Beruflich Dokumente
Kultur Dokumente
Crowdfundingina
CanadianContext
Prepared by: Nordicity
www.cmf-fmc.ca
Exp|or|ngthe
Potent|a|of
Orowdfund|ng
|ntheOreat|ve
Oontentlndustr|es
August,2012
2 Crowdfunding for the creative content industries in a Canadian Context
1. IntroductIon 3
2. crowdfundIng defIned 4
2.1 crowdfunding Models 6
2.1.1 TheDonat|onMode| 6
2.1.2 The|end|ngMode| 9
2.1.3 ThelnvestmentMode| 13
2.2 Market trends 15
2.2.1 SMarketTrends 17
2.2.2 EuropeanMarketTrends 18
2.2.3 Oanad|anMarketTrends 20
3. deMand for crowdfundIng In canadas
tV and dIgItal MedIa IndustrIes 22
3.1 the best ft for creative content crowdfunding 22
3.2 Benefts for the creator 25
3.3 risks and Barriers for the creator 27
4. IMpleMentatIon consIderatIons
for the canadIan tV and
dIgItal MedIa IndustrIes 29
4.1 canadian securities law and private financing 30
4.2 the creative content funding ecosystem 33
4.2.1 Oert|fedlndependentProduct|onFundsand
otherfund|nggrants 33
4.2.2 Prov|nc|a|andFedera|TaxOred|ts 33
4.2.3 BroadcastandD|str|but|onPartners 35
5. suMMary and conclusIons 37
appendix a canadian crowdfunding platforms 39
3 Crowdfunding for the creative content industries in a Canadian Context
1. IntroductIon
Orowdfund|ng |s an emerg|ng a|ternat|ve fnanc|ng veh|c|e that
has exper|enced a recent boom |n Europe and North Amer|ca,
pr|mar||y dr|ven by recent mu|t|-m||||on do||ar record-break|ng
successesonp|atforms|ntheS.lnthewakeofthe|ncreased
med|a attent|on for these campa|gns and recent changes to
secur|t|es |aws |n the S to accommodate crowdfund|ng, th|s
fnanc|ng mode| has become more v|s|b|e |n Oanada as we||.
A number of Oanad|an-based crowdfund|ng p|atforms have
emergedandd|scuss|onhasbeenabundantamongregu|atory
and|ndustrybod|esfromthetechsectortothecreat|vemed|a
sectorregard|ng how crowdfund|ng fts |nto Oanadas current
|ega|,regu|atoryandfund|ngenv|ronment.
The Oanada Med|a Fund OMF} comm|ss|oned Nord|c|ty to
conductastudyonthetop|cofcrowdfund|ng|nOanadaw|tha
mandatetoprov|debothanoverv|ewoftheg|oba|crowdfund|ng
phenomenon as re|ated to the creat|ve content |ndustr|es and
a|so a domest|c env|ronmenta| scan to determ|ne what the
demand for crowdfund|ng m|ght be among content creators,
how they m|ght best |everage th|s type of fund|ng and how |t
m|ghtft|ntothebroaderstructura|env|ronmentforthecreat|ve
content|ndustr|es|nOanada.
Through secondar y research, case st udy ana| ys| s and
stakeho|der|nterv|ewsw|thproducers,|nteract|ved|g|ta|med|a
lDM} content deve|opers, |ndustry and regu|atory bod|es, and
|ega| and fnance experts}, Nord|c|ty exp|ored the opportun|t|es
and cha||enges regard|ng the regu|atory, fnanc|a|, soc|a| and
operat|ona| dep|oyment of crowdfund|ng w|th|n the Oanad|an
creat|vecontentenv|ronment.
The fo||ow|ng report frst prov|des a work|ng defn|t|on of
crowdfund|ng and a descr|pt|on of the var|ous crowdfund|ng
mode|s, as defned by Nord|c|ty. The report then goes on to
prov|de an overv|ew of g|oba| market trends |n crowdfund|ng.
