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Subject: The realities of Kickstarter and (lack of?) profit rss

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Charlie Theel
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I see this thrown around a lot and thought it beared further discussing to clarify this for Kickstarter backers and future project planners. It seems to be a common notion that companies/individuals do not make much (if any) profit from successful Kickstarter campaigns.

We've seen this thrown around on the Ogre Kickstarter, all of Valley/Radiant Games kickstarters, and now several people are saying this concerning Kingdom Death: Monster.

My issue is that I think the notion that companies make no profit off Kickstarter is being thrown around a little too liberally. If that is truly the case, then the managers of each of these campaigns are shooting themselves in the foot.

Let me put it like this, if Kickstarter is a break even or slightly profitable venture at beast, then why did...

-Valley Games throw in hundreds of stretch goals for Up Front? Why did they need to offer a Canvas Bag or more than 4 or 5 bonus nationalities? If they're not increasing their profit, then what's the incentive?

-Kingdom Death: Monster throw in a bazillion extra miniature you could order? It's a single guy behind the project and now he has to manage 2 million dollars of funds and he created a ton more work for himself. So why incentivize people to give you additional work/stress if there's nothing in it for you?

Granted, you need to reach a certain number to assure you have the necessary funds to make the print run and perhaps eek out some small profit. But did KD:M really need 2 million bucks? Would the creator have been better off knocking off half the new sculpts/expansions and running a campaign that brouhgt in $500,000? Would Radiant Gaming not be better off nixing the Canvas bag and half the stretch reward nations and only pulling in $200,000?

What's the point in creating hundreds of hours of more work/stress/headaches if you realize very little additional profit? Are Kickstarter campaign managers masochists? Maybe they're just chasing those huge numbers of funds raised so that they have something concrete to show how successful they've been?
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Matt Brown
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I think the profit issue is for the projects that barely meet their goal, but as they go above that mark, then it is more about padding their own wallets. People don't use KS so they can barely make money.
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Now a Major General
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    Your questions indicate a belief that the people starting these kickstarter efforts are fully aware of what they're getting themselves into.

             S.


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Brian Cherry
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charlest wrote:
-Valley Games throw in hundreds of stretch goals for Up Front? Why did they need to offer a Canvas Bag or more than 4 or 5 bonus nationalities? If they're not increasing their profit, then what's the incentive?


Because of the massive amounts of strech goals, I bought 3 games I would not normally have purchased, and will buy expansions for in the future. Not to mention they get to try to sell their product into stores with an established sales record - very important stuff.
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Morgan Langhofer

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Sagrilarus wrote:

    Your questions indicate a belief that the people starting these kickstarter efforts are fully aware of what they're getting themselves into.



That may be true, but Rik Falch has already delivered D-Day Dice through KS funding, has run a second successful campaign for Airborne in My Pocket, and STILL used strong incentives to drive the Up Front campaign to its successful conclusion. He has the experience to know what a KS campaign is in realty and still used it to launch the game. This would seem to speak strongly against the "if they only knew" theory.
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Scott Hill
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I think it's people (mostly Kickstarter backers) trying to convince themselves that they're somehow getting something that is better than it seems.

I got into quite long discussions with people during the Zombicide Kickstarter because people were saying things like "they can't add another mini as a stretch goal because it would cost too much" (some even said it about the optional extras!) and then not believing me when I pointed out that CMON and GG would be making a profit from each and every pledge because if they weren't there would be absolutely no reason for them to be doing the Kickstarter in the first place!
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mlanghof wrote:
to drive the Up Front campaign to its successful conclusion.


    "Successful" = Product Shipping. At least that's my perspective on it. Has Up Front cleared all its IP legal hurdles?

             S.

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GeekInsight
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I think it's naive to believe that Kickstarters don't make money. Clearly they do or the publishers wouldn't use Kickstarter. Now, maybe there is an initial small loss on the first print run, but the hope is to make it up with later runs and sales once a game is popular. I could see that.

