Advice on best crowdfunding practices

Crowdfunding is fast becoming a serious alternative to traditional financing sources for the production of content. It’s an indisputable fact.

The Social media monthly covers crowdfunding in its May 2012 issue

For a number of months, Kickstarter, the applauded American crowdfunding platform, has been making the news. First came the Sundance Film Festival , which announced that 10% of the films in its official selection had been fully or partially funded by Kickstarter. Next, two video game producers grabbed the headlines in quick succession: surpassing $1 million in their financing quests. A more recent case is that of the fledgling company that designed the Pebble watch and raised an impressive $10 million in under 30 days becoming the “richest” project in the short history of crowdfunding.

What until lately was a relatively marginal phenomenon that enabled a certain number of project promoters to launch modest initiatives, crowdfunding can no longer be ignored. The recent decision by the U.S. Congress allowing start-up companies to access crowdfunding is one obvious example of the attention the practice has been garnering.

Closer to home, Canadian project developers are also hoping to benefit from this new funding mechanism. While crowdfunding platforms exist in Canada(Haricot, Smallchange, Touscoprod), many Canadians are drawn to high-profile Kickstarter. In fact the recent HOTDOCS conference offered a few tips to anyone considering this alternative.

During a presentation entitled “Best Practices in Canadian Crowdfunding,” Richard Hanet, a partner at Lewis Birnberg Hanet LLP, recommended the following:

  1. Pay close attention to the type of contributions you receive. This aspect is central to the crowdfunding strategy. Canadian content      creators must understand that any funding received via a platform such as Kickstarter will be considered as taxable income as soon as it enters the country. In addition, under the federal law governing tax credits, this kind of      monetary injection into a financial structure is considered as      “assistance,” which obliges the producer to reduce the contribution of  these tax credits accordingly in the organization’s financing structure. Therefore, what may be gained on one level could be lost on another.
  1. Ensure you have a chain of title in accordance with      Canadian requirements. As part of the incentive exchanges between producers and their “contributors,” on-screen credits or even certain rights may be granted. Such exchange strategies should be avoided, not only because of rights issues but also due to the CAVCO certification rules that Canadian productions are subject to.
  1. Ensure you have a valid contract for your American “antenna.”    A site such as Kickstarter requires that the project developer have a U.S. address, bank account, and business number. Therefore, Canadian producers  must establish an agreement with an American entity. Hanet warns against      partnering with ‘friends or in-laws.’ Instead, he recommends establishing  a legal contract with an American entity—ideally a distributor. In this way, the money raised via crowdfunding will be considered as a  distribution advance, and the problems noted above could be avoided.
  1. Lastly, give careful thought to the cost of your exchanges.  Hanet emphasizes that it’s all well and good to offer a t-shirt for a $10 contribution to your film. But if the shirt costs you $4.50 to make, $17 in postage, and $10 in customs fees to send it to your contributor in Austria, it’s a losing proposition.

A Harmonized Way to Measure Digital Media Projects

This is an exciting moment for the Canada Media Fund: earlier this week, we launched the Digital Media Performance Measurement Framework.

It’s a product of extensive research that aims to simplify how we rate digital media success. We spent many months in back-and-forth consultation with industry stakeholders. We also developed a complete process to validate our classification and measurement methodology.

Speaking for both myself and Julie Look, Director of Research and fellow co-director of this project, I wish to thank all the content producers, broadcasters, industry associations, other funding agencies and analytics experts who were involved. The challenge we faced ranking success of digital media projects across our different groups was colossal, a fact we all knew from the start. While digital media lets us track and measure almost anything, there is no common language that we can use to interpret the resulting numbers. Nor is there a unique data source – something comparable to television’s BBM ratings – that can give us an industry-wide baseline for data collection.

We wanted to “keep it simple,” but the system had to be flexible enough to encompass all types of projects supported by CMF. We think the projects we fund – whether in the Convergent or Experimental Streams – are fairly representative of the digital media landscape. That means that projects from different genres are available to users across multiple access points, including PCs, tablets, consoles and smartphones. We also allow for various delivery formats, some content arriving online and others embedded in applications or as packages downloaded and run offline.

