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.

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 & http://meta-media.fr/2011/11/22/cest-le-tour-de-la-tele/ (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)

(Ce billet est disponible en français.)

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.)

Coming up next: review of the 2012 media trends

As everyone is finalizing their Christmas list, digital media experts are hard at work on another type of lists: their 2012 predictions! What emerging trends, technologies and behaviors will impact the media industry in the next year?
As privileged observers, we will discuss those predictions in early Q1 of 2012 since some of these highly expected predictions – such as the TMT Predictions from Deloitte (the 2011 Predictions can be discovered here) will only be released in mid-January.
In the meantime, without trying to play “the crystal ball game” ourselves, we thought we would offer an appetizer: a hybrid between the review of the year 2011 and 2012 predictions. Therefore, we will gradually reveal – starting today and until Christmas- what we believe to be the “Top 10 must-watch” topics.   Many of these themes are not new, but we believe they will reach a tipping point in 2012, often passing from emerging phenomenons to shaping the new norm in digital media consumption.   We’ve selected them because of the influence we believe they had in 2011 and the role they will continue to play in impacting significantly the content production & media broadcast industry in Canada.

 

This week, we will post the original versions of the texts in English and next week, the original postings will be made in French.  Both the English and French translations of all the postings will be available in early January.  Enjoy your reading and Happy Holidays everyone!

 

The Industry and market trends department – CMF

Life of the rich and substantial

Ce billet est disponible en français.

A little over a year ago, the CMF unveiled its new guidelines and introduced the concept of « rich and substantial », a new prerequisite for digital media components in the Convergent Stream that excited some… and puzzled many.  As the CMF is releasing its first annual report, we sat down with the CMF’s English market director at Telefilm Canada Francesca Accinelli to take a look at the challenges and successes of the Fund’s most talked-about criteria.

When the CMF first released its new guidelines in April 2010, it didn’t take long for producers to react to one of the Fund’s new requirements: the now famous “rich and substantial” criteria instantly caused a stir.   “In the beginning, I think people struggled to understand the concept,”  remembers Francesca. “And in truth, without examples of exactly what we wanted, we also struggled to explain it to them.  In television, you know, we have a fixed format, things to respect.  This was much larger.”

As a reminder, there are three ways for projects to trigger eligibility in the Convergent stream: the DM component related to the TV program has to either be streamed on-line in a non-simultaneous manner, be broadcasted by a CRTC-licensed VOD service or – and the preferred option from the CMF’s point of view – present a “rich and substantial” digital media component aimed at at least one other platform than television.  Yet, there was no “formula” or set-in-stone elements that made a project rich and substantial.  For Francesca, being creative and thinking out of the box also means being adaptable: “We try to let people know that there is flexibility. It’s always in terms of why – why is it rich and substantial?  What are you offering other than photos of the cast?

The CMF’s first task was thus to meet with the industry and expand on their expectations, case by case.  As sites became richer and richer, they started to have more examples at hand.  “Now we can sit down with broadcasters and look at their own websites and say: ‘this series, absolutely rich and substantial’ and this series… ‘not’.  We spent a lot of time doing that with everyone (broadcasters and producers), and I think it paid off.

An unforeseen enthusiasm

For its first year of operation, the CMF had set an objective of 50% for the rich and substantial criteria: at the end of the year, out of the 486 projects funded, 65% had a rich and substantial component. For Francesca, this enthusiasm of the industry for R&S translates into creative benefits both for the audience and the producers — which was one of the original intents behind the Fund: “We wanted producers to go beyond the simple promotion of the project, and for the broadcaster to understand that as well — understand that audiences can be reached in many different ways. The projects that we’ve seen as “rich and substantial” really do that, they truly enrich the audience’s experience and the viewership, and it created an additional dimension to the project.”

Spawned from sometimes otherwise unused original content, this new vision often enriches the whole production:  “In the case of documentaries there may be hundreds of hours of footage that they were’t able to put in that brings a whole other aspect, that litterally tells a different story.”

For Francesca, establishing the ‘rich and substantial’ criteria also entailed the conversion of the broadcasters.  “Sometimes you reach audiences through a digital platform and then they will go to the television.  And digital allows audience engagement in between seasons!  Original, on-going content keeps your audience coming back. You don’t want your audience to go away. There is a lot of competition, and when you’re off, somebody else is on. By adding new material every week, returning for new clips, little quizzes, producers keep the audience coming back, and that’s what we want to happen.”

More components… more work?

Francesca recalls many producers first thought that ‘rich and substantial’ meant more work for them.  “Some thought – ‘Oh no, I am going to have to learn a whole other thing’. They think they have to do the work — and they don’t.  There are interactive producers waiting around the corner to help you tell your story in a different mindset.

Francesca firmly believes in the power of partnerships between traditional and new media producers: “I think the ones who are doing it right are the ones who have found individuals to help them.”

Trendscape will continue exploring this topic in the weeks to come.  Comment this post or contact us via email to send us your questions, preoccupations and success stories about past, present and future rich and substantial projects!

Some examples of rich and substantial projects:

Museum Secrets

Tiga Talk!

The Dating Guy

Les artisans du changement

Launch of “Trendscape”

The creation of the Canada Media Fund in June 2009 marked the beginning of a new era in the Canadian audio-visual industry by taking into account the major changes our industry has undergone since the arrival of new digital technologies.

It didn’t take long for CMF senior management – with the support of its board of directors – to express its desire to get event more in tune with the television and digital production industry. They then created a business intelligence team to ensure the Fund’s programs and policies met the business and operational needs of the companies receiving financial aid from the CMF. This goal was the driving force behind the creation of the Industry and Market Trends Department. It’s also why I had the privilege of joining the CMF team at the end of October 2010.

One thing I learned during my many years as a digital media producer and lecturer is that “trendspotting” work within an organization doesn’t make sense unless its results are made known to others…which is why it was essential for us to create this sharing platform. First, it enables us to share our latest discoveries with you. It also provides our analysts and collaborators with a place to express their views on the industry’s different trends. Finally – and most important of all – it gives you, the main change makers in the content production and distribution field, a voice. We encourage you to comment on all posts, share your views and opinions as well as submit your discoveries and topics of interest. This blog’s for you!

So welcome, and happy reading!

Catalina Briceno | Director of Industry and Market Trends