No one is getting rich from Exploding Kittens' $8.7 million Kickstarter
J Thoendell stashed this in Business
I spoke with Cards Against Humanity's Max Temkin to discuss the economics of a Kickstarter project this large. Temkin is no stranger to creating and shipping large amounts of a card game, and Cards Against Humanity's own manufacturing and fulfillment partners, Ad Magic, will be producing Exploding Kittens.
Cards Against Humanity itself was Kickstarted back in 2011, bringing in $15,570 from a $4,000 goal.
"I think given enough continued interest in the game and time, it's possible it will make really good money," Temkin told Polygon. "But what they have right now is a lot of expenses to meet to fulfill this Kickstarter and put this thing in production."
He then began to break down the numbers, and it became clear very quickly that the riches everyone assumes exist around this project are still mostly hypothetical.
"I think what most people tend to forget is Kickstarter is a contract that you’re signing with every single backer," Elan Lee told Polygon. "What that means is we have to give them the thing that we promised."
I asked him point blank: Aren't you going to walk away from this a millionaire? "No," he said, laughing. "Absolutely not."
Those Kickstarter fees really add up, but I'm amazed they're going to make so little money on $9 million in revenue.
Temkin began to break down the cost of making the product real. The game itself will cost around $5 to manufacture including packaging. The "surprise" added to the Kickstarter campaign, which is something Temkin said will be "very cool," adds another $3 to $4 per game.
Shipping is around $3 per game, with international shipping averaging as much as $10 per game. Then there's the cost of fulfillment itself, which includes making sure the boxes are packed up safely and shipped where they need to go. That adds an extra $1.50 per game.
These costs add up quickly, and Temkin estimates that around 2 percent of shipments will be lost or damaged or will otherwise need to be resent, which means around 10,000 extra copies of the game will need to be made and reshipped to make sure every customer is happy.
"We’re printing nearly a million decks of cards right now, and that’s really expensive, and really hard to do," Lee explained. "The hidden costs and the productions issues that come up and the fulfillment centers we have to commission — keep in mind this is our first card game — there are all these little things that come up that we’re going to use that money for."
All told, Temkin estimates it will cost around $14 to $15 to create and ship each deck. This version of the product, according to Lee, is too expensive to offer on a standard retail basis.
"The decks that the backers are getting and the packaging and the surprise in the box? Those are things we’ll never produce again," he said. "Frankly they’re just too expensive, it’s not a good business to keep doing that forever." "We will be producing more decks, we’ll figure out a retail plan, but the stuff that we give in this initial run we’re never going to produce again. It’s nothing we can afford to do more than just this once as a thank you to the people who helped us out."
You also can't look at the money brought in as pure revenue; Kickstarter takes its own cut of the overall total, plus a per-pledge payment processing fee:
That means $750,000 or so just left the project, which eats directly into the profit margin.
The payout from Exploding Kittens is certainly going to be sizable, but don't fool yourself into thinking anyone is becoming wealthy from this one Kickstarter, especially with three individuals splitting the profit. In a best-case scenario, it's likely everyone involved will make a nice six-figure profit from the Kickstarter campaign, but no one is running to the bank with millions of dollars.
A piece about Exploding Kittens was on CNN today, going mainstream, good PR ;)
Yeah, thanks to Kickstarter they were able to promote it well.
If Exploding Kittens' creators wanted to print 420,000 copies of the game and ship them, hoping they would sell, the project would cost around $6.3 million, with no guarantee of return. Using Kickstarter allowed them to not only promote the project, but use sales to fund the game's creation, removing that risk and allowing them to increase the profit margin.
While everyone involved with Exploding Kittens will likely earn a very nice payday, the number of copies sold and the profit made from them won't be ridiculous; a better word is meaningful. Kickstarter allowed them to scale expectations and sales while removing much of the upfront cost and risk. It's not a perversion of the crowdfunding model; it's a great example of a team using it well.
(For more on companies using Kickstarter for funding and inventory management, see The Verge's report on Pebble's newest smart watch)
Board games and card games are a brutal business. If you print too few, you lose sales during your initial push. Print too many, and your entire profit margin sits in unused inventory. Kickstarter allowed Exploding Kittens to scale appropriately, and adjust the plans for the game's release.