Posted by Rampant Coyote on October 4, 2012

Next week, my former boss at a video game company will be sentenced. It was going to be this week, but the judge decided that he wanted more evidence to determine if said former boss was consciously and willfully screwing people over, or if he was simply a guy who got caught in a bad situation and made some stupid decisions out of desperation. From the rumors I hear, the difference could be one to fifteen years’ jail time. That’s about all I’m gonna say about that, as I really don’t know enough or care enough to talk about it, but I wanted to use it as an illustration.

See, when things get hairy, people do some pretty strange things to try and preserve their business. Money that’s supposed to be allocated to X get allocated to Y. And then money that’s supposed to go to Z gets allocated to X to cover over the deficit. People do this. And so long as the money keeps flowing in, people can get away with it. Do it the right way, at the right time, and its creative accounting which pays off. Do it the wrong way, and you could be facing several years in federal prison.

When things are hitting a rough patch, the search for money to cover the gap between payments can get pretty desperate – especially when the economy is in a funk and banks aren’t making bridge loans anymore.

I’m not suggesting anybody is doing this right now, but with these larger companies doing Kickstarters now, imagine this: Contracts are getting a little slim, and your last self-produced “indie” title did not bring in the cash you expected. You are a small company, and have some small projects currently going, but it’s not enough to keep you solvent. You are looking at a horizon getting awfully close, and you are going to have to start letting people go if you can’t get some money in the door within the next 60 days. But how can you get that kind of cash?

Kickstarter.

With a talented group, whipping up a decent Kickstarter presentation within a week would look pretty easy. You have your design team and a couple of idle artists generate a pitch that sounds like a sure winner. You leave it vague enough that any viewer can insert their own idea of what the promised game is going to be. Then let the money roll in.

I’m sure that this would be done with the full intention of making good on the promises as best as possible. But when half the cash obtained ends up going to pay off the landlord, paying the part of the team that’s running late and has delayed a milestone payment, and paid off a few other obligations, there won’t be quite so much left to make a game. But with the critical money paid off in advance… well, it might not really matter so much if the resulting product is not up to par.

And with Kickstarter, when you rob Peter to pay Paul, you have near-zero accountability to Peter. It could damage your reputation, but legally there’s not much the Kickstarter backers can do.

And so Kickstarter becomes the go-to place to stave off bankruptcy. A quick hit for a couple hundred grand, and whatever is left over goes to fund a skeleton crew – if they aren’t too busy on other projects – to throw together something to show for it.

When it’s that or bankruptcy (or worse, jail time), don’t think for a second that it won’t happen.

I can’t say for sure it hasn’t happened, or isn’t happening right now.