Crowdfunding and Preselling - What you give makes all the difference
In a New York Times article, "Movie Makers Appeal to the Crowd, for Money," the newspaper reminds us that a direct appeal by filmmakers or musicians to their fans known "crowdfunding" can be used to raise considerable funds in support of a project.
The article focuses on buyacredit.com, a nicely designed website for three young British filmmakers, Adrian Bliss, Benjamin Robbins and Toby Stubbs. The filmmakers are approximately ten percent of the way to their goal of £1 million with a reported £100,000 ($149,000 U.S.) from more than 10,000 donors, reports the Times.
But the article does not explain how these filmmakers are going to bridge the other ninety percent budget gap or the details of crowdfunding and federal securities laws, so here are a few pointers.
Crowdfunding works by selling something directly to the public. In the case of buyacredit.com, the item sold is the purchaser's name in the end credits. That's it: £1 buys you your name on the list. The purchaser is not an investor in the movie.
The more traditional method of publicly funding a project is known as a public offering. In a public offering, a filing must be made by the seller of the securities with the Securities and Exchange Commission that provides an extensive amount of detail regarding the seller and its key executives, the use of the funds, and the financial risks associated with project. The purchasers are then entitled to an ownership interest in the seller - in an amount explained in the securities filing and the prospectus provided to every buyer. Selling film stock or other company stock can be done directly over the Internet, but it is a very detailed process and requires the guidance of securities laws experts. There are stiff civil and criminal penalties for getting this wrong, and I think the government has gone back to enforcing these laws again.
So if the buyacredit.com project is ninety percent short and the sale of corporate securities is too difficult, what should an aspiring filmmaker or musician do? The answer, my friend, is presell!
Crowdfunding is a great idea, but in most cases it provides too little value to the public, so it fails to raise sufficient funds. Instead, project funders should consider preselling the DVD or CD along with the special thanks credit. For $50, a supporter receives a credit in the film and an advance copy of DVD prior to its general release. Depending on the nature of the project, filmmakers could also consider adding a copy of the screenplay or production tee-shirts into the package (necessarily at a higher cost). Only 20,000 purchasers are needed for a $50 purchase to get the $1 million needed to produce the film. Add ticket sales at advance screenings and the income can really make a difference.
There are details that need to go into the sales contract to protect the filmmaker or musician and make clear precisely what the purchaser is receiving. But combining a creative sales package with a good crowdfunding appeal can move many projects along.
The article focuses on buyacredit.com, a nicely designed website for three young British filmmakers, Adrian Bliss, Benjamin Robbins and Toby Stubbs. The filmmakers are approximately ten percent of the way to their goal of £1 million with a reported £100,000 ($149,000 U.S.) from more than 10,000 donors, reports the Times.
But the article does not explain how these filmmakers are going to bridge the other ninety percent budget gap or the details of crowdfunding and federal securities laws, so here are a few pointers.
Crowdfunding works by selling something directly to the public. In the case of buyacredit.com, the item sold is the purchaser's name in the end credits. That's it: £1 buys you your name on the list. The purchaser is not an investor in the movie.
The more traditional method of publicly funding a project is known as a public offering. In a public offering, a filing must be made by the seller of the securities with the Securities and Exchange Commission that provides an extensive amount of detail regarding the seller and its key executives, the use of the funds, and the financial risks associated with project. The purchasers are then entitled to an ownership interest in the seller - in an amount explained in the securities filing and the prospectus provided to every buyer. Selling film stock or other company stock can be done directly over the Internet, but it is a very detailed process and requires the guidance of securities laws experts. There are stiff civil and criminal penalties for getting this wrong, and I think the government has gone back to enforcing these laws again.
So if the buyacredit.com project is ninety percent short and the sale of corporate securities is too difficult, what should an aspiring filmmaker or musician do? The answer, my friend, is presell!
Crowdfunding is a great idea, but in most cases it provides too little value to the public, so it fails to raise sufficient funds. Instead, project funders should consider preselling the DVD or CD along with the special thanks credit. For $50, a supporter receives a credit in the film and an advance copy of DVD prior to its general release. Depending on the nature of the project, filmmakers could also consider adding a copy of the screenplay or production tee-shirts into the package (necessarily at a higher cost). Only 20,000 purchasers are needed for a $50 purchase to get the $1 million needed to produce the film. Add ticket sales at advance screenings and the income can really make a difference.
There are details that need to go into the sales contract to protect the filmmaker or musician and make clear precisely what the purchaser is receiving. But combining a creative sales package with a good crowdfunding appeal can move many projects along.
