Crowdfunding is perhaps the most powerful tool since the creation of the Internet for independent filmmakers. Sites like Kickstarter, IndieGoGo, and RocketHub and spread like wild-fire, with more imitators on the way. At first glance, this method to raising money seems like a no brainer for filmmakers to raise funds to make their films.
So how does it work? The basic premise is instead of asking one person for $10,000, you ask 10,000 people for $1. It's twenty-first century collectivism, and it empowers everyday people to become film, music, or art investors. The power behind crowd funding is in numbers - both in terms of donation but in donors.
In a sense, it also democratizes film, allowing fans and supporters to back the films they most want to see. If ten filmmakers run campaigns to each make their own films, the "crowd" will choose the ones they actually want to see by giving. Typically, most film campaigns offer a copy of the final product which acts like a pre-sale. The system has become so popular (and successful), that celebrities have taken to using these platforms to raise funds, including Scrubs' Zach Braff and his latest, Wish I Was Here:
The film looks like one traditional investors would run from (I haven't seen it, but I imagine it looks strange to the average Braff non-fan). So Braff took to Kickstarter, raising over $3 million to make the film. Directors Rob Thomas (Veronica Mars) and Spike Lee (Do The Right Thing) have also taken to the platform, raising over $1 million each. I even ran a Kickstarter campaign for my own film, Scream Park, and raised $10,000 to complete the film. The model works: filmmakers get their money, fans get stuff, and Kickstarter gets a cut.
One has to wonder though, at what point does it feel like extortion? I'm not speaking for struggling indie filmmakers, documentarians, and those who otherwise do not have access to money. These platforms are built to suit them. But when heavy hitters enter the arena, it begins to feel like fans are getting used. Even worse, do these big names and their $1 million plus campaigns drain funding from struggling artists?
Take Rob Zombie's new campaign for 31, which you can view here. Zombie offers up merchandise, props from past films, and even background roles in the film. I can see why fans are quick to give - exclusives and screen-used props sound great, especially if you're a fan. But why would someone like Zombie need to run a campaign and collect money from fans to make his next film? After all, he's had studio deals in the past, still does music tours, and draws revenue streams from past movie and music distribution. I wouldn't expect him to sell the farm to make a single film, but still. The secret lies in the campaign itself:
By collecting the money up front to make the film, there are no investors to pay back. All revenue made from the film's distribution is kept.
In the traditional financing model, investors or banks put money into the project with promised interest and returns. When the film is done, revenues go back to the investors or bank until the loan is paid with interest. Then after all the rest is divvied up to deferred crew payments, marketing, actors' cuts, etc. The filmmaker gets what's left (and usually last). But when the film is financed up front by fans, there's few people or even no one to pay back. You just ship your promised merchandise out and that's that. (In an article with Rolling Stone, Zombie admits that some of the campaign rewards he just found in storage from the past decade)
This article isn't mean to take away from the fans who want to give. I've even considered giving to Zombie's campaign. It's a great way for filmmakers and artists to connect with fans and build a fan base. The fear is that the Hollywood established, who would be able to make their film anyway, turn to these platforms and extort them. (There are some exceptions where established filmmakers are tying to do something different or experimental, and can't get traditional funding - like Paul Schrader and The Canyons)
You have to assume there's a finite amount of money available across these platforms - there's only so many people who can give so much - so when big names with large fan bases enter the fray, it takes away from other artists who desperately need it to build their projects and careers. Burgeoning artists who want to crowd fund will find themselves crowded out.
The game, however, could be changing. In 2012, the JOBS (Jumpstart Our Business Startups) Act was passed. Title III of the act in particular deals with crowd funding, and still awaits final SEC ruling. This act would allow filmmakers to offer an equity stake in the project for giving money on a platform like Kickstarter. Currently, this method is illegal as it violates SEC securities laws (which is why Kickstarter or IndieGoGo rewards are limited to merchandise and non-money gifts instead of profits). When this changes, even small time independent filmmakers will be able to solicit investors for projects - potentially leading to more financing. Unfortunately, until the SEC completes the specifications for Title III, we won't know for sure.