F|na||y,thereportout||nestheneedsandkeycons|derat|onsfrom
theperspect|veofcontentcreatorsaswe||askeycons|derat|ons
re|atedtotheregu|atory,|eg|s|at|ve,andfnanc|a|env|ronmentfor
thecreat|vecontent|ndustr|es|nOanada.
4 Crowdfunding for the creative content industries in a Canadian Context
2. crowdfundIng defIned
Th| s sect | on prov| des a wor k| ng def | n| t | on of t he t er m
crowdfund|ngandabroadoverv|ewdescr|pt|onoftheconcept,
what|t|sandhow|t|sused.Thesub-sect|onsthatfo||owprov|de
anoverv|ewofthethreebas|cex|st|ngcrowdfund|ngmode|s.
Crowdfunding:
A working defnition
Crowdfundingistheraisingof
fundsthroughtheco||ection
ofsma||contributionsfromthe
genera|pub|ic(knownasthe
crowd}usingtheInternetand
socia|media
1
Crowdfunding: Disintermediated Investment Banking.Br|anJ.Rub|nton.McG|||n|vers|ty.Apr||,2011.
2
SEC Regulations Barricade The Crowdfunding Floodgates.Kev|n|awton.HuffngtonPost.November30,2011.
http://www.huffngtonpost.com/kev|n-|awton/crowdfund|ng_b_789088.htm|?.
crowdf undi ng has i t s or i gi ns i n t he concept of
crowdsourcing, wh|ch |s the broader concept of an |nd|v|dua|
reach|ng a goa| by rece|v|ng and |everag|ng sma|| contr|but|ons
frommanypart|es.
1
Orowdfund|ng|stheapp||cat|onofth|sconcept
totheco||ect|onoffundsthroughsma||contr|but|onsfrommany
part|es|nordertofnanceapart|cu|arprojectorventure.
lnterpreted |n th|s way, Orowdfund|ng has ex|sted for a |ong
t|me |n the not-for-proft wor|d, where fundra|s|ng campa|gns
are ub|qu|tous. lt has a|so ex|sted |n what |s common|y referred
toasafr|endsandfam||yfnanc|nground|nthetechno|ogystart-
upsector.
the key to crowdfunding in the present context is its
inextricable link to online social networking and its ability to
harness the power of online communities in order to extend
a projects promotion and fnancing opportunities. lndeed,
the soc|a| network|ng aspect of crowdfund|ng |s the pr|mary
dr|v|ngforcebeh|nd|tssuccess.
2
Fromthebeg|nn|ng,crowdfund|ngwasbasedonthesharedva|ues
and re|at|onsh|ps bu||t between those seek|ng support and the
donors,oftenresu|t|ng|nrepeatdonat|ons.By|everag|ngex|st|ng
commun|t|es both on||ne and off|ne, crowdfund|ng re|at|onsh|ps
are strengthened through |ncreased engagement and |nstant
grat|fcat|onv|asoc|a|med|a,asopposedtothe||m|tat|onsofone-
waymessag|ngw|thbroadcastmed|aandd|rectma||.Wh||ethe
conceptofdonat|on|snotnew,theab|||tyforon||necrowdfund|ng
toengagefundersonsucha|argesca|eenab|es|ttora|se|arge
amountsofmoney|nshorterper|odsoft|mefroma|argerpoo|of
potent|a||nvestors.
5 Crowdfunding for the creative content industries in a Canadian Context
the non-proft sector was the frst to successfully employ
crowdfunding in its present online form. Two notab|e and
often-c|ted ear|y examp|es of successfu| crowdfund|ng efforts
|nc|udetheHurr|caneKatr|nad|sasterre||effundra|s|ngcampa|gn
and Pres|dent Barrack Obamas frst-term e|ect|on campa|gn
back|n2008.
More recently, crowdfunding is becoming an increasingly
common form of raising funds in the technology and
media industries; including music, flm and video games.
A|though|nternetcrowdfund|nghasex|sted|nthemus|candf|m
|ndustr|esfora|mostadecade,|t|son|y|nthe|astfveyearsthat
crowdfund|ng|nthemed|a|ndustr|eshasga|nedmomentum.
