Rewards Based Crowdfunding for Film and Television Projects

Crowdfunding has been successful in more than just consumer products. The Veronica Mars Movie Project met its goal in just 10 hours, and raised a total of $5,702,153 by the end of the campaign. The film was released in theaters on March 14, 2014. Another successfully crowdfunded film, Inocente, went on to become the first Kickstarter-funded film to win an Oscar for best documentary.1  Most recently, Broken Lizard comedy troupe raised their goal of $2M for “Super Troopers 2” in just two days.2  With approximately 12% of all crowdfunding campaigns contributable to film and video projects (as of 2012), platforms are also starting to develop special features and unique models to appeal specifically to this growing market segment.3

Most of the current platforms geared towards film and video campaigns utilize a rewards based model, as equity crowdfunding platforms are currently limited to accredited investors only.  However, there are some sites, such as Slated and Junction, which offer accredited investors equity in film and television projects in exchange for their investment.

With the SEC’s recent passage of the final rules of Regulation A+, the types of investing models for film and television projects are sure to evolve and change. It is yet to be seen how this new avenue for funding will take form in this space, but with the rapid pace at which things are changing in crowdfunding, online platforms and funding models, it is only a matter of time before we see additional options unfold that utilize this newest exemption from securities laws.

Reward Based Crowdfunding for Film and Television Projects:  Unique Challenges, and Important Considerations. As the crowdfunding space continues to expand and grow, there are more and more niche specialty platforms being created that cater specifically to film and television campaigns, in addition to the more general, traditional players that have become well known in the last few years, such as IndieGogo and Kickstarter.

Because of the nature of film and television projects, there are a few unique challenges and considerations that these campaigns face in particular.

DSC_1394-95CATHERINE MCEVOY
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The Reward Challenge.  Unlike other campaigns that are raising money for tangible products such as a new smart watch, game console, music player, or 3D printer,4  film and television projects do not have a direct tangible item that can be offered as a reward for a user’s contribution. The average movie ticket price in the U.S. as of 2014 was a little over $8.00,5  so the offer of a free ticket to see the movie if and when it ever hits theatres may not be enough incentive for people to donate money to the production of the project or exclusive enough to make the donor feel special. End credits might be offered to all of the contributors, but this list could become very lengthy and of little appeal to donors.  Inviting every donor to the premiere is also not feasible or realistic. Further, just because a film or television campaign hits its funding goals does not mean that it will be successful in finding distribution for the project once it has been produced, making the offer of such rewards uncertain and not an immediate or definite prize for potential contributors.

Some platforms, such as Tube Start and Fan Backed, have attempted to address this particular challenge head on.  For example, both of these platforms offer campaign hosts full service, “hands off” reward options. For a fee (10% of proceeds from rewards sold) the filmmakers receive help creating, manufacturing, processing orders, and handling shipments and returns of custom made “swag bags” for backers of the project.  Tube Start has taken this idea a step further by creating a bidding system as a way for potential contributors to bid on various rewards chosen by the campaigner, which both drives up donation amounts as users fight to win certain rewards, and engages users in a highly interactive way, making them more emotionally invested in a particular project.  Additionally, Tube Start has brand partnerships that offer coupons and promo codes as rewards, and which do not cost the filmmaker a substantial amount.

Another unique aspect that the platforms Tube Start and Fanbacked have utilized is the integration of a real time, live feed feature embedded directly into the campaign page. This allows campaigners to continue to engage and interact with contributors by posting, in real time, video exclusive footage from casting calls, on set shoots, special interviews with key talent, writers and/or directors and other clips that will keep users updated and engaged in the process.

The Distribution Challenge. Even if the campaign’s funding goals are reached and the project is filmed and created, it still needs to find distribution channels in order to be seen by an audience and be successful. Most platforms in the film and video space have launched features designed to specifically address this challenged.

Kickstarter’s newest feature is called “Spotlight” and uses a simple interface for project creators that allow filmmakers to change the way their project is viewed by directing backers and other people who stumble on the page to where you can watch and buy the film. 6 For example, there may be a “Watch on ITunes” button that links to ITunes where you can buy or watch the film.