That said, I've spoken to some designers and Kickstarter definitely takes its cut. In fact, one told me that the company would make "strictly more money" if it didn't use Kickstarter. And that company's goal was to stop using Kickstarter for established properties.
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Charlie Theel
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Sagrilarus wrote:
mlanghof wrote:
to drive the Up Front campaign to its successful conclusion.


    "Successful" = Product Shipping. At least that's my perspective on it. Has Up Front cleared all its IP legal hurdles?

             S.



Lets not start that discussion back up in here, please.



It seems like most of you are agreeing with my beliefs that these companies are in fact making profit, and making additional profit by utilizing stretch rewards to boost pledge income.

However, many people post that these companies are not making much profit. I'm hoping to get some of these people's opinions on here.
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matt cocuzzi
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MyParadox wrote:
I think it's naive to believe that Kickstarters don't make money. Clearly they do or the publishers wouldn't use Kickstarter. Now, maybe there is an initial small loss on the first print run, but the hope is to make it up with later runs and sales once a game is popular. I could see that.

That said, I've spoken to some designers and Kickstarter definitely takes its cut. In fact, one told me that the company would make "strictly more money" if it didn't use Kickstarter. And that company's goal was to stop using Kickstarter for established properties.


It's not a secret -- Kickstarter takes 5% of any successful project. All payments go through Amazon which, depending on how it is set up, takes an additional 3-5% (presumably of the full project value, and not the post-kickstarter-fee value).

So, you're down to about 90% of the final dollar amount.

Making a Kickstarter, especially keeping up with FAQs, stretch goals, etc, is work. People expect to get "paid" for that work. In some cases, the company already exists and wants to get "paid" in materials (see Reaper's kickstarter), some want to get "paid" in product (like having an excess quantity of a game that they can sell later).
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Jeff Wolfe
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MyParadox wrote:
I think it's naive to believe that Kickstarters don't make money. Clearly they do or the publishers wouldn't use Kickstarter. Now, maybe there is an initial small loss on the first print run, but the hope is to make it up with later runs and sales once a game is popular. I could see that.

That assumes that people know what they're doing. Owing to the nature of Kickstarter, I would say that that's often not going to be the case.

Every business venture is a risk. That's why most businesses fail. It's possible to make money with Kickstarter. It's possible to lose money with Kickstarter. A well planned and well run project is more likely to make money. Kickstarter doesn't change that basic equation.
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GeekInsight
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jeffwolfe wrote:
MyParadox wrote:
I think it's naive to believe that Kickstarters don't make money. Clearly they do or the publishers wouldn't use Kickstarter. Now, maybe there is an initial small loss on the first print run, but the hope is to make it up with later runs and sales once a game is popular. I could see that.

That assumes that people know what they're doing. Owing to the nature of Kickstarter, I would say that that's often not going to be the case.

Every business venture is a risk. That's why most businesses fail. It's possible to make money with Kickstarter. It's possible to lose money with Kickstarter. A well planned and well run project is more likely to make money. Kickstarter doesn't change that basic equation.


You're right, of course. And any given project might end up with a loss if the guy in charge (especially a newcomer to business) mismanages or underestimates his needs.

But given how many projects there are, and its use by established companies such as Eagle/Gryphon and Valley games, I think the safer assumption is that, on the whole, money is being made.
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Brian Cherry
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charlest wrote:
It seems like most of you are agreeing with my beliefs that these companies are in fact making profit, and making additional profit by utilizing stretch rewards to boost pledge income.


How many people bought multiple copies of games (to resell on ebay) so they could get a messenger bag? Or how many bought Tshirts, dice bags or signed books. The kickstarters can use the store dynamic to drive up sales. Its genius. As I said, Im a backer, but have a hard time letting things go because it isnt always as good of a deal as it seems.
 
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Eric Matthews
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Isn't the whole point of Kickstarter was to find funds to start a project, like board games production, which normally requires a large upfront investment.

