Fabian Unger Stakeholder management in crowdfunded video game development Faculty of Information Technology and Communication Sciences Master’s Thesis May 2019 2 ABSTRACT Fabian Unger: Stakeholder management in crowdfunded video game development Master’s Thesis, 155 pages, 7 appendices Tampere University Master's Degree Programme in Media Management May 2019 This case study examines, how stakeholder interests affect reward-based crowdfunded video game development, how managers cope with (potential) stakeholder conflicts, and the similarities and differences between crowdfunding video game projects of different scales. As research on stakeholder interests in the production of crowdfunded video games is scarce, this study thus aims to fill a gap in scholarly literature. The purpose of this study is to contribute to the field of managing crowdfunding projects using a reward-based model, to examine stakeholder-developer interactions and the management of interests in crowdfunded video games, specifically from a manager’s point of view. The outcomes of this study should provide valuable insights for media managers, who deal with varying stakeholders as part of the development of a crowdfunded video game. The study examines seven cases of crowdfunded video games developed by video game companies using a reward-based financing model. It takes a qualitative approach, using semi-structured in-depth interviews with a sample of one employee per company in charge of the overall game development process. The results demonstrate the various ways in which stakeholders influence the development process, similarities and differences of crowdfunding projects of various size, and the impact of crowdfunding on the video game development process in general. Research on developer-stakeholder interaction suggests that stakeholders can affect the development by presenting the prospect of providing more funds, by being a lead user or specialist, or by putting pressure on the developers to change the creative direction by voicing opinions as a crowd, among other reasons. Developers may adopt strategies, that maintain the creative control over the game, but at the same time, be more willing to change project aspects by request or perceived stakeholder interest. In order not to lose a stakeholder group, managers continuously assess the active and passive influence exerted by various stakeholder groups on the overall project. They often try to find common ground in order to satisfy all stakeholder groups and communicate their decisions accordingly. By specifying those strategies, the author presents valuable methods for coping with stakeholder interests in the development of a reward-based crowdfunded video game. Keywords: crowdfunding, reward-based crowdfunding, crowdfunding campaign, stakeholder, stakeholder management, stakeholder influence, stakeholder interests, video game, video games, video game development The originality of this thesis has been checked using the Turnitin OriginalityCheck service. 3 Table of contents 1. Introduction 6 Statement of the general problem to be studied 6 Purpose and significance of the study 7 Theoretical framework 8 2. Literature review 11 2.1. Crowdfunding 11 Roots, history, and industry numbers 11 Crowdfunding definitions 12 Classification of crowdfunding models 13 Characteristics of crowdfunding 15 Advantages and disadvantages of crowdfunding 15 Success factors and pitfalls of crowdfunding 19 2.2. Video games 22 Video games industry numbers 23 Video games industry framework 23 The emerging video gaming value chain 26 2.3. Co-creation and user participation in video game development 28 Co-creation and co-creativity definitions 29 Participatory culture 29 A framework of co-creation 30 Implications of co-creative approaches 31 2.4. Stakeholders and the organization 32 The stakeholder-organization relationship 32 Power and influence in a stakeholder-organization relationship 35 How stakeholders influence organizations 36 How organizations manage stakeholders 39 The backer-developer connection (Smith, A. N., 2015) 40 Stakeholder influence in crowdfunded video game development 44 3. Research questions 46 4. Presentation of the cases 47 Definition of key terms 47 Case characteristics table 50 4 4.1. Large-scale projects 52 Case 1 – Crowfall (ArtCraft Entertainment) 52 Case 2 – BattleTech (Harebrained Schemes) 53 Case 3 – Kingdom Come: Deliverance (Warhorse Studios) 54 4.2. Medium-scale projects 56 Case 4 – Descent (Descendent Studios) 56 Case 5 – The Flame in the Flood (The Molasses Flood) 57 4.3. Small-scale projects 59 Case 6 – Nevermind (Flying Mollusk) 59 Case 7 – Perception (The Deep End Games) 60 5. Methodology 62 6. Findings 64 6.1. Large-scale projects 64 Case 1 – Crowfall (ArtCraft Entertainment) – Interview