By all means, the Shenmue 3 Kickstarter has been a fantastic financial success. At the time of writing, the game has earned $5,652,645, well over its original goal of two million. Fans have been asking for Shenmue 3 for ages, and Yu Suzuki has always wanted to find an outlet that would let him continue making his vision for the Shenmue story. As it stands, Shenmue 3 is the most successful video game Kickstarter of all time, blasting past Koji Igarashi’s Bloodstained: Ritual of the Night , and easily breaking the landmarks set by games such as Hiveswap and Broken Age . It’s a success all around and everybody wins… right?
Well, as happy as I am that Shenmue 3 is being made, and as supportive as I am of Kickstarter in general, Shenmue 3 is setting a disturbing precedent where AAA companies withhold funding until a game succeeds on Kickstarter first.
On the surface, everything is fine. It operates just like any other Kickstarter, for a consumer. You pitch in your money, get your rewards, and the game gets made. Heck, it might even be a little bit better as the support from a third party publisher will reduce the chance that the Kickstarter will fail. Pressure from a big company like Sony will pretty much guarantee that the final product doesn’t get lost to the Kickstarter ether.
But, in a way, these sort of publishing relationships are undermining the whole point of Kickstarter’s existence, and for that matter the point of our traditional publishing mode.
Let’s examine these two models of funding. In the traditional model of funding, a publisher, who has much more money than a developer, gives that developer cash in order to fund the development of a project. In return, the publisher also gets a heavy chunk of the profits. The heaviest, actually. Primarily, money is made for publishers, and developers make only around 10% of each sale once all fees are paid. But there’s a reason for this relationship. The publisher is taking most of the risk, by investing most of their money up front, and so the publisher gets the most return, if the game succeeds. If it fails, they stand to lose money. These are the risks inherent in being a publisher, or any sort of investor.
Unfortunately the desire to not lose money can cause publishers and investors to become super conservative with who they give funds to. Innovation is scary, and so great new ideas tend to not get funded. That’s where Kickstarter comes in.
Kickstarter allows fans to take the risk, instead of a publisher. We all give a developer some money, and expect it to deliver on its promise. The risk is that it doesn’t deliver on that promise, and we just lose our money. But if it comes through, then we get the game we wanted, and, perhaps even better, profit can go directly to the developer. No publisher took a risk, and our risk payoff was already made, so the developer makes a higher percentage of the money returned. The drawback is that crowdfunding simply doesn’t have the same financial capacity that a AAA publisher does. We may be able to give a developer a couple million, but the biggest AAA games have budgets in the 10-50 million dollar range.
But this new arrangement, Kickstarting before getting AAA funding, kind of undermines the whole risk taking process. Basically, it allows a AAA company to invest in a game with 0 risk. Now, all the risk is offloaded onto the consumer. But the consumer isn’t getting rewarded, nor is the developer! It’s the publisher who is getting rewarded! Now, fans have to take the initial risk of funding, while publishers make all the money, and developers are left in the lurch! How is that fair? Why should investors have to not take risks? That’s their whole purpose!
So while I’m very happy that Shenmue III is getting funded, it is distressing to see other indie developers enter into similar agreements, such as Lab Zero with their new 2D RPG Indivisible . It really feels like this is a case of investors holding their funds hostage until enough gamers prepay for a game that doesn’t even exist yet! How ludicrous is that?