3
Talkerscanainwascnecl|heearlies|crcwalunain
ini|ia|iveslcr|hecrea|ivesec|crin0anaaa.Assuch,Talker
IK HI II3 I1 1 I| H3 T F T 3 )I T T 8 P 0 HaHI3 T
e||helunainheneeaea|c|einrcauc|icncn|hencvie,
P K P P HI1 1 a I I I1 8H3 I F K 1 a I 3 0 0 0
u|henecessarylunaininancre|inelynannerccula|e
a||ri|u|ea|canun|ercllac|crs:
1.Eewascrcwalunaina|a|inewhennc|cayknewwha|
crcwalunainwas,
8.Eiscriinallunaincalcl$1nillicnacllarslikelyu|
c|en|ialccn|ri|u|crscll,ana
3.Eeuseaaaci|ycursellarcach,whichnean|heccula
T HHF 3 T 0 II I T I1 HXT 3 HII3 H1 T F T P H3
3 IF K T P HX1 IFT 3 0 HH
1heAIi||leBi|3cn|iecaseisanincr|an|cases|uay
|ecausei|illus|ra|esscnecl|hereula|crychallenesana
an|iui|ies|ha|exis|wi|hin|hisnewlcrncllunain,
ar|icularlyccnsiaerin|hea|senceclclearuiaelinescr
reula|icns|ccverni|.
11 Crowdfunding for the creative content industries in a Canadian Context
Arecerd-breakingpre-salecrewdfandingcampaign:
8 N1 N IK 8 K 8I2 N2
1ypeefpredactien/preject: , 0I1 b HI IP I3 I I3 H IK P
randing1arget:8100,000{080}
rands8aised:810,866,848{080}
1he0empany: 8 N1 N NK V 1 a
- 2 K 8 K 8a 2 K I0NNLNIN2 N8 N1 N
Ta|chwhenhewass|illas|uaen|a||he0niversi|ycl
Ta|erlcc.Al|erraaua|inin8009heanaa|eanaevelcea
P H3 H3 IT T F P H0 I3 IK P K I1 1 HI 1 1 HP K P
wascnlyccna|i|lewi|hBlackBerry.Icllcwinas|in|a|
s|ar|uaccelera|cr0cn|ina|cranaarcunaclanel
inves|nen|lunaraisin,|henewlynaneaPe||le1echnclcy
aeciaea|cu|i|sellcr|sin|c|uilainaKicks|ar|er0anain
lcr|henewPe||leTa|ch,whichisncwccna|i|lewi|hiPhcne
anaAnarciaaevices|hrcuhBlue|cc|h|echnclcy,anancvea
hisccnany|cPalcAl|c,0alilcrnia.
1he8tery:Hiiccvsky|urnea|ccrcwalunainwhenhis
IH0 XT K P I3 0 0 IPT 3 HT 3 FH1 1 I)1 P T 0P P HI I
successlullyraise$37b,000lrcnanelinves|crs,hewas
unsuccesslulinraisinlarersunscren|icinven|urecai|al
H0 Hb 0K T 8 a I3 HP I F K 1 a I 3 0 0 0
XIK 0T 1 HP IH K 0I1 H03 HFT 3 P HHI3 1 H3
InPulseana|helac||ha|inves|nen|inharawareisenerally
I F K 1 T K T 0 H a
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alreaayclear|ha||hePe||leTa|chwcula|eareccra|reaker.
P P H3 P T 3 T F P H3 K 8 I3 H3 K I0 XI0H1 H
1echnclcyhaaraisea$1nillicn(08P),al|erless|hana
week|ha|nun|erhaasurassea|herevicusKicks|ar|er
reccracl$3.3nillicn(08P),anawi|hin|wcweeksi|haa
3 HIK P HI 0 1 1 T , ,
Iinally,|wcweeks|elcre|heenacl|hereae|erninea
lunaincanainPe||le1echnclcyaeciaea|cclcse|heluna
0HI3 1 aIF H3 3 HIK P 0PT H3 0 1 1 T , ,
inlunain,incraer|clccuscnnakin|hewa|ches.