with Walton (2017) 64 Case 2 – BattleTech (Harebrained Schemes) – Interview with Weisman (2017) 68 Case 3 – Kingdom Come: Deliverance (Warhorse Studios) – Interview with Klima (2017) 73 6.2. Medium-scale projects 78 Case 4 – Descent (Descendent Studios) – Interview with Peterson (2017) 78 Case 5 – The Flame in the Flood (The Molasses Flood) – Interview with Dowling (2017) 84 6.3. Small-scale projects 90 Case 6 – Nevermind (Flying Mollusk) – Interview with Reynolds (2017) 90 Case 7 – Perception (The Deep End Games) – Interview with Gardner (2017) 95 7. Discussion 103 Comparison with literature review results 103 Research question #1 104 Research question #2 104 Research question #3 120 Research question #4 121 Research question #5 123 8. Conclusion 129 Limitations and further research 129 Outlook 129 9. Appendices 130 10. References 145 5 1. Introduction Statement of the general problem to be studied Companies in the creative industries today increasingly struggle to merge their own artistic work with the needs and demands of stakeholders. They tend to demand more product value for a better price, while expecting artists to meet their demands. These developments lead to company efforts to actively integrate (potential) stakeholders into the activities of the company. (Prahalad & Ramaswamy, 2004; Ramaswamy & Gouillart, 2010) Gaming companies are no exception to this development. Crowdfunding is one method of including stakeholders into the creative development process that has become increasingly popular among gaming companies in recent years. Considering the management of crowdfunded video games, little research has been done so far. By explaining how stakeholder interests can influence the game development, and by illustrating the methods that gaming companies apply to balance interests and deal with stakeholder conflict, this study fills a gap in crowdfunding and managerial literature. Thus, this study can contribute towards a better understanding of the mechanisms of crowdfunded video game creation and how managers can cope with aspects of these mechanisms. Within a crowdfunding model, stakeholders like the crowdfunding community have influence on the game development process in two ways. Firstly, they are funding the game development by providing financial resources. Secondly, because of their role as funders, they also have a voice in the creative direction the game takes during development. (Smith, A. N., 2015) However, as Prystupa-Rządca & Starostka (2015) note, tensions in interests between developers and users follow the engagement of customers into the developing process. Scholarly literature on how stakeholders influence the development of a crowdfunded video game and how companies develop strategies to cope with these sometimes-contradicting interests, is scarce. A larger body of literature deals with co-creation methods, like modding (Postigo, 2008; Sotamaa, 2010; Coleman & Dyer-Witheford, 2007). A small number of authors have researched the influence of users on the development process of an artistic product in the creative industries (Smith, A. N., 2015; Prystupa-Rządca & Starostka, 2015). A. N. Smith (2015) has examined the connection of backers and developers in crowdfunded video games, while Prystupa-Rządca & Starostka (2015) looked at the involvement and influence of customers on the video game development process. Finally, Hobbs et al. (2016) determined success factors in the management of crowdfunded projects in the creative industries. 6 However, research on the influence of other stakeholders in the development process of crowdfunded video games is so far absent. In many crowdfunded video game models, interests of additional stakeholders, like large investors, or the broader gaming community, must be taken into consideration. Also, within crowdfunding of video games, varying approaches of how to integrate different stakeholders into the game development exist. By involving various stakeholders in the game development process, adopting differing methods of how to deal with interests and needs of respective stakeholders are necessary to guarantee a successful campaign. Thus, it is important for managers of these companies to develop strategies to be able to balance those needs. Purpose and significance of the study The purpose of this case study is on one hand to examine, how stakeholder interests influence the development of reward-based crowdfunded video games. On the other hand, the study illustrates, which strategies managers adopt to cope with the varying interests of involved stakeholders. To understand those influences and the strategies to cope with them, one has to look at the different ways that a varying number of stakeholders can be involved in a crowdfunded video game