Matt Holden of the Indie Game Alliance joins us for an advice post about first-time creators on Kickstarter. The Indie Game Alliance is a professional organization made of publishers who have united to bring buying power and community to indie publishers and creators. You can learn more about the Indie Game Alliance HERE.
If you are a first-time creator:
* Don't do a deluxe edition.
* Don't do an add-on.
* Don't do Kickstarter exclusives.
* Don't discount your MSRP on Kickstarter.
Just. Don't.
These things were invented by companies MUCH bigger than you, with MUCH bigger reach and buying power than you, because they know their fans had *options* other than buying their game from Kickstarter. CMON for example - I know all of their games are going to be at my favorite FLGS or deep discounter a week after they ship, and I can get it then and keep the money in my pocket in the meantime.
So why do big creators care if you back their Kickstarter if the game is going to get made anyway?
Let's say they sell right to a retailer. Normally, retailers buy from publishers at 50% of MSRP. Typically 20% of MSRP is tied up in just the printing of the game. So, assuming no other expenses to keep the math simple, that's a 30% margin.
But wait - a significant portion of retail sales go through distributors. Distributors buy from publishers at 40% of MSRP. Subtract our 20% for manufacturing and that's a 20% margin assuming no other expenses. (If you're small enough to need a consolidator, that's more like 15%.)
By contrast, Kickstarter takes 10% for taxes and fees, and there's no other middle man. That means that, for the identical game, the CMONs of the world get to print the game out of your pocket instead of their own, AND their margin is a whopping SEVENTY PERCENT (after manufacturing costs, all other things being equal.) So, they're making 3.5 TIMES the amount of profit per copy that they'd make if they sold that identical item in distribution. Thus, they push the campaign hard, and fans who used to show up on release day at a big event at the game store now back on Kickstarter, and just stop going to the game store.
(If you're wondering why your FLGS now sells exclusively Magic cards and Snickers bars, let's call this exhibit A.)
Well, after a while, backers got wise. Why would they let CMON, etc. (and I'm not picking on CMON exclusively, it's just the shortest big company name to type) hold their cash for eight months, for the same game they could get without shipping, on launch day, often at the same or cheaper price? So potential backers started flocking back to the FLGS and the Miniature Markets and Cool Stuffs of the world - which cut into that magic 3.5-times-as-big margin that the creator likes so much. So, what to do?
Enter the KS Exclusive / Add-On Option / Deluxe Version. Some tiny thing to trigger that Fear of Missing Out (FOMO) bug in the backer's head. Now, if I want the fullest version of my game (and why wouldn't I?!) I *have* to buy at the Kickstarter. Sure, it costs CMON an extra ten cents a copy to make that exclusive thing -- because CMON prints enough quantity that they can get those kinds of prices -- but 67% of MSRP still beats 20% all day. That's why these things exist.
Now, let's look at your operation.
People know you need the money to make your game. You don't have it sitting in the bank otherwise. So you don't need to make a special overture to get them to part with their money on the Kickstarter. You don't have a choice, and they know it, and they aren't going to side-eye you for putting your hand out on a crowdfunding campaign unless you massively screwed something up.
You have minimum order quantities (MOQs) to contend with. So everything you make, you need to make in a certain quantity. If 40 of your backers want a 5 player add-on, guess who's still printing 500-1000 five player add-ons? Does CMON care when it happens to them? Nope. They know they'll sell those extras all day online. And if they have to throw 400 in the garbage, they still came out WAY ahead on the extra margin on all those copies of the base game. For you? It could be the difference between profit and loss on your game.
There's also a logistical concern. Every item you pack in the shipping box increases the cost of the shipment - both the physical size of box needed, and the labor to do it - and increases the risk of mistakes. Large companies build in margin for this out of their 2.5 million dollar campaigns. You don't have the margin to spare.
Your first game is likely going to struggle at retail. Consolidators like the one I run can help you get availability at distribution, and help you drive demand, but you'll be making sales 3-5 copies at a time rather than 300-500 like the big boys will, often on consignment. Remember how CMON had to entice people to buy the game on Kickstarter to get more money, because the backer *had other options*? Well, it turns out, for your game, the backer often won't in any realistic sense. Will some FLGS have your game? Sure, one hopes, but what's the likelihood that it happens to be the one in any particular buyer's neighborhood? Can the player get it on Amazon? Sure, if they know what they're looking for in a sea of literally tens of millions of products, but they're statistically never going to walk by it on Amazon's virtual game aisle and say "that's a game I want to try." And the backers - a significant number of whom have been doing this a long time and many of whom are in the industry in some form themselves - *understand this*. They know that your whole print run is functionally Kickstarter exclusive other than the odd convention. If they want the game, they will back it there, without you needing to come up with some kludgey bonus item.
Let's take the simplest possible example of an exclusive: an alternative art card. We'll say the rules are the same, so we can handwave playtesting concerns. Yes, it's possible to break your game by adding an untested Kickstarter exclusive promo, but that's another TED Talk entirely.