1hePe||leTa|chKicks|ar|ercanainuseaarinarily
resaleIenainHcaelcanain,hcwever|heyalsccllerea
cneccn|ri|u|icnlevellcranyccn|ri|u|crswhcwishea|c
XXT 3 P HX3 T PHK I I T IT X3 K P IHP HX3 T I K
Analysis:1hePe||leTa|chs|cryaencns|ra|es|hec|en|ial
HP I K 3 T I F I 0T XXT 3 II 3 0T F 3 T IX3 T PHK
|ha|nih|nc|c|herwise|ea|le|caccessncre|raai|icnal
F I 0T 3 IK 0T 3 K H6T T 1 a Ib 0K T 8 a I1 H
|crcve|ha||hewa|chwasaccaiaea,|u|hewasalsca|le
|cins|an|ly|uilaanarke|lcr|hercauc|anahasalare
nun|ercluaran|eeasales.
1hecases|uayalscaencns|ra|es|hecwerclaresale
crcwalunainncael.1hercniseclaccyclarcauc||ha|
ccn|ri|u|crsarekeen|csucr|isaverycwerlulincen|ive.
Akey|c|hesuccesscl|hePe||leTa|chcanainwas
I1 T b 0K T 8 a I1 0K I H0 HK 3 HI0P 0P
uali|yrcnc|icnalna|erials,suchas|hercnc
viaeclea|ureacn|heKicks|ar|ercanainae.
12 Crowdfunding for the creative content industries in a Canadian Context
2.1.3ThelnvestmentMode|
the Investment Model resembles a standard equity
investment, where an individual receives equity in an entity
in return for fnancing.Therearetwostandardsub-categor|es
oflnvestmentMode|crowdfund|ng:
Secur|t|eslnvestmentMode|
shares |n the company are bought by |nvestors. ln th|s mode|,
contr|butors wou|d be buy|ng ownersh|p |n the parent company
orr|ghts|naproject.
ProftorRevenue-shar|ngMode|
a share of the revenue or profts of the project |s earned by
|nvestors,asopposedtoshares|ntheunder|y|ngcompany.Th|s
|sa|soknownasaOo||ect|velnvestmentScheme.
Typ|ca||yunderacrowdfund|ng|nvestmentscheme,the|nvestment
wou|dbepass|veratherthanact|ve.lnotherwords,|nvestorsbuy
ownersh|porrevenueorproftsharesbutdonothaveanact|ve
ro|e|ncreat|veormanagementdec|s|on-mak|ng.
The |nvestment mode| |s current|y not |ega| |n Oanada due to
current secur|t|es |aws. However, The S recent|y passed the
Jumpstart Our Bus|ness Start-ups JOBS} Act, wh|ch opens
the door to |nvestment-based crowdfund|ng. A|though the act
out||nes some |n|t|a| regu|at|ons re|ated to the new |aw, the fu||
extentofthenewregu|at|onsarecurrent|ybe|ngdeve|opedbythe
Nat|ona|Secur|t|esRegu|atorandw|||notbeknownunt||thenew
|awcomes|ntoeffect|near|y2013.
There are current|y a number of p|atforms based |n the S
and other countr|es that offer |nvestment-based crowdfund|ng
mode|s,|nc|ud|ngSe||ABand.com,Appbackr,Equ|tyO|rc|e,
SEEDPSandMotaav|.
