Is This a Solution for Kickstarter Backer “Loans”?

25 October 2018 | 40 Comments

After Monday’s post in which I discussed how some backers view their pledge as an interest-free loan–an opinion with which I respectfully disagree–I had an unexpected idea.

The idea stemmed from a comment I read on the corresponding thread on the Stonemaier Games Facebook page. The comment was about how it’s quite common for Kickstarter projects to deliver after the estimated delivery date, resulting in the backer’s money being tied up in something for an indeterminable amount of time.

In truth, I think this is a bit of a problem on Kickstarter. It’s one thing if I pay $50 and receive my reward within a few months of the estimated date. But it really does start to feel like a loan for the many projects that stretch that delivery date to 4-6 months later, and even more so for the (admittedly few) projects that take years to deliver.

So I have a solution I’d like to propose. It has both pros and cons, but it might have potential for the right creators, and I’d love to hear your thoughts.

The Solution

For a company that doesn’t necessarily need a wave of up-front funding, what if backers could place a very small pledge to reserve a special copy of the game, and then they would pay the majority of their pledge through a pledge manager when the game is fully produced and ready to ship from the manufacturer?

Basically, the project would have one reward level that would read something like, “$9 – Reserve 1 copy of the game with all stretch goals. Purchase will be completed at the special Kickstarter backer price via the pledge manager when production is complete. Also receive access to the full print-and-play files when the campaign ends. Add $9/game to reserve up to 4 total games.”

To avoid confusion, the “Kickstarter backer price” would be printed on the page, not the reward, showing that if the KS price is $69, you would only pay $60 + shipping via the pledge manager (shipping would be clearly defined on the project page so there are no surprises). Refunds on the $9 would not be an option after the publisher disseminates the print-and-play files.

Stretch goals would work the same as normal, except that the thresholds would be much lower than what we normally see.

It’s not all that dissimilar to how some companies use pledge managers, except (a) a $1 pledge isn’t necessarily indicative of backer demand for the game, as it’s not enough of a sunk cost and (b) those projects always include a full reward level too. Would it be all that bad to include a full-price reward? Possibly not, though if you did, you’re essentially creating the problem that this solution is attempting to solve.

It’s also very similar to what some creators offer to retailers, who are much more likely to back a project if it has a lower impact on their current cash flow. I tried this with Scythe, and out of 106 retail backers, I think only 2 of them didn’t follow through with their commitment.

I talked to Joe at BackerKit to see if this approach is feasible through their system, and he echoed the sentiment about how many projects use the $1 reward level–they’re set up to handle upgraded pledges. He did say that they might have to make a small tweak to their system to ensure that a person who reserved 1 copy of the game doesn’t try to buy 3 copies, given that they’ll be buying from a limited pool of already-produced games at the point in time when they finalize their payment.

If you had multiple reward levels, you could have $5 and a $9 rewards, though I’d worry about $5 backers being frustrated later that they didn’t reserve a deluxe copy (at which point it would be too late, as you would have already made a specific quantity of each type of reward). I think this system may work best when there is only 1 reward.

Pros

Backers can have all the excitement and fun of a Kickstarter–including improving the product with stretch goals and getting a special version of it–without fronting a lot of money, given the uncertain delivery date.

The publisher benefits from the buzz of Kickstarter and the demand they gauge from backer pledges. They might attract more backers, as $9 is a much better foot-in-the-door price than $69 + shipping. Also, they may have to deal with less of the negativity that stems from a combination of backer impatience (which is often justifiable) and passion (which is great until it transforms into beast mode), as $9 isn’t enough to stress out about.

Oh, and here’s a fun perk: Kickstarter charges 5%, right? (I’m excluding credit card fees, as the publisher will pay them either way.) BackerKit charges 0% of funds raised in BackerKit. Even if they decided to charge 1% for a special project like this, that could be a monumental difference for a big project.