First off, you have art costs. Let's be conservative and say it costs $50. Not so bad, right? Now we have to print the card itself. For a single card, you can probably get it printed and delivered to your fulfiller for about $100 all-in.
OK. Now we have to decide how we're going to get the card to the people. We have two real options: put it in the game box, or not.
Game box first. The game comes shrinkwrapped, right? So, do you want to tear the shrink off, put the card in the box, and re-shrink it? You can, but that's a labor-intensive process that's going to cost you at least $1 a copy just for the amount of manpower (humanpower? We need a better word for that) required to make it happen. Plus, now you've wasted all the money you paid to have them shrinked and such at the factory in the first place.
So, what if you have the *factory* put the card in? Great idea! Now, how many do you need to ship to backers? Let's do that many cards. But what about people whose copy gets lost in shipping and has to be replaced? Gotta do those. Also, how do you tell which ones have the card and which ones don't? Guess we better put something on the box that says Kickstarter Edition. But thats new box art -- which means you need to pay an artist to make that new art, and you need to have them print that box. But the box has a minimum quantity to produce. So now that's a thing to contend with, and the box is the most expensive component of most games. You could do something basic like a sticker, but that comes with its own challenges and costs, and comes off kind of cheap.
OK. Putting it in the box, bad idea. Let's just ship it alongside.
First, it's a second item to put in the box. Most fulfilment companies will charge you by the "pick", which means even something as tiny as a card has a cost associated with a human picking it up and putting it in the box. But it's a human doing it, which means mistakes are going to happen. Some people aren't going to get their card. They'll complain, and you'll have to then ship them a replacement card (at your time and expense) and they will feel that they had a bummer experience.
Also, it's one card. Super flimsy! Just tossing it naked in the box means it's very likely to get bent up in transit, which means you need to secure it or you're back to the replacing a bunch of cards problem from above. So you need some sort of packing material, a plastic sleeve, a cardboard backer, something to protect it. That costs money to make, and the factory won't do that (because they produce a deck of cards and that's it) so you're paying the fulfiller to do that labor too. What if you slit the shrink and stuff it in? You can do it - but again, it'll cost more to have the fulfiller do it, and lots of people - *especially* any retail backers you get - will be pissed if you damage the shrinkwrap to do it. So that's out.
At every step in this process, there's the potential for cost overruns (and really, any cost is a cost overrun because it's essentially a gift) and human error. You have to do all the work to get this coordinated between the factory, the fulfiller, an artist, the backers, and you, which sucks valuable time away from customer support, last-minute playtesting, marketing, and all the other places where your time is needed.
All because you decided to add one card.
So, how come CMON can do it? Let's say, hypothetically, you and CMON both want to do a Kickstarter exclusive. They're making a $100 minis game, you're making a $25 card game, and both of you have an exclusive bit that's going to cost $2 to produce.
First off - let's get one thing straight. CMON's $2 addon will be better than yours. It will, because they have staff artists rather than freelancers, they have longstanding relationships and killer deals with their manufacturers, and they print in way larger quantities than you. So their $2 addon is a mini, and yours is probably a tuckbox of cards.
Now, let's look at the raw numbers. We talked above about that 70% vs. 20% margin. So, what that means is that for every game CMON sells on Kickstarter that would have otherwise sold at retail, they make an ADDITIONAL $50 on their $100 game. Well, $48, because of that $2 exclusive. But that's a $48 profit *per copy sold* because the exclusive was there to entice the backer out of the FLGS. Doomsday scenario, they have to throw away 499 copies of the exclusive (which they won't, they'll just put them on eBay and say it was a scalper) -- they're out $998. But remember, they're making $48 to the good *on every copy that gets sold on Kickstarter vs. retail*, so as soon as they hit their 21st copy (of a game that is going to sell thousands), they are already making a profit *even if they have to throw half a print run of the exclusive in the trash!*
Now let's look at your $2 add-on. First off, it's not $2, because you have to pay a freelance artist, and you have to do all the testing yourself, get a UPC, all these other things that happen automagically when you have a big company. It's expensive to be poor. But let's say it's $2.
How many more sales are you going to get vs. retail? That number is pretty hard to know for sure - but it's vanishingly close to zero. Why? Your game won't be in retail in a big way on your first print run. You'll be exceedingly lucky if 5% of your first print run of your first game ends up on retail store shelves. So pretty much, everybody who sees your campaign and backs it *would not have ever bought the game any other way*.
This means you're essentially *gifting* every backer $2 worth of product - for performing an action they were going to perform anyway. You didn't bump them from buying the game at retail, because they never expected to be able to - so the best you can do is hope to sell a copy that you otherwise wouldn't have sold *at all*. Because backers know the game isn't likely to appear in retail, the exclusives don't influence a buying decision except in the vanishingly rare case where somebody says lack of Kickstarter exclusives are automatically a deal-breaker - a number that anecdotally is in the low single digit percentages and consists almost entirely of backers who will be more expensive to maintain due to other unreasonable demands that will surely follow on the support backend. So, the exclusive nets +$48 for CMON - and -$2 for you - when the exclusive cost the same $2 for both of you to produce.