13 Crowdfunding for the creative content industries in a Canadian Context
InvestmentNedel0ase8tady:1heAgeef8tapid
1ypeefpredactien/preject:0ecamentary
randing1arget:N/A
rands8aised:780,000
1he0empany:8pannerrilms
1he8tery: .IV V a } 2 02 V IV L8INLIV V N2 1 0
LNK LNLK 2 LNV LN} NNLIN1 0K 1 L
renainccnle|elyinaeenaen|ana|heycculare|ain100cl
P HK 3 HI HI HK T 0 I8 0T P H1 0 1 I0 XT 3 IFT 3
)3 0 3 T 0HK IHP HIHI T K 3 HIHI1 0 P I T 1 I P I H
as|rcnsccialcli|icalccnnen|aryanaaianc|wan||ha||c
HP I H3 HI a T P H3 XI3 H HHI P HX3 T PHK
1hecanainuseaahy|riainves|nen|acna|icnlenain
ncael.1hecanainrcviaeac|en|ialccn|ri|u|crswi|h|wc
TX T 3KPI HX3T PI3H ,T I H1 H T3 PII T
KT 3 HI0 0 0TF FT3I PI3HTFX3T
PH 100T H H3 PH H 0H I IK I11a 3 K 3HI1 8H
alcriva|lelcanwi|hclearlenain|ernsana|hercvisicn
PI X3T I IH I T 1IT 1a HI I3IHI FI I PH PH 10
0IIHIKH3 I I0T TFX3T ) KP PHKI0XI 0 I T IHI
1H0I1I F K 1 H I TK I HI P H11 0H aT3 PI3H
Icrccn|ri|u|crswhccculanc|ccn|ri|u|e|henininun
I0 T FT 3 I HT 3P HX3 T PHK HI0 X3 T I HI IHK T I
c|icnwhereccn|ri|u|crscculasinlyacna|eanyancun|
T P H1 0 P Ha IK 3 HI K H HFT 3 K H3 I3 I0HT F
acna|icnancun|ssuchasreccni|icncn|hewe|si|ecrin
P H1 0 K 3 HI T 3 IK P IK HT IXXHI3 P H1 0
, X I H 3 1 0 3 I H I FT 3 P H X 3 T I K T
lcr|he0Kreleaseana880,000lcr|hein|erna|icnal
release|e|ween8004ana8009,sreaacver|hreeseara|e
lunainrcunas.
Analysis:1heAecl8|uiaisanin|eres|inaci|ycursell
crcwalunaincases|uay|ha|crea|eaauniuencaelwhichne|
PH HHI TF PHK3HI T3 PHX3TPHK KT 3 T3 I I T38HI
wi|hin|helealanareula|cryccnsiaera|icnsin|he0K.
I|isalscarea|exanleclhcwacanaincansuccesslully
K T 0 X1 HH0 1 X1 HF I 03 T I FT 3 I0 1 HX3 T PHK a K 1 HI3 1 a
I H0P IP HF I 0FT 3 II P T 1 1 HHI
0necl|hekeysuccesslac|crsin|hecasecl1heAecl8|uia
P IP H1 0 IIT IT XK P IXHT X1 HI3 HXIT IH
a|cu|anawereexci|ea|csucr|.
Ecwever,|hencs|s|rikinlea|urecl1heAecl8|uiacase
is|ha||he|ernsanariskscl|heinves|nen|areaescri|ea
inclearae|ailsc|ha|c|en|ialccn|ri|u|crsarelullyaware
T F P I P H 3 3 H 1 I T P X P P H X 3 T P H K I I K 3 H I T 3
Inaeea,Arns|rcnwasscccnni||ea|c|ransarency|ha|
she|ccksecialcare|cnakeanyanaallinlcrna|icn
3 H 1 I 0 T P H X 3 T I K T II 1 I 1 H T P H 1 0 H H
incluainaae|ailealunainlan,aae|ailearcauc|icn
|uae|anareularuaa|escn|hercresscl|c|hher
lunaraisinellcr|sanarcresscn|heac|ualrcauc|icn
X 3 T K H FT 3 P H 1 0
21 Crowdfunding for the creative content industries in a Canadian Context
crowdfundi ng appears to be most common among
independent flmmakers for one-off projects, whereas
television or serial projects are much less common and
typicallyhavelowersuccessratesoncrowdfunding
platforms.
56
ln part|cu|ar, documentary f|ms seem to be one of
the most common types of projects featured on crowdfund|ng
p|atforms.
