the terms of use do constitute a legal requirement for the creator to produce or refund, there is no mechanism on the site for enforcement.  All legal disputes are between creator and backer and, given the size of many pledges, backers likely don't feel it worthwhile to involve the law.

For the moment, Kickstarter is the premier source for crowdfunded projects.  However, unless the company develops better mechanisms for policing itself, it likely will lose that position to a similar website that provides stronger protections for funders.

The opinions expressed in this column are solely those of the writer, and do not necessarily reflct the views of the editorial staff of ICv2.com.
 
 
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