A classification system forms one part of the Digital MediaMeasurement Framework (DMMF). This helps producers define projects and lets the CMF compare different ventures through data segmentation. The other part is powered by five widely used metrics that are standard in analytics software. The CMF will use these metrics to calculate Key Performance Indicators based on audience and consumption.

Today’s release is just the first step, an encouraging move towards much needed common measurement practices for screen-based digital media. The DMMF must keep up with our fast-paced and ever-evolving industry. Consultations will continue throughout the year, along with ongoing optimization of the framework. We will also form working committees to continue the development of the DMMF.

For more information, please see the related Digital Media Measurement Framework documents.

Catalina Briceno
Director, Industry and Market Trends

TRENDS 2012: All together now

(Read introduction: Coming up next, review of the 2012 media trends.)

This Beatles favorite makes for the perfect title of the final chapter in our series 2011 Review >> 2012 Trends. The best summary of the current effervescence in the digital media sector (and the best stimulus for a discussion that goes beyond mere year-end predictions) can be found in a recent article by Erick Schonfeld, in which he compares the unprecedented proliferation of technology start-ups to the Cambrian explosion and makes this enlightening observation:

“The internet is today’s steam engine. Anyone can tinker and build an app or a web business. The pace of innovation is similar to what was seen during the tail end of the industrial revolution in the late 1800s (…) Today’s most productive machine is the computer. But that machine is increasingly useless if it is not connected (…) It’s not just that the network is the computer. The network is society, the market, and politics all rolled into one.”

In all activity sectors and particularly that of media creation and distribution, this evolution will continue until society (the user) merges with the market (right-holders, producers, distributers) and politics (legislative machinery, regulation). In fact, the past few years have seen the user begin to climb back up the hierarchical ladder, moving from passive receiver to active transmitter.

As far back as 2006, TIME named “YOU” person of the year. Yet five years later, a division remains. Business is prepared to “listen” and “dialogue” with the user and even integrate user-generated content, provided users not alter the editorial or marketing trajectory of the company. User-generated content remains distinctly separated from that created by the professionals, and only rarely does anyone venture into co-creation terrain, where developers, authors and users unite to form a nucleus of inventiveness.

Granted, this year saw the progression, albeit timid, of such phenomena as crowdsourcing, crowdfunding and the alternate reality game (ARG), which involves the user (online and offline) in an interactive narrative. But many industry players see these initiatives as just more ways for companies to lose control. Transmedia storyteller Lance Weiler views co-creation with the public as a chance to bring “happy accidents” into a project. The Japanese example of Hatsune Miku is an astounding illustration of how a new economy of collaborative creation can turn into a phenomenal business success.

Control is not lost, but it must be distributed…fairly.  

In the case of Hatsune Miku, creation is communal and users have the right to change and disseminate intellectual property (within certain parameters), but all contributions by the public must be not-for-profit. However, when the company uses the creation of a fan, a contract and remuneration are arranged. To not pay contributors would be an injustice, as demonstrated by the recent Voir vs. Huffington Post affair in Quebec(1).   Such should also be the case for the giant platforms that feed off of the data they collect on their users, turn this data into profits on the markets, and use it as an asset to capitalize their business on the financial markets.

The past year has also been particularly active in terms of legislative review, regulatory upheaval, legal battles, patent wars, and privacy issues. This fight for control will take on new vigour and will confirm that in a world of quasi-continuous connectivity, society, the market, and politics cannot just co-exist…they must cooperate.

Returning to Schonfeld’s evolutionary metaphor, only those species that are able to adapt to this environment will survive. The Cambrian explosion began in Canada; there’s no reason why our talent, culture and politics cannot contribute to shaping the world of digital content tomorrow!

(1) The upcoming launch of a Quebec edition of The Huffington Post recently caused quite a stir in the blogging community when the weekly VOIR revealed that influent Quebec bloggers would contribute to the site without being paid.

2012 TRENDS: Connected TV: evolution, not revolution

(Read introduction: Coming up next, review of the 2012 media trends.)

