Crowdfunding helping to ‘democratize’ content production: report

Crowdfunding is becoming an attractive tool for content creators seeking project funding but there remain risks and regulatory limitations in Canada, a new report commissioned by the Canada Media Fund said. The report by consulting firm Nordicity Group Ltd., released Thursday, said crowdfunding—where project creators use social networking to appeal for small funding donations from a mass number of people—serves as an attractive funding model for smaller Canadian content producers who may not have success funding individual projects through traditional methods. “Producers of all sizes have increased their access to financing, contributing to the democratization of content production,” said the report, titled “Crowdfunding in a Canadian Context: Exploring the Potential of Crowdfunding in the Creative Content Industries.” “Increasingly, new entrants have the potential to be recognized and rewarded for their craft, where they may not have conventionally been able to secure funding or distribution for their projects due to traditional value chain barriers.” The report cited research released in April by Massolution/Crowdsourcing LLC that said global crowdfunding initiatives raised more than $1.5 billion US for one million projects in 2011, representing a 63 per cent dollar rise per year over the past three years, Nordicity said. The CMF said the North American market led the way in 2011 with more than $837 million US invested through 208 crowdfunding platforms such as the websites Kickstarter in the United States or Ideavibes and Springboard in Canada. Nordicity said 191 of those platforms were American and that the U.S. “has the world’s highest level” of crowdfunding activity. Canadian content producers face difficulties when attempting to use crowdfunding initiatives due to strict securities regulations and a smaller Canadian market, the report said. It said security regulations that restrict the number of investors in a private business stand “as a major hurdle” to crowdfunding initiatives seeking to offer returns to investors. Laws restricting media companies from becoming charities and issuing tax receipts similarly restrict businesses' and creators' ability to appeal to donors. “everal stakeholders have expressed concerns that the size of the Canadian market could impact the sustainability of crowdfunding in Canada due to a smaller pool of potential donors, resulting in a higher risk of donor fatigue,” the report said. A lack of awareness and a still-blossoming crowdfunding model in Canada could dampen contributions, Nordicity said. It said many content production teams do not have the skill sets required to effectively run a crowdfunding campaign and cautioned that “hard costs,” time and effort are required to get a funding campaign off the ground. “Many producers are apprehensive about the costs in resources and effort that are needed in order to manage a successful crowdfunding campaign,” the CMF wrote. Lisa Fitzgibbons, executive director of the Documentary Organization of Canada, said in a phone interview that Canadian TV and film producers should be careful not to offer foreign donors producer credits that may impact their eligibility for Canadian content funding. She said it is important for filmmakers to ensure that the crowdfunding they accept comes in the form of a “sponsorship” rather than a donation. “Otherwise, they could find themselves being told that they’ve received assistance, and that that diminishes the amount under which they are eligible for tax credits,” she said. Nordicity said successful crowdfunding campaigns can help to raise a creator's profile or the profile of their project and to build and engage potential consumers at home and abroad. “Given the lack of clarity regarding legal, financial and policy issues related to crowdfunding, and the relative novelty of the concept, producers exploring the potential opportunities offered by crowdfunding should adopt a philosophy of experimentation,” the report said. “In addition they should proceed with caution, ensuring they are aware of all the associated risks of engaging in this type financing activity before launching a campaign.” news@thewirereport.ca

Crowdfunding helping to ‘democratize’ content production: report

Broadcast | August 23, 2012

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