Cons

There are definitely some downsides to this approach:

  • The idea of accurately gauging demand is absolutely crucial to any Kickstarter. Using this solution, a publisher could be in big trouble if they had 10,000 backers but only 5,000 of them decided to complete their pledge. However, since you’d be presenting backers with a finished, fully realized game instead of an in-progress concept, you’d probably have most backers increasing their pledge. There’s also the sunk-cost fallacy in effect.
  • It requires the publisher to have a potentially significant amount of cash on hand to afford the first 50% of the manufacturing cost. Though it may not be as bad as you think: For 10,000 games that cost $15 each, you’d pay half ($75,000) up front, which would actually be covered by 10,000 pledges at $9 each (plus some extra cash for art, graphic design, moulds, etc).
  • Backers might be confused by the method, as it’s always risky to try something new. It requires you to educate backers on something they’re not familiar with, and you might have some backers who think they’re entitled to the entire game for just $9.
  • The funding total might look relatively small, which could matter to potential backers who visit the project without fulling understanding how it works. It would not be a million-dollar project, at least not on the Kickstarter page.

***

What do you think about this idea? Is there a key element to human psychology I’m not accounting for? I’ve posted a poll below to help provide some level of quantitative data.


If you answered $69 today, I’d love to know why in the comments.

Also read: If I Returned to Kickstarter, Here’s How I’d Do It

If you gain value from the 100 articles Jamey publishes on his blog each year, please consider championing this content!

40 Comments on “Is This a Solution for Kickstarter Backer “Loans”?

  1. An interesting idea. I think it could work, but I also think would require more upfront. The Kickstarter needs the funds to bring the project to life. Personally, I’d be all about 1/2 & 1/2. Reduces my risk, and helpful for cashflow (particularly on the more expensive games), but hopefully puts enough funds in the hands of the developers to make it happen.

  2. It surprised me, but my gut feeling was that I’d be happier backing for the smaller amount upfront for an established person.

    For a first time publisher, I’d be worried that they hadn’t accounted for everything that might go wrong in the production process, and so would run out of money and I’d end up with nothing.

    1. I could see this working for the big companies that really are just using KS as a pre-order system and plan to sell the game into retail anyway. They don’t have as much risk as a smaller project or new creator that has plans only to produce enough for the backers of this campaign and a few for conventions.

      1. Agree with Dan — this would make me more inclined to back a $100+ project (if I only had to lay down, say $20 deposit up front), but it would also make me feel much better about cancelling or withdrawing my full pledge after the campaign if I decide that (a) it’s too expensive, after all, (b) I can’t afford it right now, or (c) I know that my $20 helped them produce it in the first place (even if I’ve lost that ‘donation’)

  3. I think this is the sort of thinking that can help spur positive change. As a backer I like this idea a lot. I think there will be immediate concerns of this impacting stretch goals.

  4. It’s an interesting idea. I see that the stretch goals could be a problem, especially if backers don’t follow through with final payments. Publisher could be extremely overstretched. Pardon the pun.

    For some of the big guys, it’s would be fine, cmon etc.

  5. This is a really neat idea. Unfortunately I think the cons definitely outweigh the pros at this time. People just really don’t like change (at least while its changing, after its done its fine)

    It would take some of the KS veterans and bigger publishers that can absorb the risk since they get so many backers anyhow to really make a change to a system like this. This is because not only can a bigger publisher potentially absorb the risk, but since they have a bigger reach, they would expose more people to the idea during their campaign. Which will allow people to accept the change faster.

    For example, if I ran a campaign that garnered 500 backers at $9 for my game. That would only be 500 people that actually go through that experience and see if its something they like.

    But if you ran a campaign and got 20k backers and hit all expectations with your great customer service, more people would be likely to try that system again with a newer creator.

    And then of course as you mentioned, much harder for a small publisher to front the other 90% of the manufacturing costs

  6. For now, I am a hard “no” on Kickstarter projects, but this is an intriguing idea that could coax me back. I would still probably not back companies/projects that consistently deliver late (not talking a few weeks…but months)…and I may back out of a final payment if a project is really late or available at cons (excepting charity auctions) or retail before backers are receiving it.

  7. I think it’s easy to forget that the board gaming community is a specialized eco system on KS. That is to say, while boardgame backers feel like they are pre ordering or loaning to creators, the reality is that KS was started so the creators could independently fund their creative dreams. That is to say, it’s baked into the entire philosophy that one is helping someone new to creating, create a thing, and that’s how I think of it. Even if it is backing a Stonemaier, or CMON, or Kingdom Death, I’m still helping you guys to create a product that may not have been viable as an off the shelf product.

