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Is crowdfunding really here to stay? YES

I recently sat down with David Branin of Film Courage to discuss the latest Kickstarter campaign sensation, Veronica Mars.  As of this writing, the campaign has received $4.1 million in pledges backed by over 62,000 people. It is even notable that if one Google’s Veronica Mars Kickstarter, press mentions overshadow the actual campaign page showing its power to generate mainstream press coverage that will not only widen its donation pool, but also further raise the profile of crowdfunding and Kickstarter, in particular.

No, this kind of reception is not to be expected for the unknown indie artist, especially one that has done little to nothing to cultivate an online base of support and who does not have a project that would entice mainstream press coverage. But is crowdfunding really here to stay? Is this type of funding becoming the new default for indie artists? I think it is and will continue to be. Crowdfunding is not a fad that will pass quickly into history. It is on the rise and becoming an acceptable, if not preferable, means to raise money for arts related projects.

In 2011, over $1.5 billion was raised via crowdfunding worldwide. Estimates for 2012, a mere one year later, say this grew to $2.8 billion. The National Endowment for the Arts, the largest annual national funder of the arts in the United States founded in 1965, has an annual budget of $146 million that it distributes to many organizations and individuals every year. They are perpetual targets for funding reductions and if you have ever applied to grantmaking organizations, you know the reams of paperwork it takes just to apply, let alone receive a grant.

Kickstarter, since its inception in 2009, has collected $450 million in donations for arts related projects, over $85 million just for Video and Film projects as of January 1, 2013. Artists still have to submit their campaign proposal and there are 2 main guidelines for acceptance. One MUST submit a project, something that will be completed and produce a result (a film, a game, a performance, a book etc). And the platform is only open to Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, and Theater projects. It cannot be used for causes or to sell shares! The well prepared projects can receive an answer of acceptance within a week.

But Kickstarter is not the only game in town..as of April 2012, 452 crowdfunding platforms were operating globally.

If we are all honest with ourselves, earning a living from making art is pretty rare. I see many middlemen making good livings, but the artists themselves…not so much. And a lot of the money used to make the art comes from the artist or from grants and sometimes from investors who are not likely to ever see that money again. Crowdfunding (donation, not investment) offers a far less risky antidote to all of this. From the start, the artist determines a budget based on what she is willing to risk personally and on what she should expect to raise in donations. This is better than taking all of the financial risk personally (credit cards, remortgages, life savings etc) or asking others to do this because with donations, no one expects the money back. Taking investment means she has to make a good faith effort (and ideally show in a business plan how) to repay the investor and, often it means, having to compromise on the work in order to ensure its commercial prospects. Creating with debt hanging over one’s head is probably not as healthy and productive as creating with the knowledge that the pressure to conform to market expectations is lifted. The artist can still make money on the project by selling to those who did not donate. Her profit could start at dollar one!

So what of these donors? What motivates them to support, if not the prospect of making money? It seems that they are drawn to donation, not just because of perks, but because of altruism. Indiegogo reports they recently have seen a rise (33%) of all contributed dollars in excess of perk amount or without any perk requested. This is compared with 23% in 2011. Personally, I believe sites that are trying to mix crowdfunded donation and crowdfunded investment are not going to be successful. The motivations are vastly different.

There are 2 other components of a crowdfunding exercise that aren’t often talked about. One is asset protection. Since digital goods (films, books, music) can be easily reproduced at zero cost, crowdfunding helps insulate against piracy loss. The creator agrees to provide content only if enough people commit themselves to paying for it in advance. This also overcomes the “big talker problem,” whereby people say they are interested in seeing a project created, but then don’t actually purchase. This does put the onus on the creator to put out spectacular projects and would be successful mainly for those with a track record of doing so. As consumers, we like to have an idea of what we are buying into.

The second is market proof. Say that the scope of the project is so large that it is going to be a candidate for investment, but, as with most films, the investors want concrete evidence that the project has interest in the market. Crowdfunding would serve in testing the market for upcoming productions.  If enough people express interest and are willing to pay in advance, even in small amounts, this shows a strong reason to go ahead with the production. The Veronica Mars campaign is an example of this. Warner Bros studio agreed to allow the making of the film and to distribute it, ONLY if Rob Thomas reached a minimum funding goal.

For a producer that has an interesting concept, but needs to entice outside investment, a crowdfunding exercise helps to gauge interest in a way that can be demonstrated to potential partners as well as widening the audience net beyond their personal circles. I have also suggested this as a way for foreign film commissions to decide which producers will receive ever shrinking government arts funding. If audience can be demonstrated through a crowdfunding effort, it shows that the producer (or distributor/sales agent because typically they receive the funds first so they should also prove they can reach an audience) is committed not only to making the work, but making sure it will be seen. In this case, money may not be the primary objective, but audience interest is still shown through the number of backers. That audience can come from anywhere in the world, not just the home country.

With the knowledge that crowdfunding IS here to stay, then we must also agree that creators need to be mindful of their audience and how to cultivate it online. The amount of money one can raise depends on how many supporters one already has and how many potential supporters can be reached with supporters’ help. “Crowdfunding is really about your social-media network. Make sure you have built out your Facebook fans, your LinkedIn connections, your Twitter followers, your email list. All of that is your social currency,” says Geri Stengel of Venturneer. We at TFC are continually consulting with producers about how to get active online and keep their audiences maintained. This is not a skill to use for one project, but an ongoing process to use throughout a professional career. The sooner that is embraced, the more prepared for the future of filmmaking. Film schools the world over should have training in audience building as a requirement to a degree and those who don’t attend film school should be studying how to do it right now. There is an abundance of workshops, seminars, online courses teaching these skills and tools. The longer artists (and their schools) resist, the more they are resigned to falling behind or obscurity.

For information on crowdfunding tips, see here, here and here

For more on my thoughts regarding crowdfunding, view these videos.

 

 

 

 

Sheri Candler March 29th, 2013

Posted In: crowdfunding, Social Network Marketing

Tags: crowdfunding, David Branin, donation, donor motivation, Film Courage, financial risk, grants, indiegogo, investment, Kickstarter, National Endowment for the Arts, Sheri Candler, The Film Collaborative, Veronica Mars