Recently, the platform Seed&Spark announced deals with Verizon, Quiver, and Emerging Pictures. The platform already has a strong distribution component, where films can be viewed through the Seed&Spark site, but this partnership can allow filmmakers to be exposed to over 5 million VOD subscribers and the likes of iTunes, Netflix, and Google Play. Projects that meet certain crowdfunding thresholds can even become eligible for theatrical distribution.7

At the start of 2015, Indiegogo announced a partnership with Vimeo as a preferred distribution platform, which includes benefits such as unlimited backer fulfilment, curated Indiegogo films on Vimeo, and a million dollar Creator Fund for Indiegogo films that distribute exclusively on Vimeo On Demand.8

In addition, Indiegogo has partnered with Forrest Whittaker and Junto Box to establish a unique platform for filmmakers. Junto Box is not “crowdfunding” per say. It has its own production company, called Junto Box Films, which will fund, produce and distribute projects that get greenlighted. A project can be greenlighted if it successfully completes five stages. First, the project uploads its title, logline and synopsis to the site. Then, video, images, and a storyboard are posted. Once the project receives 20 four star reviews and 20 followers, it proceeds to level three. At level three, the project uploads a treatment and must obtained 40 four star reviews and 40 followers to reach the fourth stage. Level four requires the project to upload a script and receive 60 four star reviews and 60 followers. Once it reaches 60 reviews and followers, it becomes eligible to get optioned by Junto Box Films.

Tube Start has tackled the distribution issue by entering into strategic partnerships with several multi-channel networks such as Machinima and Fullscreen to support successful campaigns through digital distribution channels.9

Considering the Various Funding Models.  As a filmmaker, budgeting out your time and money is essential to success. It is important to take consider the different funding models offered by the various platforms to determine which is most appropriate for your project.

All or Nothing: The All or Nothing model requires the project to set an amount and reach that goal within the prescribed timeframe. If the goal is not met, donors are not charged and the project receives nothing. Kickstarter utilizes the All or Nothing model.  This can be useful for particular stages of a project, such as post-production, or for specific production equipment such as cameras, lights, or other necessary line items in the budget. It can be more difficult to reach a large goal, so if you are looking for an entire budget amount, this may not be the right option for the project. Most platforms that offer an All or Nothing funding option will take about 4% of the total amount raised if the goal is met. In addition, credit card payments usually require a 3-5% per transaction fee.

Seed & Spark offers a variation of this model which they call “80% or nothing”. If a campaign reaches 80% of its stated goal amount, the project is “greenlit” and the contributions may be kept, despite not reaching the full 100% amount of the stated goal. Seed and Spark takes 5% of the total amount raised, and credit card fees are 3% per transaction. However, Seed and Spark offers contributors the option of paying the 5% fee on behalf of the filmmaker, and 60% of the time, donors will do this. So, the average site fee filmmakers actually end up paying is only 1.95% of the total amount raised.

Additionally, if you choose to utilize Seed and Spark’s own streaming platform once a project is produced, the company will take a 20% commission on rental fees charged for viewing, but filmmakers get to keep the other 80%.  Another unique aspect offered by Seed and Spark is the option for filmmakers to create a wishlist of specific, tangible items that are needed for production, much like a wedding registry. Backers can then choose to donate or loan those items to the filmmaker for the project.

Flexible Funding: Flexible Funding also requires a goal amount to be set and provides for a certain timeframe during which the campaign will run. The difference here is that even if that goal is not met, the project will get to keep what it was able to raise. For this type of funding option, the platforms typically take 8-9% of the total amount raised if the goal is not met and 4% if the goal is met. The 3-5% transaction based fee for credit card payments also applies.

Subscription Funding: This type of funding option is available through Tube Start and applies to an ongoing monthly subscription project where contributors acquire ongoing rewards as long as they subscribe, or they can buy one-off rewards and you get paid instantly. The platform fee for Subscription funding is 4%.

Pledge Funding: This is also a model available through Tube Start and applies to an ongoing project where backers pledge to pay a certain amount every time the campaign releases a new video, or they can buy one-off rewards and the filmmaker gets paid instantly. The platform fee for Pledge Funding is 4%.