Unquestionably, over-the-top (OTT) services grabbed the attention of the Canadian broadcast industry in 2011.  The CRTC led (and continues to monitor the trend) a series of  consultations with the industry to examine the potential impact the arrival of players such as Netflix will have on Canadian content production.

With OTT services not subject to the same rules that govern Canadian cable operators and satellite distribution companies, the latter are demanding a level playing field, notably by asking for deregulation and greater flexibility (in Canadian content quotas).

While most of us were focusing on the high-profile subject of OTT services, other striking developments in the television industry were unfolding both at home and abroad. Cable companies may have concerns that new operators and content distributors are moving into living rooms, but television manufacturers are worried that the television is being moved out.

With media consumption habits changing and technology firms on the fast track, SONY, Panasonic, Samsung, LG and the like are facing a major challenge. Their ambitions are clear: via connected TV[i], the manufacturers hope to centralize use, win back their role as the entertainment focal point of the household, and enter the service and publishing sector to draw back control over the content-acquisition.

However, jumping on the Web-linked terminal bandwagon is not a panacea for an industry that has been built on closed distribution models. Not only will such a move serve to give third-party distributors (such as OTT services) yet another device on which to deliver their content, but broadcasters will have to compete with game publishers and developers, application developers, and the whole gamut of Web publishers—notably those who specialize in online videos, such as YouTube, Dailymotion and others—all of whom contribute to the video offering. In short, the issue of controlling the signal and diminishing the gap between content and user has become so crucial that a group of major French broadcasters took the step in late 2010 of signing a charter, most notably to control third-party displays superimposed on viewers’ screens during television programs.

So what’s next? Can we expect that in 2012 connected TV will create a tsunami of competition on your living room TV screen?

“Traditional” players need not brace for connected TV to create a massive disruption on the TV market, but blustery winds are nevertheless in the forecast. The so-called smart TV may already be enjoying steady penetration in the U.S. and Europe and will no doubt fare better than 3D models, but it still faces an uphill battle; in itself, it will never provide users with the same level of satisfaction they find on the Web in terms of social dialogue and personalizable choice. The reason for this is clear: the television screen is and will remain a shared screen. Social media and programming personalization functions make little sense when the terminal is designed to be used by many people at the same time. The response therefore lies in multitasking: everyone in front of the TV and each with their own second device to enhance the viewing experience.

Within this context, vertical integration of most industry players has been the first wave of response to the need to be on all screens.  Going further though, would imply that Media groups must break down the barriers and converge in areas that reach beyond their services; their programming strategies, advertising sales forces, and content offer should follow the same logic.

Additional reading: The Difference Between Connected TV, Social TV and Expanded TV & (in French).

[i] Connected TV refers to television sets equipped for Web access, but “more than merely an HD monitor plugged into a high-speed Internet connection, it is no less than a multimedia entertainment management centre able to recognize and interact with a personal computer, a 3rd generation gaming console, and multiple modules while offering a wide range of functionalities, including a connection to social media networks.” (Free translation from ABC de la télé branchée, Evolumédia)

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2012 TRENDS: An avalanche of data

(Read introduction: Coming up next, review of the 2012 media trends.)

The avalanche of data available to companies who operate in the digital sector and the performance measurement of their projects will be a major issue in 2012.  All of the experts, whether their specialty is interactivity, mobility, social media, or online video, agree on one fundamental point: it is no longer possible to ignore the need to measure the impact and gauge the success of content and marketing strategies.

But how does one go about this in an uber-connected world, where data on audience, usage, engagement, sharing, conversion (and countless other aspects) flows—often in real time—and is generated by a multitude of platforms? How does one go about this in a world with an abundance of analytics tools yet few if any measurement standards or key success indicators?

Even once the established players adapt to the multiplatform and social realities of the digital environment (as was the case this year for comScore Canada, Google Analytics, Facebook  and Twitter, among others), the challenge remains massive for all involved, given the management effort, continuous analysis, and actions involved in wading through this sea of information.

Paradoxically, companies have never been in a better position to cost-effectively collect and store immense quantities of data, which is prompting a keen interest in all things related to big data. Furthermore, and following the example of other trends in the digital sector, particular attention will be paid to mobility and social media measurement, and the dialogue will be once again be led in large part by the advertising sector. It is clear, however, that this issue now goes far beyond purely marketing and promotional objectives.