    All of that is to say that I would have concerns if the industry moves further into the pre order, big business paradigms on KS, because it makes it harder for the small publishers (like myself) to get a foot hold. The minimum cost and investment (which is already high) could start to become even higher if people start to expect small dollar Kickstarters. I would rather see the community more demanding on the level of completion of the game than moving towards more creator risk (although stretch goals do not help with that).

    I think I would actually like to see big publishers graduate to a different type of platform from Kickstarter, more geared towards pre orders and estimation of demand than i would like to see people continuing to use KS and push the behavior pattern further away from KS core essences. In general, I feel like the KS board game community is already diverging from the KS philosophy, and I would rather see those of us in the industry reinforce patterns that converge the philosophy rather than diverge, but that’s just me. I’m very biased in this regard.

  8. I think most people would rather put $9 down, I certainly would and pay later. But my problem with even that is that most board games are 12 months out. And the current Kickstarter for the Jagged Earth expansion to Spirit Island is delivering in May 2020! That’s 18 months. The time frame on Kickstarter boardgames is frustrating. I can late pledge for the Mate X electric bike on Indiegogo and it’ll drop ship directly to me in March 2019. I don’t understand why the production timelinens are so lengthy? I don’t do Kickstarters anymore because, truth be told, there are plenty of currently available games I can play.

    1. Jacob: I see what you’re saying. Personally, as a creator, I liked to have the game 99% ready for production when the Kickstarter project ended. However, Kickstarter is also about the act of creation, so I understand that some projects are somewhere in the middle of the process when the Kickstarter launches. As a potential backer, that definitely impacts my decision to back or not back, though.

  9. I supported more than 100 projects in KS and I can say 85% easily came later than the expected date. I assume from those 85% that around 40% had to lower the benefits to pay for something extra ( I remember last year the Typhon in Asia lowered the production of some games and got delays… nothing you can do there) or just to try to meet the deadline. I think the sellers should have a more mature product and chain of manufacture (with a coverage for unexpected costs) so maybe instead of 9$ could be 15$ or 20$ for deluxe editions.

  10. This option generally exists. You pledge $1 and then access the Pledge Manager later on. If I’m cautious of the project that is generally what I do. Not every creator has that option, but many do. The pledge manager usually closes a significant amount of time before the product is ready to ship though. So this would require the creator to keep it open longer, leading to the first two cons mentioned. THEN Kickstarter would probably not take too kindly to creators circumventing them to avoid paying their percentage. I would hate to see the platform become hostile to the creators.

    For me, I would rather pay up front. I’m happier having paid the money and not receiving my rewards on time vs hoping I have the money when that time comes and then finding out I don’t when I need it.

    I could say a bunch more, but Orion above covers that pretty well.

    From what I have seen, the delayed projects aren’t the issue. It’s the lack of communication and respect from the creators. If something is 4 years late and the creator won’t respond to the backers, then of course people will be angry. But then there are ones 3 years late whose creators are constantly updating. It shouldn’t be on the backer to have to calculate the risk of backing before hand. It should be the creators responsibility to show the backers appreciation for making their dream come true. Treat everyone with respect, creators and backers, and that would solve most problems.

  11. As someone who’s been on the back end of a number of Kickstarters, I can say that this would carry significant risks for some projects, and the longer the delay, the bigger the problem.

    Anecdotal evidence would indicate that a not insignificant portion of KS backers would either forget, or “forget” to budget for the expense that ends up coming on suddenly 2-3 months after it was expected.

    I think this would result in an unacceptable number of cancelled orders after production has been paid for.

    I base this on seeing a couple things after campaigns: backers that completely forgot they pledged, backers that fail to update their payment or other info in backerkit despite multiple contact attempts, backers that get mad at unexpected delays, backers that later express regret over pledging based on myriad reasons, etc. Imagine a project that goes an extra 6 months… and then a third of the backers jump off because they have moved on emotionally and are just sick of waiting.

