Investing in the Future of Gaming

I first heard about this idea in the aforementioned ABC interview with Gabe Newell but got reminded of it on sunday evening by Octale & Hordak.

It basically goes like this: Instead of having business people invest money into a game's production and players buying it when it is complete, why not have the players themselves invest into the game in the first place? Microinvestments if you will.
Companies would pitch their game concepts to players and those could then purchase shares of that game. Not only would they get the game when it's finished but they would eventually get paid out a small part of the game's profits. For more details of the original plans, please refer to Octale & Hordak's excellent show.

I really like the idea but for one aspect - the paying of dividends to shareholders. Yes, this is what happens with normal investments and yes, it would be an incentive - but I think the disadvantages would far outweigh the advantages.

In my opinion (and one that's shared by Octale & Hordak as far as I understand) a main problem with the state of gaming is that decisions are made to please the majority. Gaming houses produce shovel ware by the... well... shovel and the World of Warcraft team seems to be sacrificing quality for market share ever since the Blizzactivision merger. By paying dividends to gamers you basically force them to choose between the good of the game and the good of their wallet.

Aside from that, paying dividends creates all kind of problems such as the cost of paying a large amount of people small sums of money and appropriate oversight. Octale & Hordak also mentioned that each subsequent investment reduces the value of your original investment as your relative share gets smaller - making it harder to find investors further into the development cycle.

What I would propose instead is to give players various advantages (more on that below) but no monetary compensation. The money made from the game would instead flow back into the organization and be used to fund additional games - distributed according to further user contributions.

Here's an example of how this could look with completely imaginary numbers:
Users invest $200,000 into game A, $150,000 into game B and $ 50,000 into game C. Game B tanks and never makes it to the market (this is a risk you will have, alas), Game A performs reasonably well sells copies for $230,000. Game C is an exceptionally well made casual game and sells for $150,000.
A total of $130,000 would flow back into the pot. Now when a user invests $30 into game D, the actual investment made will be $40 (for example). And so on.

Instead of having the money made from the games going into the pockets of investors, it will go right back into what the gaming community votes for as worthwile games. And since players vote with their money you are far less likely to get random, unqualified opinions. Users will instead go out, examine proposals for games and make decisions based on which games they would like to play - since that is what they get from it in the end.

So what would the users get for their money? Well, the game of course, when/if it is completed, and insight into the game's progress. Then you could get a say on the direction the game goes into. I don't think it would be a great idea to have users decide everything - that's what you have professionals for - but major policy decisions could be voted upon by investors. Investors would also get the ability to give direct feedback to the developers in some form or another.

It doesn't have to stop there of course, developers could give all kinds of incentives to early adopters, but the three main points would be a reduced price, detailed information on the production process and some sort of say on the direction the game is taking.

All-in-all I suggest a not-for-profit organization that acts as an investor into video games and pledges to funnel any gains from these investments back into game development. The organization would be founded by users and users would decide where the money will go. This concept makes the whole process a lot easier for game companies (as they will "just" have to negotiate terms with the organization and not deal with a zillion individual microinvestors) and negates the effect of greed on decisions.

You would not get the yearly investment into Madden that Octale likes so much - but you would not get that anyway since no company will make a game available for investment that they are guaranteed profit on anyway. You would also not get the chance of making money through buying games - but really, that sounds more like a scam to me anyway. Instead you risk losing your money (which can be minimized by careful consideration) but have a chance at buying a very good game for your money. A game that you have co created with your opinions and that you chose to bring to life. Your investment will also not be used to lace Bobby Kotick's palms with silver but instead to create even more great games.

So what's not to love? The main reason why I don't try to implement something like this right this moment is that you'd probably need a name to back you up. Otherwise no one will ever trust you with their money.