Kickstander: Pre-Funding and A Question of Trust

The pre-development funding model that’s currently popular in video games development took a bit of a hit over the past few weeks.

In Kickstarter news, the State of Washington is initiating legal action at those behind the Asylum Playing Cards Kickstarter for failure to deliver their rewards to backers. March saw the once-hot Super Action Squad, a title that raised over $50k in their 2012 Kickstarter, announcing that it has gone on indefinite development hiatus.

Early Access has also seen some negative attention – Earth: Year 2066 got pulled off Steam for being so obviously flawed it should never have gotten up in the first place, while early Greenlight title Towns announced that development was ceasing, despite having received over US$2m in funding from customers.

The flaws with pre-funding titles, especially indie games, are starting to show.

Certainty Versus Faith

It wasn’t too long ago that certain sections of gaming culture were trying to convince people not to pre-order titles backed by publishers. “Don’t pre-order, because you’re sending the wrong message to publishers and buying a game based on its marketing and trinkets, not its actual quality,” they’d say. And they were right, because pre-order editions are about charging more for a game in exchange for also getting an exclusive cloth map or key chain or other useless gewgaws.

This kind of caution generally didn’t stretch to warning players off pre-funding (which I’m including crowdfunding, alpha-access, Steam Early Access, alphafunding, beta-access, etc – all the ways of buying a game prior to its completion of development) titles, especially indie titles. The logic there was that pre-ordering was different to pre-funding because the extra funding made no difference to publisher-backed titles, since they were coming out anyway. However, indie titles needed that pre-funding money or else they’d risk not coming out at all.

A screenshot of Steam's Early Access Games page, which is pretty minimal in terms of the information it covers.

I went looking for Steam’s Terms and Conditions around purchasing Early Access games. As best I can tell, there aren’t any T&Cs that specifically apply to Early Access, leaving pre-funders covered under only the standard Steam Subscriber Agreement – so no different than if they were buying a fully completed game from Steam. (Image sourced from: Steam Early Access)

Problem is, the announcements around games such as Super Action Squad and Towns show that just because you’ve pre-funded a title doesn’t mean you’re actually getting a full game either. In fact, you can end up with no game and the money you contributed to it gone. As I’ve pointed out, only about a third of Kickstarted video games have actually delivered the title they promised to backers and there are a heck of a lot of delayed projects out there, including those where the developers have dropped out of sight.

A broken plate.

If you pre-order a broken game, you can send it back. If you pre-fund a broken game that’s never fixed, tough – it was your fault for making a bad choice. (Image sourced from: Pixabay)

Pre-ordering a title actually gives gamers protection against the game not coming out, or not liking what they hear about a game further down the line – they can get a refund, or swap their pre-order to another title. The attitude around pre-funding can often be that gamers are actually donating to the developers, or even have themselves to blame when the title is cancelled or goes into hiatus: those backers / gamers should have picked better titles buy in alpha. Caveat emptor, but only in the case of pre-funded games.

A Polygon article led with the statement, “Ever since Kickstarter launched its crowdfunding platform, it was long believed that backers had to bear the risks of supporting projects[,]” which is symptomatic of the crowdfunding attitude that the crowds should bear the loss while the creators should benefit from the success. Perhaps someone needs to say it openly: that attitude is just insane.

This is not a viable position in the long-term, because it poisons the well of future backers against believing they can trust crowdfunding when projects can just go silent after taking the money. It’s a situation that leads to gamers only pre-funding developers who have a proven track record in delivering pre-funded projects, or have a good enough reputation from all the titles they made so that backers trust them – a group that will grow increasingly smaller as pre-funded projects fail. And it’s also a statement that’s completely wrong, given Kickstarter’s own Terms of Use (which are looked at below).

It’s entirely up to a gamer to choose if they want to buy a title sight unseen (or even release version unseen, in the case of alpha access), but where pre-purchasing a title is about the certainty that the system will deliver or there will be a refund, pre-funding is all about trusting the developer to maybe, perhaps give you something.  Trust can only be broken a certain number of times before it ends up disappearing.

There’s a problem with a funding model that relies heavily on faith. (Unless you’re an organised religion, and I don’t think any games have reached that point yet. … well, maybe Dark Souls.)

Terms of Dis-Service

One thing I’ve seen people mention is that sites such as Kickstarter have terms and conditions (the official page is Terms of Use, or ToU) that protects backers from projects that have gone rogue. Several sites mentioned clause 4.9 from the State of Washington’s suit (pdf) against the Asylum Playing Card creators: that project creators are “legally bound to fulfill backer rewards if funding is successful“. In short, Kickstarter protects backers in some ways.

A picture of a contract.

