Kickstarter and Indiegogo Crowd Source Investment and Profit But Also Risk
It’s normal for people to buy things that they like; that’s the basis of our consumer economy. The money we spend, in turn, becomes profit and funds more things that we hope to buy. While my description is incredibly basic, the idea of paying for something so your favorite company can make more products you want to buy is something everyone understands. However, what happens when companies take that initial product out of the equation and replace it with a promise that they will still make something you want if you fund it?
That is the concept behind organizations like Indiegogo and Kickstarter, crowd-funding websites that allow the public to finance products and services for development the way a company would. I have seen quite a few projects that I was into, the latest being the ala carte video subscription service Koo Dey Ta. The company is asking for $150,000 to make a streaming system where viewers can pay just for the channels they want. The target price is $3 per channel and is intended to be available on browsers, iOS, Android, Xbox Live, Boxee, Roku, etc.
Personally, I love the idea because I can literally name only ten channels that I would pay for through this service, meaning they could charge me $3 a piece and it would still be quite an affordable option. Also, if the iOS option works, I should ideally be allowed to watch on the iPhone anywhere so that would be a big positive. However, that doesn’t mean that there isn’t cause for concern.
As I mentioned, Koo Dey Ta is the latest in a long line of crowd funded projects that I have come across, particularly in gaming, where it has become quite the trend. The most ambitious project of the sort is Ouya, a video game console that will run on the Android operating system, which raised over $8.5 million through Kickstarter. Other projects include a PC adventure game by famed developer Tim Schafer, a virtual reality headset promoted by industry legend John Carmack and a sequel to the beloved classic Wasteland.
In a way, this is great because these are all products big companies might never risk funding. But it’s still scary because it means that consumers are counting on things that, well, big companies might never risk funding. Those big companies have control over what is and isn’t possible in business deals. Will cable providers just sit pretty while Koo Dey Ta lures away paying customers with its service or will they negotiate deals with fellow giant Disney so that ESPN and ABC never offer ala carte streaming? Will Microsoft just ignore the fact that Tim Schafer is making an awesome game without them being involved or will they make it so that all their releases coincide with his and completely overshadow his game with their superior marketing prowess? Will the murderous plumber Mario sit idly by as Ouya promises to offer free games or will his company dictate exclusivity in their contracts with all developers, something that is bound to be effective because you simply don’t turn down Nintendo for something new and unproven. Keep in mind, these are all legal tactics and, so long as these companies stay within the extent of the law, we really should not punish them or tarnish their image.
It can’t be denied that big companies have a stronghold over many services. Why would any giant cable provider surrender their firm grip on the entertainment industry, for example? Of course, if there is a genuine demand for any of these services or products, there will be someone who attempts to bring that to consumers; that is the beauty of laissez faire capitalism. However, these smaller companies do have less assurance, as was shown by the seemingly disheartening outcome of the Kickstarted game Haunts: The Manse Macabre. Personally, I hope these projects survive because I like them and even more so because people are now directly involved in the funding. This is a different level of support and a lot of great people are putting their reputations on the line by directly asking fans for help. With this kind of funding, however, you’re really purchasing nothing more than hope. Kickstarter has already stated that they do not deal with refunds, something that is understandable because they do not have the funds to begin with. Still, until we see our specific project come to fruition, there’s no functional difference between these companies and Mark Twain’s royal conmen.