    I think a higher buy-in would be necessary to ensure that the creators don’t face a real problem, especially for projects that barely fund. What about using an estimated production cost as the level of buy-in, so that the creator is never on the hook for more than it cost to produce, even if they end up with zero profit from flaky backers.

    If the usual pledge for a game would be $60, and the estimated production cost is $45, then the buy-in pledge is $45, with a “fulfillment payment” of $15 due on shipment.

    This of course comes with other Pros and Cons, and might confuse people too. It would have to be billed as a different kind of campaign I think, with support from Kickstarter, to make sure backers understand what they are getting into.

  12. I’d prefer it as a cash-strapped hobbyist torn between KS pledges and on the shelves older titles. Wonder if ks would approve if they only saw the initial pledge $$

  13. For me I choose the pay now option. The reason is that I know there would be a psychological impact on me. I would back more games and then they would all hit at a time when I don’t have the money and I would have to pass on a lot. I can’t justify saving money an indefinite amount of time for games. I would end up having to use it for something else. This way when I have the money I back and when I don’t have the money I pass.

  14. I think this idea is interesting, especially for those established companies that are using Kickstarter as a preorder system anyway (i.e. Queen Games).

    I have backed a lot of Kickstarter projects over the years. Too many, in fact. One other potential benefit of this idea, at least from the backer’s perspective, is that it offers a relatively low cost out if the project goes awry. A majority of the 70+ projects I have backed have been great experiences. However, 3 or 4 projects have had 12+ month delays or the creator ended up delivering a game that was completely different than what was described in the campaign. Some creators do not offer a money back guarantee, or it is a hassle to get your money back. It would be nice to only be out $9 (or some small percentage) in those rare instances.

  15. I think it would work, but I’d change the numbers. On a $69 game, I think it’d be reasonable to pay $20-25 up front to reserve a copy, and presumably that would cover the development costs and most of the initial order payment. Certainly deferring the cost of shipping until after the product is ready to ship (and that cost is going to be incurred) is reasonable. That would also force failed campaigns to come to terms with the fact that they’re not going to make it a lot earlier, because they wouldn’t have the larger bucket of cash that really needs to be spent on shipping (whereas today they continue to spend that money even once they could no longer be successful).

  16. I believe this could help many first-time publishers as risking $10 instead of $100 would make people more likely to back. Also being asked to put in that extra $90 when the product is about to ship would also ease many of the fears of backing a new project.
    The only issue is with shipping costs. It seems that they increase by 50% every six months or so. While you need to state the expected shipping costs, the project creator as well as the backers need to be realistic about how much they are going to increase by if the delivery date blows out by a few months (or years for one of the projects I backed).

  17. I think one of the reasons kickstarter works so well is that you spend your money while the hype is at it’s peak level, at the end of a campaign (at least for many games that is where there is the most excitement). If you have to spend the main bulk several months down the road, some people will have second thoughts because so many new shiny things appeared in between. And at that point, if you don’t want it that badly anymore, it can only go downhill – either lose the $9 for good and not get the game or go through with it because you already spent $9. If you have already spent the whole amount, it is psychologically much more difficult to ask for a refund.
    So, I think the total funding will be lower (in addition to the fact that the amount displayed on KS will be much lower which is also HUGE, but you already mentioned that).

  18. Amazing idea for backers, but it could be bad for creators and KS. You might have to ask KS is it okay. I wonder if they would change their rules.

    1 thing that you may not have thought of: I see lots of people selling their KS games still in shrink wrap, even great games. They changed their minds, or they need money. They are fine with selling it at a $10 or more discount to get back most of their money. I don’t know if sunk cost psychology works as well with board gamers.

  19. my initial thinking is – you’d see a fundamental shift in how campaigns are run. it could become an issue for many smaller campaigns to be successful and thus may simply turn KS into a retail market.
    reason being, like you pointed out, many campaigns hinge on stretch goals. they would have to build goals off of the non-refundable $9 pledge or risk losing their hats when more people than normal inevitably back out of the campaign and they have to pay out of pocket to fund those stretch goals.
    large manufacturers can leverage that to offer better stretch goals – taking that risk – and potentially muscle out the little guy.
    just a thought.