57
lt|sharderforte|ev|s|onproducerstousecrowdfund|ng
because the cost of produc|ng a trad|t|ona| broadcast te|ev|s|on
product|on |s too h|gh for a typ|ca| crowdfund|ng campa|gn.
58
However,webser|esareverywe||su|tedtoacrowdfund|ngmode|
becausethe|rproduct|oncost|ss|gn|fcant|y|essthanatrad|t|ona|
broadcastproduct|on.
59
S|m||ar|y,stakeholders agree that the
crowdfunding model is extremely well suited to interactive
digital media projects,becauseoftheproject-basedbus|ness
structure of lDM content deve|opers much ||ke that of sma||er,
|ndependentproduct|oncompan|es}.
crowdfunding is also a great funding alternative solution
forprojectsthatdealwithverynichecontent.Projects
a|medatn|chemarketsaretyp|ca||ymuchhardertofundthrough
trad|t|ona| fund|ng opt|ons. Orowdfund|ng prov|des creators of
theseprojectsw|thawaytoaccessfund|ngbyd|rect|yappea||ng
totheaud|encesthatwou|dconsumetheproductforsupport.ln
manyways,crowdfund|ngprov|desanopportun|tyforprojectsto
becreatedthatm|ghtnototherw|sehavebeenposs|b|e.
Stakeho| dersseemedtoshowthemostre| uctancewhen
cons|der|ngse|||ngequ|tyorg|v|ngup|nte||ectua|propertyr|ghtsfor
the|rprojects.Most producers are highly reluctant to explore
funding options where they would have to give up rights or
equity. Th|sre|uctance|smostoftenre|atedtoequ|tystructures
that wou|d comp||cate or even prevent add|t|ona| fnanc|ng and
thatcou|drequ|resuchsubstant|a||ega|ma|ntenancetomakethe
projectfnanc|a||yunsusta|nab|e.
56
Mobcaster Crowdfunds Its First TV Season.AnthonyHa.TechOrunch.March09,2012.http://techcrunch.com/2012/03/09/
mobcaster-crowdfunds-the-weatherman/.Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
57
Stakeho|der|nterv|ews,conductedbyNord|c|ty,May-June2012.
58
Time to Join the Crowdsourcing Trend?.P|ayback.Spr|ng2012.P.13-117.
59
Time to Join the Crowdsourcing Trend?.P|ayback.Spr|ng2012.P.13-117.
22 Crowdfunding for the creative content industries in a Canadian Context
IngredIents for a successful
crowdfundIng caMpaIgn
Stakeho|dersandsecondaryresearchidentied
anumberofkeycharacteristicsthatincrease
thechancesofacrowdfundingcampaignbeing
successfu|,theseinc|ude.
s C O M P E L L I N G P R O J E C T Themostsuccessfu|projectsare
onesthatmanagetocaptureanaud|encesemot|onsand
getpeop|eexc|ted.Peop|eneedtocareaboutandbe||eve
|ntheproject|nordertobemot|vatedtocontr|buteto|t.
60
s ! N E l S T l N G P A S S l O N A T E A D l E N O E.Projectsthatappea|
toa|readyex|st|ng,h|gh|ysupport|veandpass|onate
aud|ences e.g. projects that dea| w|th top|cs that have
strong grass roots fo||ow|ng} are far more successfu|
becausethoseaud|enceshe|psupportandpromotethe
campa|gnonbeha|foftheprojectowner.
61
s ! S T R O N G E l S T l N G N E T W O R K .Successfu|crowdfund|ng
campa|gns typ|ca||y start off be|ng promoted |n the
projectownersnetworkandspreadfromthere.Astrong
ex|st|ng soc|a| network|ng presence and network of
fo||owersmake|teas|erforcreatorsandprojectowners
to |everage the power of the soc|a| network|ng s|de
ofcrowdfund|ng.