If long term profit is expected from the project then sales after the kickstarter should be part of the the plan from the get-go.


ogre is a bad example, though, or maybe a great example. It was never meant to make a profit, SJ said long before initiating the kickstarter that the whole point of doing this was because he wanted to make a reprint of his baby at a size and scope that would not be feasable using a normal production plan because of the upfront costs.

For him a success is not having to spend a hundreds of thousands of dollars upfront for a game he expected very few people to be interested in.
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Scott Hartman
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Here is how I see it, planning to use Kickstarter in the next few months. The number of backers are essentially pre-ordering something that would not be available otherwise. The project goal amount is not determined to make a profit, it is set to fund production. The sales after production are what will hopefully make a profit.

example. I can make 100 widgets for $500. I don't have $500. I think I can sell each widget for $10. I use Kickstarter to get 50 people to fund $10 each, making the $500 I need. I use that $500 to buy 100 widgets, mail 50 of them to my backers. Now I have 50 widgets to sell to other people, I better get cracking on some sales. Who wants a widget?
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Kevin Wisser
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This can't be the case, since any game you kickstart for 50 shows up for 30 or less on coolstuffinc.com - the company is making bank by cutting out the middleman, retail stores, and selling it themselves directly for basically MSRP or higher.
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Jason Hinchliffe
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I can't imagine its not quite profitable at a level like KD: Monster.

They're selling for retail level pricing. Given there are costs to getting the tools made etc., but at a volume of 2 million, the scale should be enough that the margins are quite healthy.
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matt cocuzzi
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shartma wrote:
Here is how I see it, planning to use Kickstarter in the next few months. The number of backers are essentially pre-ordering something that would not be available otherwise. The project goal amount is not determined to make a profit, it is set to fund production. The sales after production are what will hopefully make a profit.

example. I can make 100 widgets for $500. I don't have $500. I think I can sell each widget for $10. I use Kickstarter to get 50 people to fund $10 each, making the $500 I need. I use that $500 to buy 100 widgets, mail 50 of them to my backers. Now I have 50 widgets to sell to other people, I better get cracking on some sales. Who wants a widget?


For what it's worth, you'd have about $450 after Kickstarter and Amazon take their cuts. And that doesn't include shipping to customers. If shipping is $5, then you'd have to charge $15 per widget, or sell a lot more widgets to cover your costs.

If you're going to launch a Kickstarter, I hope you've worked through that math. If you want to know more, PM me.

Edit: I agree though. My plan is to use the Kickstarter to fund the production run and sell the rest of the units as profit. Good luck!
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Ralph T
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I suspect Valley Games lost quite a bit of money on their D-Day dice Kickstarter. Hence their financial collapse as a company.
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Shawn George
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ralpher wrote:
I suspect Valley Games lost quite a bit of money on their D-Day dice Kickstarter. Hence their financial collapse as a company.


What basis do you have for that claim? They continued to add more stretch goals up until the last minute; I can't imagine that they would do so unless it was financially viable. Unless there was a major unforeseen expense, they should have remained well within the black for this one. And I don't remember any major snafus happening with that project, other than packing/shipping out to the customers taking slightly longer than expected.

They probably didn't make a ton of money off of the $35 supporters, but their most popular backer level was the $75 category, which was more than double the $35 level in terms of price but only added 4 expansions, none of which were likely more than a few bucks to produce and ship.
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I suspect that there are a lot of kickstarter projects (boardgames) that get funded under $20K-$50K range that end up losing money - even losing substantial amounts of money. Some will lose money because of the number of stretch goals that are added (free upgrades, with no additional revenue), others because not all the costs are factored in up front (shipping is a huge expensive that not everyone fully realizes).

Some kickstarter boardgames lead to products that will sell well after the project is over - others are niche products that reach most of their audience during the kickstarter and won't/don't sell well after (and this isn't just because the game is "bad", but because there are only so many people that are going to buy that type of game).

That said, I don't think that the $500K+ projects are going to be losing money unless they are terribly mismanaged.