But it gets worse. Remember how CMON easily makes the money back to cover overprints on just a few copies? Well, for one thing, they're budgeting in profit on every game sold, and you're not. They can do that because they aren't shy about slapping a $200K goal on a campaign; they'll fund in an hour anyway. Meanwhile, you're stressing on whether $9,500 is too high a goal or if you should stick with $9,000 to be safe. On a small indie Kickstarter, every dime raised is budgeted out (and even if it weren't, you're out of pocket on art, ads, and everything else you've paid for to this point, so you're already in the red and need every dollar you can find to try and recoup those costs). Your only profit is your leftover product that you can try to sell. So, good news, you've got 400 exclusive widgets left! Win? Nope. It's Kickstarter exclusive, so if you sell it, you betray your backers. You can give it away, and there are some smart ways to do that, but ultimately it doesn't get the money itself back. But you had to print them to meet MOQ, so that's another $800 hit you take, on top of what you already lost on the copies that actually sold, just so you could give your backers a present that didn't influence their behavior *at all*.
People see CMON do a $3M Kickstarter, and do Kickstarter exclusives, and they think, "if I do the same things CMON does, I will have huge Kickstarters like they do!" The problem is, the tactic doesn't work in a vacuum - it requires the cachet they have, the cost of a big box game to balance out the margins, and a real retail presence to make any sort of sense. Simply put, they can waste $2 and be alright a lot more often than you can.
Economy of scale is a bitch.
What about a discounted price for Kickstarter backers? Here's the thing. Let's say you do get your game in a retail store. I've never heard of it, so I pull out my phone and I google it. Kickstarter's domain gets more traffic than yours, so it'll come up before your own website in the search results. It'll be the first link. *click* Check out this game! It's got great art, looks fun... wait. It's $25 here, and $35 in the store. Clearly the store owner is gouging me! Does it say that you're giving a break on Kickstarter for backer appreciation? Sure, 95% of the way down the page, where the retail shopper will never see it. It damages the relationship between retailer and customer, and retailers got tired of price matching Kickstarters with artificially low pricing to placate their customers, and eventually just decided to never support games with artificially low MSRPs on Kickstarter en masse. (If you want to give the customer a break in a way that doesn't trigger this reaction, subsidize some or all of the shipping instead. The shell game works.)
Now, ask these same questions in a backers forum and you will hear the exact opposite. Let me let you in on a little secret - consumers like free stuff and most don't care if you go bankrupt giving it to them. It's up to you to protect your margins and the health of your business. The backer is not always right. Will you lose some backers in this strategy? Yes. And 90% of the people you will lose are the kinds of people who want everything - right now, for free - and they will be problem customers to deal with on the customer service backend, wanting you to pay for every tiny box ding, cursing your name on every Kickstarter update if your game is a day late because it's stuck in the Suez canal, and then still giving you a 4 rating on BGG before they've ever held the game in their hands. TL;DR: most of the backers who don't understand why a first-timer doesn't offer KS exclusives or add-ons are precisely the kinds of backers you will be glad you didn't get.
Beyond all of that - this is your first game. Your debutante ball. This is the time for you to tell the world what to expect from your publishing brand. Think about the reaction when video game companies sell you half a game and make you buy the rest as DLC. If you know your game plays well at 5 players, and it costs an extra buck to add the components, just do it, or make it a stretch goal to add it -- but then add it to *every copy* of the game. Give every one of the limited number of people who will see a copy of your first print run an absolutely WOW experience. Hold nothing back. Show them what you can do with their resources plus your skill. That's how you get a second print run. And a third. And then sure, when there's 50,000 copies of your game out there, and you have some devoted fans who want your merch, and there are enough fans who discovered the game after the Kickstarter that it's a mark of prestige and not the obvious default to say "I'm special because I was there at the beginning", THEN break out the T-shirt and the beer stein and the collector's edition with the metal coins and the swanky holofoil cards. You'll have earned it then, and you'll probably be better situated to afford it and manage it responsibly as a portion of your budget and product line then, too.
It's your first game. Make every copy as great as you can. Pour everything you've got into it. Promote it well and trust the backer community to support it on its merits and not because you lured them in with gimmicks and tchotchkes. Will you have every bell and whistle you want? Of course not. But give it everything you can. That's how you earn the right, and the resources, to make a second game, and a third game, and a fourth game. CMON and Portal are in a place where they get to sell the limited edition exclusive minis when they want to -- but they got there by making solid, complete games people wanted to play right out of the box, not by hawking random swag with a heavy dose of flim-flam and prestidigitation.