62
s O O D A D l E N O E E N G A G E M E N T Partoftheappea||n
crowdfund|ngcomesfromtheaud|encesdes|reandab|||ty
topart|c|pate|nthedeve|opmentprocess.Oampa|gnsthat
prov|dethe|raud|encesw|thregu|arupdatesontheprojects
progressorotherpromot|ona|andfund|ngact|v|t|esre|ated
totheprojectw|||tendtobemoresuccessfu|.
64
s = O M P E | | l N G O O N T R l B T O R l N O E N T l v E S Typ|ca||y,tang|b|e
goods |.e. branded merchand|se} or pre-sa|e cop|es of
aproductarethemostcompe|||ng|ncent|vesaswe||as
advanced access to the product. n|que exper|ences
re|ated to the product and/or |ts creat|ve team are a|so
good|ncent|ves.
65
s ! O | E A R | D E | N E D F N D A | | O O A T l O N P | A N Projects
are more ||ke|y to be successfu| |f the creator c|ear|y
demonstrates why they need to ra|se the funds they
are ask|ng for and how |t w||| be used to further the|r
project. Oontr|butors need to fee| confdent that the|r
contr|but|onsw|||bewe||-used.
67
60
Whitepaper Presents Community Sourced Approach to Better CrowdFunding Campaigns, PRWeb,June12,2012,
http://www.prweb.com/re|eases/2012/6/prweb9596475.htm,Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
61
RocketHub founder Brian Meece on crowd funding,RussMart|n,Oanada.com,June12,2012,
http://b|ogs.canada.com/2012/06/12/rockethub-founder-br|an-meece-on-crowd-fund|ng/
62
RocketHub founder Brian Meece on crowd funding,RussMart|n,Oanada.com,June12,2012,http://b|ogs.canada.com/2012/06/12/rockethub-founder-br|an-meece-on-
crowd-fund|ng/,Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
63
7 Reasons Why Crowdfunding Projects Fail.Just|nKownack|.OrowdFund|ngHe|p.,January,2012.http://crowdfund|nghe|p.com/7-reasons-why-crowdfund|ng-projects-
fa||/,SomeThoughtsonK|ckstarter.Oe|c|usGameStud|os.May2012.http://www.ce|s|usgs.com/b|og/?p=446=more-446,Stakeho|der|nterv|ews.
OonductedbyNord|c|ty.MayJune,2012.
64
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
65
http://b|ogs.canada.com/2012/06/12/rockethub-founder-br|an-meece-on-crowd-fund|ng/,Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
66
http://crowdfund|nghe|p.com/7-reasons-why-crowdfund|ng-projects-fa||/,Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
67
http://www.ce|s|usgs.com/b|og/?p=446=more-446
23 Crowdfunding for the creative content industries in a Canadian Context
3.2 Benefts for the creator
crowdfunding campaigns provide producers with a number
of benefts, beyond the strict fnancial gains, |nc|ud|ng:
s ! R A l S E D P R O | | E A successfu| crowdfund|ng campa|gn for
a compe|||ng project can he|p ra|se a producers prof|e and
prov|deaboosttothe|rreputat|on.
s ! P R O v E N M A R K E T Orowdfund|ng|sagreatwayforcreatorsto
deve|opproofthattheconceptforthe|rprojecthasanex|st|ng
aud|enceandmarket.lnthecaseofanunsuccessfu|campa|gn,
|tprov|desgoodmarketfeedbackthatacerta|nconcept|snot
v|ab|e.Beyonds|mp|yreach|ngthefund|nggoa|,wh|chprov|des
one |eve| of proof, ana|yt|cs regard|ng the number of backers,
contr|butorsorp|edgesare|nva|uab|e|ntermsofest|mat|ngthe
s|ze of the projects aud|ence. lf the campa|gn fa||s to attract
attent|on, then creators have so||d market feedback that the
projectmaynothaveanaud|ence|n|tscurrent|ncarnat|on.Th|s
|s a very |mportant run-off beneft of crowdfund|ng as market
research|softenweakornon-ex|stentord|ffcu|ttoamassfor
creat|vecontentproducers.
