For over a century, filmmaking has been an industrialized process geared towards turning a profit. By its very nature, filmmaking is a labor-intensive, time-intensive, and therefore expensive creative process. Requiring high upfront costs, with fees sometimes in the hundreds of millions of dollars, films MUST be treated as a business to recoup such large investments. But this model is based on a consumer economy: upfront investment to create a product, marketing that product, a marketplace (theaters), sales, and finally consumption of that product to recoup that investment, and hopefully higher R.O.I. than just breaking even.
But our world is evolving, our economy is changing… Consumer tastes and desires are changing. What used to work in product design and advertising is no longer working. “The world is shifting from a world of transactions to a world of relationships. Nowadays, no one wants to be treated like a customer.” (Paul Trigonis, Crowdfunding for Filmmakers, 125) The question is: What do consumers want today? Or… What will they want in the future? Well, I’m not sure anybody can answer these questions; our tastes are as unique and diverse as we are, and constantly changing. But one thing we can do is deduce consumer trends by following the money. The industries of customization and personalization are growing exponentially. Rather than corporate profit-centric schemes like planned obsolescence, more emphasis is being placed on quality, personalization, and customization, so consumers can say: “This product was made especially for me!” or even better, “I made this myself!” Wouldn’t you much rather have a car or house that was designed specifically for you, that was as unique as you, that expressed your personality more accurately? I know I do. Kickstarter co-founder Yancey Strickler says, “For backers going through the site, it doesn’t feel like shopping. It feels like participating. When they support a project, they’re becoming part of an artists’s dream. In this way it turns audiences into [co]creators” (Ryan, A Film in the Crowd). According to Joseph Beyer, Sundance’s director of digital initiatives, “When you’re able to watch that project come to fruition, it’s incredibly rewarding. It makes you feel connected to a larger group” (Ryan, A Film in the Crowd). This is what consumers want: participation, connection, involvement, co-creation. Our world has become too isolated, separating ourselves by walls and boxes, replacing face-to-face interpersonal connection with pixelated screens.
Taking this idea to an extreme is crowdfunding, where consumers actually decide what products, businesses, or projects get made. Technology has now allowed the public easy access to this funding technique with new tools like Indiegogo, Kickstarter, Hubbub, Rockethub, FundAnything, and many others. Crowdfunding is not a new thing, though my word processor doesn’t recognize “crowdfunding” as a word. Getting small amounts of money from many public sources is a funding technique that has been around forever. But what is new about these websites is the idea of pre-selling a product BEFORE it exists; convincing consumers to buy a product, sometimes without even a prototype, based on just an idea. It used to be illegal to sell a product that doesn’t yet exist, and these websites do still exist in some legal grey-area. These websites allow people to “donate” money, and the creators to offer perks or rewards in return as a thank you, so some say that it’s not technically taxable as income. The moneys received for the purpose of production itself are spent to create the product and therefore can be considered to be business expenses against that income (netting to zero taxable income). But when a tangible good is exchanged for money, sales tax rates do apply. Following the rise of these new crowdfunding sites, President Obama passed the JOBS Act in 2012, a law permitting crowdsourced micro-investments (previously illegal) in order to help stimulate the economy. But this is not the “crowdfunding" that sites like Indiegogo and Kickstarter allow creators to do.
It’s no longer about the money, it’s not about the marketing, it’s certainly not about the creator, it’s not even about the product itself, but it’s now about the CROWD and what they want. Ted Hope of HopeforFilm.com notes that, “filmmakers mistakenly think of the crowdfunding platforms for financial purposes, but as Peter [Broderick] points out, it works to build community, involve audiences, and generate publicity and a true sense of ownership” (Maximizing Distribution Through Crowdfunding). Indiegogo has an acronym to describe this: DIWO, or Do It With Others. “This is the core of crowdfund ing – community engagement.” (Trigonis, Crowdfunding for Filmmakers, 97) Creators are now becoming more of mensches and philanthropists rather than entrepreneurs, giving the people what they want. “J. Abraham used to say, ‘Don’t fall in love with your product, fall in love with your customer.’” (Hays, Hal Elrod's Achieve Your Goals Podcast, Crowdfunding Your Goals, 26:58) Crowdfunding is like crowdsourcing – where the people get involved with the creation of the product itself. Of course, there is still some sales and marketing involved. And many projects are still funded solely based on the clout of the creator, the coolness of the idea, or the emotions felt when a creator asks: “Please help me make this project!” But ultimately, the crowd decides whether or not the project gets funded.