Performance measurement is clearly a responsibility of every business, but it has also become an industrial issue in all sectors. In the audiovisual content production and broadcast sector in particular, a number of measurement consortiums and certification bodies have been created in recent years, sometimes on an initiative by the television sector (as in the United Kingdom and the U.S.), other times on an initiative by the advertising sector (as with 3MS from IAB) or by ODJ in France.  In certain cases, progress has been marginal, and in others a membership system has confined the application of standards to a limited number of players.

This trend is here to stay, and the Canada Media Fund will continue to do its part in 2012. Since late 2010, we have led a concerted drive towards digital performance measurement across the country, notably via the creation of an advisory committee and the introduction of a discussion forum. The result is a measurement framework that will be applied to all digital media projects funded through the Convergent and Experimental streams of the CMF and an implementation plan for the measurement system that will be introduced in the first quarter of 2012.

2012 TRENDS: Your virtual wallet

(Read introduction: Coming up next, review of the 2012 media trends.)

During the last quarter of 2011, competition in the new (and highly lucrative) mobile payment market intensified in North America, with Google launching its Google Wallet service in the U.S. in September, and VISA, Master Card and PayPal following close behind with a range of mobile transaction services. A recent study by Forrester Research predicts that by 2016, consumers will be able to pay for most of their purchases using their smartphones.

Mobile payment can take many forms. It may consist of using your cell phone to interface with the merchant’s terminal and finalizing payment with a simple click. Or it may involve using your phone to register your transactions, which in turn are added to the monthly bill you receive from your mobile phone operator, as is offered by Android for application purchases in the US and since 2011 in Europe.

In all cases, we can expect that the ease of shopping using mobile payments will build consumer confidence and drive the growth of business models such as in-app purchases or mobile advertising, both directly linked to the increase in paid app downloads.

In Canada, while the rush to mobile payment is less pronounced, a recent survey conducted by ING Direct demonstrates the extent to which Canadians are ready to shift their banking transactions to their mobile phones. Among the functionalities most sought (31% of respondents) from financial institutions is the possibility of making payments using smartphones.

In an environment where business and monetization models rule and where the ultra-connectivity of users can facilitate—indeed accelerate—this shift to transaction models, the mobile payment trend is clearly one to watch.

 (Ce billet est disponible en français.)

TRENDS 2012: Behold, the resurrection of publishing

(Read introduction: Coming up next, review of the 2012 media trends.)

The extraordinary success of the iPad has generated unexpected spinoffs for the market; not since the onset of the “tablet revolution” had one of the devices truly captured the public’s interest.

Still, as of the second quarter of 2011, the use of tablets seemed confined to the affluent, with 45.9% of users having an annual income of more than $100,000 (Comscore, Digital Omnivores). But now, with the introduction of the Kindle Fire, Nook, and other tablets for under $200 and the emergence of initiatives such as DataWind in India, the tablet is poised to become the latest gadget for the masses and may have the same impact on the e-publishing industry as the iPod had on digital music distribution a few years ago.

According to the economic news coming from the media industry, newspapers and print publications have been at the top of the “endangered species” list for the past three years. However, by the end of 2011, encouraging news was coming from publishers whose apps for tablets had pushed their profits beyond the forecasts, prompting renewed hope. Such is the case for The Economist and magazine publisher Hearst.

Despite statistics on mobile application use showing that game downloads systematically represented the most popular application category in 2011, data recently released by SODEC indicates genuine signs of growth, notably in the U.S., where digital book sales rose by 162.9% in the first quarter of 2011, reaching US$313 million, while print book sales dropped by 18.7%.

Certain emerging phenomena suggest that e-publishing and digital distribution of narrative content will gain increasing popularity in 2012. Among the observable trends are a keen interest in self-publishing options (Amazon, Wattpad) and for aggregation and page layout applications such as Flipboard.  Will 2012 be – as promoted by the Economist – the year for Leanback 2.0 ?

(Ce billet est disponible en français.)