No Goal: Fan Backed currently offers a No Goal funding option, where for a fixed time, projects can promote and raise whatever they can. Backers will be charged instantly and proceeds given immediately to the campaign. Fan Backed also offers a unique feature, which they call the Evergreen feature. This allows campaigns who are successfully gaining contributions to revive and extend a campaign if the time allotted for it expires. There is an additional 2% charge on funds raised after the expiration of the original campaign.

Considering the Type of Reward Offered to Backers.  If seeking funding through crowdfunding platforms, filmmakers need to consider what rewards will be most enticing to potential backers. With all of the different campaigns out there, contributors have to be enticed to choose your campaign from among the thousands of others being offered. The following is an overview of the options that are available.

Standard: A standard reward is any kind of permissible reward (as determined by the platform’s terms of service) a filmmaker wants to offer backers in return for a contribution. You can set up one time or monthly recurring rewards that backers can subscribe to. Standard Rewards transactions are typically subject to the applicable platform fee.

Hands Free: Tubestart has partnered with Spreadshirt and CafePress so filmmakers can easily create over 800 customizable perk products ranging from t-shirts to smart phone covers to shower curtains with their logo and branding and fully automated “setup & forget” payment and order processing. Hands Free Rewards transactions are usually subject to the applicable platform fee plus a 10% fee. Fan Backed also offers a similar option.

Sponsored:  These rewards are unique to Tube Start.  Tube Start has partnered with leading brands in various verticals to offer rewards like coupon codes or sponsored merchandise. Eligible projects can display these offers on their project page and keep 100% of the net profit. Sponsored Rewards are subject to the applicable platform fee plus a 10% sponsored perk handling fee.

Biddable: These rewards are also unique to Tube Start. These rewards feature one- time special limited reward offers.  The filmmaker can set up auctionable rewards that will be sold to the highest bidder. Tubestart will manage the entire bidding and payment process for you. Biddable rewards are subject to the applicable platform fee.

Promotional Considerations. As the market and venues available for crowdfunded films and video continues to expand, it is important to plan and consider a marketing and promotion strategy in order to gain the attention and support necessary to carry out a successful campaign.

Choosing a site such as KickStarter or Indiegogo that is open to multiple industries and is more established, may have a downside in that they host a much larger number of projects as compared to some of the more niche and targeted platforms. This makes it more difficult to garner attention and stand out from amongst the crowd.

Most of the film specific platforms have integrated promotional/marketing aspects, as they recognize the importance of creating a buzz and creating a community around the project. For instance, Fan Backed has developed a feature that rewards backers for “spreading the word” about a particular project by sharing it on social media or inviting people to view the project page.

Other sites, including Rocket Hub and Tube Start, offer campaign hosts teaching sessions, videos, articles and other means of learning how to leverage certain tools to promote a campaign, as well as analytic tools to track and assess the effectiveness of promotion strategies undertaken.   Additionally, since film and television projects usually seek multiple rounds of funding at the various stages of production, TubeStart has partnered with other pre-production support sites such as Thunder Clap and Prefundia in order to streamline announcements and provide clarity to all of the contributors along the way and to grow and maintain an interesting and invested following community.

Seed and Spark has its own rewards system in which supporters can earn “SPARKS” for following or promoting filmmakers’ projects, which they can then use to buy or rent films from its online streaming platform.  Additionally, it incentivizes filmmakers to do all that they can to promote their project by making distribution through theatres, cable VOD, and digital retail platforms available to those who gather 500 followers or more. The more followers that are gained, the more distribution options are unlocked and available to the filmmaker.

Conclusion. The online crowdfunding space is a burgeoning world for filmmakers, whether they are established or just starting out. Avenues for obtaining financing, successfully completing, and distributing projects have opened up tremendously and have provided multiple options and possibilities that have, until now, never been known in the industry. Depending on what stage the production is in, the budget requirements, promotional considerations and distribution goals, filmmakers must consider all of the options and choose the most appropriate platform accordingly to maximize the opportunities made available through them.