This is NOT economics, though money transactions are involved. It’s not entrepreneurialism because the point is not necessarily to make profit. But it’s not charity either because contributors do get something in return. That means it’s not necessarily even business. It’s a whole new paradigm. It can be considered socioeconomics. It can be considered social practice art. I like to call it “crowdonomics”….
Jeff Hays, the world’s foremost authority on crowdfunding (he can only be considered this because it’s such a new thing, there really are no authorities on the subject) and award-winning filmmaker most well known for his controversial film “Fahrenype 9/11,” describes this paradigm shift very well: “If we talk about crowdfunding, the first thing is: is there a crowd that gives a crap about what you want to accomplish?” (Hal Elrod’s Achieve Your Goals podcast, Crowdfunding your goals with Jeff Hays, 6:20). “I don’t make the films that I want to make, I make films that there is an audience that wants to support.”
I don’t think it's any coincidence that “the world’s foremost expert on crowdfunding" is a filmmaker. A quick look at Kickstarter’s current live projects shows that there are twice as many film(1018 live projects) and music(865 live projects) projects as there are tech projects(988 live projects), and at least twice as many tech projects as any other category (http://www.kickstarter.com/discover as of May 27, 2015). A deeper look at Kickstarter’s numbers since it’s launch in 2009 shows the same trend, though more money is transacted through games, tech, and design projects (http://www.kickstarter.com/help/stats). Intrinsic to the nature of filmmaking is having people actually watch your films, so crowdfunding is a good fit. Some say it’s even a PERFECT fit. Paul Trigonis, author of Crowdfunding for Filmmakers (currently the only crowdfunding/filmmaking book available), says “the yin of DIY filmmaking seems to have found its yang in crowdfund ing” (13). And since filmmaking is still so expensive, it still requires much upfront cost, then many sales to recoup that cost. Crowdfunding simply cuts out a whole chunk of the creation process. Instead of coming up with the idea, getting the money for the idea, creating the product, marketing the product, placing it in a marketplace, selling the product to the crowd, getting the money, and returning the money…. The process now only consists of coming up with the idea, presenting it to the crowd, getting the money, creating the product, and giving them the product. There’s virtually no marketing/sales involved, except in the pitch of the idea. But in addition to a whole chunk of the process, this paradigm also cuts out an entire industry. “Middle-men beware! Crowd-funding puts you in direct contact with your audience” (David Branin’s Crowdfunding Cheat Sheet). No more studios, no more record companies, no more publishers, no more agents, no more aggregators, no more distribution channels. “All of a sudden, you don’t have to sell your soul to get an album deal or to get a film out. You can own it every step of the process” (Hal Elrod’s Achieve Your Goals Podcast, Crowdfunding Your Goals, 9:55). And this is INCREDIBLY empowering for artists.
Will this completely replace the traditional models? Probably not. It would be very sad to see studios, movie theaters, and Netflix go away completely. However, the success of Hollywood-ish, star-studded films like “Super Troopers 2” ($4.5mil raised), “Palo Alto’ ($326K raised by James Franco), “Video Game High School” series (over $1mil raised), “Road Hard” ($1.4mil raised by Adam Carolla), are now being crowdfunded as well. Crowdfunding is simply another way to offer a more diverse product-line to the continually-expanding niche tastes of consumers, probably “much more the territory of the no-budget, DIY moviemaker” (Ryan, A Film in the Crowd). So this new paradigm is perfect for (1.) underserved groups of people or niche audiences, (2.) organizations with the marketing savvy to get huge coverage, but no access to venture capital, (3.) creators with a large audience already, or (4.) the DIY creator looking to build his/her own audience.
But it sure isn’t easy! Many filmmakers are now learning that, “marketing your film begins when you are in pre-production.” (David Branin’s Crowd-Funding Cheat Sheet). Crowdfunding is indeed a powerful marketing and audience-building strategy. However, “crowdfunding is not for the weak of heart” (Pinsonneault, Networking Novice). “If you’re hungry enough, you will get there. But it’s incredibly time consuming and tedious.” With some savvy, anybody can build an audience and crowdfund any project. Based on over twenty five articles, books, podcasts, workshops, and personal experience, I have assembled this in-depth guide to crowdfunding, pieced together from marketing and crowdfunding experts in the fields of filmmaking, entrepreneurialism, and publishing. This is not a blog post, this is not a magazine article, this is not a get rich quick scheme. This text is meant for the serious learner to be read, reread, highlighted, notated, and digested slowly. All sources I mention AND MORE are listed in the Bibliography if you want to go further down the rabbit hole. So grab a pen or pencil and take good notes. Here’s how to put together a solid crowdfunding campaign. Happy learning….