Just because something is in a contract doesn’t make it the law. (Image sourced from: OpenClipArt.org)

There’s just a little bit of an issue with that statement though. Just because something is in a contract (as Kickstarter has with Project Creators) doesn’t mean that it is enforceable, or will stand up when tested in court. After all, what laws is Kickstarter actually relying on to back their ToU? Other sections of the ToU mention specific Acts (e.g. Digital Millennium Copyright Act, U.S. Copyright Act), but the Projects: Funding and Commerce section is absent any specifics or penalties.

Kickstarter’s ToU doesn’t actually protect backers, they protect Kickstarter. The State of Washington isn’t going after Asylum’s project creators for breaching the Kickstarter ToU, they are doing so under unfair and deceptive conduct behaviour covered by commerce laws.

The ToU states that Kickstarter “offer[s] the public the opportunity to enter into a contract with” Project Creators and that “Kickstarter is not a party to that agreement between the Backer and Project Creator”. Once Kickstarter has collected its cut of the crowdfunding amount and the Project Creator has their cash, it’s no longer Kickstarter’s problem.

Kickstarter could go out and try to enforce their own ToU against developers who don’t deliver. It’s actually very clearly stated what Kickstarter requires of the people who use their service to raise funds: “Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill” while making a “a good faith attempt to fulfill each reward by its Estimated Delivery Date” (which is completely the opposite of the opinion expressed in Polygon, because theoretically the Project Creator bears all the risk). Kickstarter would appear to have a soild stating point for suing non-delivering developers for the backer money to be returned. But the day Kickstarter does that is the day that wannabe developers stop using that crowdfunding service.

(Sidenote: if this kind of responsibility to either deliver or refund was actually enforced, I think that crowdfunding would get a lot less popular very quickly on the Project Creator side. After all, if you’ve just spent all the money you were given but the project failed, then you’re still on the hook for those refunds too. Lose / lose, if you will. )

Kickstarter’s ToU is very clear that it isn’t responsible for anything other than offering crowdfunding services. Pretty much everything outside of that service is someone else’s problem. The warning Kickstarter gives to Project Creators is that if they don’t deliver, then backers might initiate legal action against them.

Kickstarter's creator responsibility statement: "If your project is successfully funded, you are required to fulfill all rewards or refund any backer whose reward you do not or cannot fulfill. A failure to do so could result in damage to your reputation or even legal action by your backers."

In other words: if you don’t deliver, it’s up to backers to get back their funds. (Image sourced from: Kickstarter)

But it’s up to the backers to go down this path. And that’s a pretty big hassle to try to recoup a $10 or $30 or $50 payment from a pre-funded title that the developer has stopped working on. (I’m aware that this has been pursued through lower courts in the past, but looking at this story shows that the claimant had more legal knowledge than most.)

So it’s going to require either class action lawsuits from backers or legal action to protect consumers (such as is seen with the State of Washington) to actually start enforcing crowdfunded project delivery, because backers individually lack the power and the service organisations involved in pre-funding really aren’t that interested in what happens after they collect the cash.

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3 thoughts on “Kickstander: Pre-Funding and A Question of Trust

  1. “service organisations involved in pre-funding really aren’t that interested in what happens after they collect the cash”

    Could a state like Washington sue on the grounds that KS is willfully profiting from disregarding the allegedly unlawful conduct (false advertising, etc)? I assume not because otherwise Craigslist would be dead by now, but then Craigslist doesn’t get a cut of every Nigerian Scam. Kickstarter likely has data at least as good as your on delivery rates, and it’s explicitly stated that they only get paid when a project funds.

    I’m curious if we are actually going to see a poisoned well effect the first time a million-dollar KS campaign goes under without delivering. (Hex could be a contender, as I don’t recall a legal defense fund amongst their stretch goals, and the merits of the suit don’t matter if they can’t afford to litigate it.) Rational consumers should in principle reach the conclusion that the well is poisoned, but the MMO playerbases is an oddly captive audience that not appear to change its collective behavior in response to high profile disappointments. If you want a $100 million dollar virtual world, or even a $2 million online TCG, you don’t have an indefinite number of vendors willing to offer that up for retail prices.

    • IANAL, but I think Kickstarter is very clear about where its services begin and end. They are likely well covered from a legal perspective.

      Morally, it’s a bit of a different story. Which is why trust is important.

      I can definitely see a poison well effect creeping in, but it is unlikely that one project (unless it is Star Citizen) will turn the tide. Likely it will be a number of high profile failures, or perhaps under-delivery of original promises, that will be what turns off a lot of casual crowdfunders / pre-funders. And that’s a problem, given that these kind of funding approaches require a lot of people contributing small amounts to be successful.

  2. Pingback: The Yogventures Collapse: A Case Study in Kickstarter Video Games Failure | Evil As A Hobby

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