Are Kickstarter developers legally bound to deliver? And what rights do you have if things go wrong?
By Patrick Vuleta on September 28, 2012 at 11:17 am
Everyone’s talking about Kickstarter. Ever since Double Fine Adventures broke the floodgates with their $3.45 million fundraiser, many developers have wanted a piece of the action. Obsidian’s Project Eternity is the latest hot new thing, having just set stretch goals for $2.3 million. While none appear to be a Leliana cameo, I await the $3 million stretch goal with bated breath.
However, Kickstarter’s not all roses. Outside the celebrity developers, plenty of failures abound.
Mythic: The Story of Gods and Men was meant to “combine the gameplay of WoW with the graphics of Skyrim”. That was before backers caught on to that the game’s concept art had been shamelessly ripped from other games. Ninja Baseball aimed to combine ninjas… and baseball! Having raised only $3,796 of a $10,000 goal, the failed fundraiser simply demonstrated the inherent superiority of pirates.
But while these projects failed to get off the ground entirely, a more serious situation is where the Kickstarter does meet its pledge, the backers hand over their money… and a year or two later, the developers don’t deliver on what was promised. What safeguards will stop this from happening?
The legal obligation on kickstarter projects
Every game developer who wants to use Kickstarter has to agree to this:
“If your project is successfully funded, you are required to fulfil all rewards or refund any backer whose reward you do not or cannot fulfil. A failure to do so could result in damage to your reputation or even legal action on behalf of your backers.”
The reputation damage is obvious. But what legal action could anyone take?
A project must deliver on its promises
A Kickstarter project is, essentially, an advertisement. It’s a pitch for money, the same sort of pitch that developers would make to a publisher or investor.
While no real contract is created, this does creates a promise, by the developer, in exchange for the money of the backer. Although untested, this potentially comes under a law called promissory estoppel.
Promissory estoppel says that if someone promises you something, they must deliver on it. If they don’t, they become liable for what you lost in relying on that promise. There are additional nuances, but that’s the vibe of the thing.
Important here is the reliance by the person who suffers loss. In Kickstarter, this reliance is arguably established by the stated project goals and estimated time of delivery. You’re enticed to hand over money by these details.
Arguably, if a Kickstarter project fails to deliver, there should be no problem in suing the developers (even if it takes a class action).
What’s a failure to deliver?
A failure to deliver could take many forms. Obviously, the developers could spend $2 million on beer and not create a game at all. Clear lawsuit material. The developer must also live up to their ‘added value’ — all the little t-shirts, posters, and other assorted merchandise Kickstarter projects throw around.
More seriously, however, a project would also fail to deliver should it be substantially different to what was originally promised. Should Project Eternity somehow be made into an FPS instead — like Blizzard briefly considered for Diablo III — then any of its backers would have a right to sue.
Kickstarter games cannot change mid-step
The obvious implication is that Kickstarter is just not suitable for games that change halfway through production. Consider if the original Borderlands was funded by Kickstarter. “A Mad-Max style, brown, semi-realistic shooter – fund it today!” Then, two years later… “Here’s your comic book.”
While the traditional publisher model allows these changes to be managed by good communication between publisher and developer, consulting with the fifty thousand or so backers that you want to change your game mid-step is going to be… messy.
Even if the majority agree to the change of direction, many will still be miffed enough to consider demanding a refund. This threat is enough of a risk to throw the entire project into financial problems. Developers are unlikely to be open to changing the game substantially from its original conception.
And even if the refunds don’t come, or the legal action fails, the reputation hit alone is enough to discourage a deviation from the original concept.
To date, few of the large Kickstarter projects have had time to deliver on their promises, so these issues are untested. However, when they do, we’re likely going to see games that have been locked into their concept pitches from day one, for fear of the legal and reputational risks. This, I hope, won’t stifle the innovation Kickstarter is trying to promote.
Disclaimer: As always, this is general opinion rather than advice on specific circumstances. Talk to a lawyer if you need legal advice.