Bursting The "KickStarter Bubble" Bubble
In Games Industry - posted on Tue 8th May 2012 12. 39PM
Many news outlets keep referring to the current success and popularity of "Kickstarting" games development projects as a bubble. Specifically in the terms of a market bubble.
This is incorrect and shows a misunderstanding of what a market bubble is and how a market works.
A bubble begins when too many people begin investing in something. Its value then becomes inflated beyond a reasonable value. This can be due to emotional reasons, such as the excitement around a sudden growth in value, or rational but incorrect thought, such as assuming a new economy has emerged where the rules no longer apply.
Herd mentality then takes control and the value will grow rapidly, a positive feedback loop will occur, fuelling further investment. This happens until the confidence is lost and the stock value then plummets in panic selling.
This is not happening with KickStarter. KickStarter is not a market. Prices are not set by demand, they are set by the developers. People are not investing in games. It is either pure donation, a pre-order or a purchase. If people panic and "pull out" their cash, nobody else loses their money. It is very unlikely that confidence could be lost in a faceless platform, ripple effects can't occur. The site is mostly transparent; people, in their minds, are not placing their money in the site, but in individual projects. Only the media, who are incorrectly likening it to a bubble can damage confidence globally in the system and push users wrongly into disillusionment.
What KickStarter is seeing is a Hype Cycle from the users' and media perspective and a Gold Rush for the developers.
So please, stop calling it a bubble.
Disclaimer: The opinions expressed within this blog are solely my own and not those of my employer, sponsors or research centre.(3) comments :
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Comment by SD on Wed 13th March 2013 7. 19PMChurchDena25, some specialists also claim that personal loan spam is a bubble as well. Do you agree, or is it, like Kickstarter, a Hype Cycle by spammers, and a Gold Rush for unscrupulous lenders?
Discuss amongst yourselves.
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