  20. This is a response to both this and the last post. I am one of those people who view Kickstarter as an interest free loan (though as I’ll explain in a minute, I don’t think that is necessarily a bad thing).

    In your post, I felt like you looked at this from the perspective of the backer. I look at it from the perspective of the the creator. The creator needs funding to be able to produce the game that they presumably do not have. They could take out a loan which has both upfront costs and interest. Kickstarter on the other hand has (what I believe are) higher upfront fees, but no interest. Thus, In my mind, when I back a project I feel like I am saving the creator from paying interest. I realize that this is an oversimplification, because many creators might not be willing or able to take out a loan to cover production costs.

    I don’t necessarily view this as a bad thing. I pay upfront for services all the time. For example, my security company offers me one month free if I pay for a year up front. I gladly do this. If a kickstarter project offers me a discount or extra content for the same price, then I feel rewarded for giving them my money so far in advance.

    I don’t know that I am the biggest fan of your scheme. My biggest concern with Kickstarter is getting a well-made, fun game, within a reasonable amount of time. I would rather give up more money upfront to ensure that this happens. I have backed one project that delivered 2 years late and one more where the creator ran out of money and fell off the face of the earth. I luckily received my pledge but many others did not. Fortunately, I enjoy all of the games that I have backed, but I am aware of many that others have that were flops.

    I like that your idea allows people to be part of the creative process without having to commit a large amount of money. I do wish that Kickstarter had a “pre-order” section, where established creators could still interact with the community, but without the fiction of crowdfunding and stretch goals.

    As a consumer, I hate unexpected expenses. In this plan, when I pay for the game is an unknown that I will eventually get a bill for.

    If I were to improve upon Kickstarter, I would focus on helping creators get the product to market faster, rather than on the money being pledged.

  21. I can’t speak for other platforms, but we already handle this natively, including the product specific credits and quantity restrictions based on the amount reserved. We’ve done this primarily with retailer-type rewards but we’ve also had pre-reserves even with specific addons that worked exactly like you suggest.

      1. Yessir! Coin and dice projects use this functionality a lot with us and some of those can be incredibly complex/involved.

        Some projects have used a placeholder amount to gain access to just their addons like for pre-reserving a base game reprint for a campaign for an expansion. They can then use that pledged credit to apply to buying those early shipping products and have them delivered in an initial shipping wave that is shipped prior to the expansion.

  22. I have answered 69usd in the Poll. I think It doesn’t mater (to me at least) if I pay the full amount now or later, you have to pay it anyway. At least at this moment if you make your full pledge, you do it based on the fact that you can effort it now at this moment. You made a valid point, you may attract more backers who cannot pay 69 USD now but 9 bugs is no hurdle. However what about months or a year later? Can the backer pay the 60USD + shipping when asked for it? Its not an pro active decision, its a reaction to an unexpected expense. For the backer who paid the full amount upfront, he only worries about the shipping.

    In terms of risk, sure you its much lower to pay a small amount upfront and see if its work out. But I think the mindset is (yet again I speak only for me), if the project really intrigued me I would give my full support. I would not back a project or more projects just because the entry fee is lower. It also would not make a project more attractive.

    As a creator on the other hand, i think he rather have the full amount upfront. What if the backer can’t effort it or lost interest a year later. He may think I loose the 9 bugs which I paid a year ago, rather then shell out a other 60+shipping now. The backer who pledged the full amount would not risk loosing his 69 usd pledge by not paying the shipping on time.

  23. 1. I voted $69 now as that is when I have the money. There are several reasons for this, first it has not always been the case that my disposable income was the level it is. Second, life can be challenging and you just don’t know what might happen. Third having a bunch of $10-$15 delivery fees land in a short space of time is easier to handle than having to pay the majority of the sale price at some random time.
    2. Whilst the amount is much less and so less to get upset about (although clearly not for some, it is the internet after all) do you not think that maybe the lower buy-in price means some people are more likely to not do the research they really should before backing projects, after all it may only be $9 to you but to someone else that is “$9 dollars!!! OMG I can’t eat for a month”

  24. Part of why I said I’d prefer to pay the $69 upfront is because for me at least, it makes me think wiser about my purchasing choices. Also it makes it easier for me to budget because I don’t have a purchase looming over my head. If I have the money now, I have the money now.
    The reason the wait doesn’t bother me is because I have complete trust in Stonemaier providing what they promise and I know they do everything they can to get the games as soon as possible. Any delays are an unfortunate part of Murphy’s Law.

