PlayJam’s GameStick: Does it need Kickstarter?

Last Wednesday Smart TV outfit PlayJam followed in Ouya’s footsteps by taking to crowdfunding website Kickstarter with its own Android console, GameStick.

Looking for $100,000, the platform has quickly surpassed its goal and has amassed $242,000 from nearly 2,500 backers at the time of writing, showing there is an early market demand for the device, and perhaps room for another Android TV console in the sector.

But with growing concern that larger and financially-backed companies could be using Kickstarter to generate funds and potentially outing smaller firms desperately in need of the cash, is PlayJam part of the problem?

In the last year or so, PlayJam has raised at least £3.6million in funding rounds.

£3.6 million ($5 million) was raised in a Series A funding round in October 2011, with backers including GameStop, Adobe Ventures, London Venture Partners, Digital Ventures and Endeavour Ventures.

Further undisclosed funding was garnered in March last year from London Venture Partners, while in May it was also revealed that PlayJam had received £538,000 in government funding.

PlayJam’s Game Network meanwhile, as described on the company’s website, is currently made up of hundreds of games distributed across millions of devices, “each utilising a common set of social / billing features powered by the PlayJam Games Platform”. The service spans a wide array of Smart TVs from manufacturers including Sony, LG, Google, Panasonic and Samsung.

The company is also a worldwide firm, with offices based in San Francisco, London, Seoul and Krakow.

Turning to crowdfunding

So why does the company need just $100,000 from contributors on Kickstarter, and why has the company not gone back to its investors or perhaps dipped into its own funds?

Develop spoke to PlayJam chief marketing officer Anthony Johnson, who said the previous funding rounds were costed against the expansion of its Smart TV business, which he described as a hugely expensive and difficult market.

“The funding that we’ve received to date for PlayJam is absolutely costed against a roadmap to deliver games on Smart TV, which is a hugely expensive task due to the fact that right now, or until very recently, it’s very, very difficult to monetise content on TV,” explained Johnson.

“So PlayJam’s play has been in the Smart TV world to establish as wide a base as possible and to, in terms of distribution, so its done all the deals with the hardware manufacturers, and to build up a games network.

“Right now, we’ve got no revenue coming through on that, and it’s an extremely expensive business. So the investors that came in and gave us money for that are expecting to see those goals delivered.”

Johnson went on to describe GameStick as like a “boiler room project”, which two of the staff had been working on on the side with PlayJam for the past year. He said that the project had been able to leverage the investment that had gone into the backend systems and platforms that power its Smart TV service to give them a platform to use on GameStick, helping to alleviate significant costs of creating one from scratch.

As also explained in the Kickstarter campaign, he adds that the $100,000 is designed to bring the company to the point where they can put the GameStick into production, although it will mostly be used to fulfil the creation of GameSticks for those who have pledged.

“At the moment we’ve got prototypes, we’ve got the bonds, we know where we are in terms of what it’s going to cost us to build, we’ve got all of the manufacturers lined up,” he said.

“We needed $100,000 to get over the line in terms of funding the production run of enough GameSticks to fulfil the Kickstarter pledges. Obviously we’re hoping that we can surpass the $100,000 significantly. And what that will enable us to do is to buy into volume discounts with the manufacturers and take it much wider.”

When pushed further on whether just $100,000 would be enough, he added: “$100,000 will be enough to fund the Kickstarter run.”

This raises the question of how the company will raise the money to make the GameStick available for general sale – Unless it develops each device on order or uses its own funds to further production.

Asked later whether Kickstarter was part of a marketing ploy to gain interest, Johnson replied: “Absolutely not. I don’t think we would have got away with it if we’d have done it like that.”

A ‘side project’

Clarifying then why the console couldn’t have garnered further funding through another investment round or from current investors, Johnson said that as GameStick had always been regarded as a side project, PlayJam couldn’t just go to investors and ask them to pledge more money, given they still needed to make a return on original investments.

“To get that money we had to be really single minded about what we were doing. This was always regarded as a side project,” he explained.

“If you are an investor and you invested money they’re expecting you to deliver and get to a set of targets. To suddenly come in with a side project and go ‘hey guys this is what we want to do’ – and by the way, this is not going to replace PlayJam’s core business, PlayJam is full steam ahead on Smart TV – would have been a very difficult sell.

“So that’s one reason, the second reason is that Kickstarter gives us the opportunity to test the market and validate an idea really nicely. First of all we wouldn’t have been able to do it without the $100,000, and secondly, knowing that we’ve got consumer support out there for such a project is totally invaluable.

“Not only that, but the comments and suggestions that are coming through every five minutes on the direct mailing list within the Kickstarter panel are giving us tonnes and tonnes of ideas that we hadn’t even thought of for the GameStick, and you just can’t buy that.”

Although many people may be happy to invest in a product being developed by a medium-to-large sized company that has a number of investors and millions of users, these firms must be open with their backgrounds.

The situation with the likes of GameStick and Ouya, as well as a number of other projects taken on Kickstarter, shows that these firms should share their history in the industry before asking for funds, to give potential backers as much information as possible before making an investment, and treat the general public as they would any serious investor.