Its nice to see the success that Kingdom Death had, and given the professional way in which the project was run I expect that the project will deliver (it will be late, but it will deliver).
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Scott Hartman
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cocuzzi wrote:
shartma wrote:
Here is how I see it, planning to use Kickstarter in the next few months. The number of backers are essentially pre-ordering something that would not be available otherwise. The project goal amount is not determined to make a profit, it is set to fund production. The sales after production are what will hopefully make a profit.

example. I can make 100 widgets for $500. I don't have $500. I think I can sell each widget for $10. I use Kickstarter to get 50 people to fund $10 each, making the $500 I need. I use that $500 to buy 100 widgets, mail 50 of them to my backers. Now I have 50 widgets to sell to other people, I better get cracking on some sales. Who wants a widget?


For what it's worth, you'd have about $450 after Kickstarter and Amazon take their cuts. And that doesn't include shipping to customers. If shipping is $5, then you'd have to charge $15 per widget, or sell a lot more widgets to cover your costs.

If you're going to launch a Kickstarter, I hope you've worked through that math. If you want to know more, PM me.

Edit: I agree though. My plan is to use the Kickstarter to fund the production run and sell the rest of the units as profit. Good luck!



Yes I have considered all of the additional costs and fees. My example is meant to illustrate that Kickstarter is ideally meant to fund production not be a means of retail sales. Good luck to you as well.

And of course it is entirely possible to make a profit from raising money on Kickstarter. But setting an initial goal, and achieving it, is the most important part of raising these funds. If you make more than what you expected/need then more power to you.
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Ralph T
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Putts wrote:
ralpher wrote:
I suspect Valley Games lost quite a bit of money on their D-Day dice Kickstarter. Hence their financial collapse as a company.


What basis do you have for that claim? They continued to add more stretch goals up until the last minute; I can't imagine that they would do so unless it was financially viable. Unless there was a major unforeseen expense, they should have remained well within the black for this one. And I don't remember any major snafus happening with that project, other than packing/shipping out to the customers taking slightly longer than expected.

They probably didn't make a ton of money off of the $35 supporters, but their most popular backer level was the $75 category, which was more than double the $35 level in terms of price but only added 4 expansions, none of which were likely more than a few bucks to produce and ship.


The basis of the claim is are the reports that Valley Games cannot pay its game designers and is now facing creditors. If they made money off of a successful D-Day Dice campaign they should be in better shape than they are.
I suspect they lost at least $10 for each $35 supporter. The cost of shipping and the bag alone had to be pretty significant.

The other thing that hurts the Kickstarter campaigns is the aftermath--how is the demand for a Kickstarted game once it is available to everyone? Often times it's pretty low. The demand definitely subsides once the game is released to the general public and if the Kickstarter was successful, it either met the pent-up demand or resulted in a secondary market of players seeking out or trading for Kickstarted copies as opposed general release copies.
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David Hoffman
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The point of putting a boardgame (or some other product) on Kickstarter is NOT selling your product as part of the Kickstarter campaign.

At least, that's not the main point.

The main point is funding the production of your game (or product) so non-Kickstarter people can buy it. Kickstarter is about making things that might not be able to raise funding through traditional means happen. Making them exist.

The game (or watch, or iPhone case) you get as a reward from the campaign is just that: a reward.

Kingdom Death: Monster, for example, is not about the 5,000 people who supported the game. It's about the people who'll be able to buy the game, the expansions, the minis, etc. because these things now exist. Especially with miniatures and miniature games, where the biggest cost (to my understanding) is the creation of the molds for the minis themselves.

It's easy to lose sight of this as the list of super-successful projects keeps growing. Another example I'll use is the Pebble watch. I supported that, and I'll get a watch sometime soon, but it's YOU, the people who are now Googling and saying, "what the hell is he talking about?" who they're after. They have my money. They want you to be able to walk into a store or go to a site and order yourself a Pebble watch. Or a copy of D-Day Dice. Or that fancy new iPhone case . . .
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David Millette
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Read this thread if you want to hear from an established game manufacturer...

http://www.boardgamegeek.com/thread/888384/1775-rebellion-on...
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