  25. I’d rather see a 50/50 split between upfront costs and pledge manager finalization. I know I’d be tempted to back a lot more kickstarter game projects if I was only paying 10-15% upfront, and might not have the disposable income if a few of them hit at once. Since projects often get delayed and sometimes even fulfill early, you could get into a situation where say two projects fulfill on time, one is early, and three are late, but all hit you at the same time for finalization costs. I think 50% up front would be a good threshold to keep up my current budget-friendly caution. But then it probably defeats the point of what you are trying to accomplish. So in the end just paying upfront is probably the best way to do it.

  26. I’m very picky with my ks backing, and I don’t have liquidity problems at this level, so the amount I pledge is not a factor. You can usually tell if a ks has problematic designers who are not 100% trustworthy. I guess no talented con man has ever gone into board game ks. On one hand it may be surprising because there’s potential to get easy money. On the other hand if you have leveled up your conning that much you’re probably going to find bigger fish to fry.

    Finding a game I like is more important to me than money ^^ If it’s a Stonemaier game it means it’s 100% trustworthy. Board gamers are a small community. People who don’t know Stonemaier could easily find out on BGG

  27. I’m not certain a ~13% “down payment” is a high enough proportion for such a thing, although I definitely agree that a bigger bite than the $1 reservation common to certain projects with BackerKit-style late pledging available, as a higher minimum buy-in gives a much better indication of serious intent to follow-through. Maybe 20% or 25%?

    I generally prefer to pay in full for KS campaigns (I still get a bit aggravated by paying $60-$100 via KS and then having to pay another separate shipping charge at some unknown later date; having run several KS campaigns myself and shipped out products of a variety of weights I *get it*, but as a consumer I want to 1: know how much I’m paying, total, and 2: prefer to pay it all at once, if I have the money.), but I’ve missed out on several KS campaigns in the last year or two because my household’s discretionary/entertainment budget is relatively restricted—when a campaign appears out of nowhere mid-month and ends in a week or two there’s almost never a chance it’ll fit into my budget. If I’d known far enough in advance when the campaign was launching and how much the main pledge would be (e.g.: to get the game/whatever) that I could include it in my decision-making that would be one thing, or in the old days if the campaign lasted long enough that I could know the pledge would get charged the following month and count against the next month’s budget … but more often than not, I don’t hear about campaigns until after they start (or if I do, there’s no pricing information *ever* and rarely a date), and then they start and end in the same month, and at least for the ones I’ve been interested in, usually don’t have the $1-then-BackerKit option. So…

    So, I’m in favor of the smallish-amount-down, full payment via Pledge Manager sometime between start of manufacture and start of distribution, as an option… but if I’d had the mentioned information in advance so I could budget for the game I’d instead want to be able to pay the full amount either at once (in the campaign) or as soon as the Pledge Manager was turned on. If allowed during the campaign, stretch goals would likely have to be based on social goals or backer counts (which we’ve been seeing more of lately, anyway, probably owing to the $1-then-BackerKit thing).

  28. $69 today so I can use the “set it and forget it” method; budgeting isn’t my strength, so paying for something all at once is my preferred method. Plus, it’s a nice surprise when it shows up.

  29. One of the things I most enjoy about Kickstarter is that whenever a game arrives to my doorstep it feels like I received a gift. So I would rather pay 100% (pledge + shipping cost) at the end of the Kickstarter campaign than paying one part now, the rest later. Even if it’s only the shipping.

    There was a Kickstarter campaign where I had to pay the amount pledged at the end of the campaign, completely forgot about the game and woke up with a notification in my mailbox a month later when the pledge manager opened that I should pay for transport as well. I was a bit upset as I felt I paid twice for the same game.

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