s ! D l E N O E B l | D l N G The fund|ng campa|gn |tse|f and a|| the
promot|ona|effortsaroundthecampa|gnhavetheadd-onbeneft
of promot|ng the project |tse|f among ex|st|ng and potent|a||y
new aud|ences. ln th|s way, a crowdfund|ng campa|gn can
he|paproducerreachex|st|ngaud|ences,aswe||asbu||dand
grownewaud|encesforthe|rprojectbeforetheyevenbeg|nto
produce|t.Producersarea|soexc|tedbythed|rectd|str|but|on
potent|a| beh|nd crowdfund|ng p|atforms, such as w|th pre-
sa|es-basedmode|s.
s ! D l E N O E E N G A G E M E N T Stakeho|ders agree that one of the
most un|que add-on benefts of crowdfund|ng |s |ts ro|e as a
forumwherecontentcreatorscanengagew|ththe|raud|ences
andaud|encescanengagew|thmean|ngfu|content.Aud|ences
are |ncreas|ng|y |nterested |n the creat|on of the content they
consumeandproducersare|ncreas|ng|y|ook|ngfornewways
to engage w|th the|r aud|ences more deep|y.
68
Orowdfund|ng
fac|||tatesjustthat.Aud|encescanbothcontr|butefnanc|a||yto
aprojecttheycareabout,andengage|ntheproduct|onprocess
by fo||ow|ng progress through updates from the creators and
shar|ng feedback v|a comment features on the projects
crowdfund|ngpage.
s ! D l E N O E E E D B A O K Oneofthefo||ow-oneffectsofbe|ngab|e
toengagew|thaud|encesthroughcrowdfund|ng|sthatcontent
creators can use crowdfund|ng webs|tes to gather |mportant
creat|vefeedbackfromthe|raud|encesastheprojectdeve|ops.
For examp|e, beyond just the proof of concept feedback that
comesfromcomp|et|ngasuccessfu|campa|gn,projectowners
can gather more spec|fc creat|ve feedback from contr|butors
orotherv|s|torsaboutspec|fcaspectsoftheprojectthrougha
commentfeatureonthe|rcampa|gnpage,wh|ch|sava||ab|eon
most crowdfund|ng p|atforms. ln add|t|on, offer|ng pre-re|ease
access to content and/or the opportun|ty to beta-test content
as part of a fund|ng |ncent|ve package prov|des creators w|th
|nstant access to good market test|ng feedback data on the
project beyond just know|ng whether or not there |s a |arge
enoughaud|encethatsupportstheconceptor|dea.
69
ltprov|des
an opportun|ty for aud|ences to g|ve more spec|fc creat|ve
feedbackonvar|ousaspectsoftheproject.
s } N T E R N A T l O N A | S P P O R T F O R = A N A D l A N P R O J E O T S Orowdfund|ng
prov|desaun|queopportun|tytoattractaud|encesand|nvestors
fromaroundthewor|dtosupportOanad|anproduct|ons,thereby
expand|ngthemarketreachofOanad|an-producedcontent.Th|s
|s a very |mportant potent|a| beneft of |ncreased crowdfund|ng
effortsamongOanad|anscreen-basedcontentcreators.
70
68
Time to Join the Crowdsourcing Trend?.P|ayback.Spr|ng2012.P.13117.
69
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
70
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
24 Crowdfunding for the creative content industries in a Canadian Context
3.3 risks and Barriers for the creator
crowdfunding also comes with a number of potential risks
or barriers that might hinder the adoption of this emerging
funding model amongscreen-basedcontentcreators|nOanada.
Ther|sksandbarr|ers|dent|fedbystakeho|ders|nc|ude:
s ! W A R E N E S S Orowdfund|ng |s just beg|nn|ng to emerge as a
ser|ous|ndustry|nOanadaandassuch,themajor|tyofcontent
creators do not have a fu||y deve|oped understand|ng of the
crowdfund|ng env|ronment or how they cou|d use |t.
71
The
genera| pub||c |s even |ess aware of crowdfund|ng and do not
necessar||y know that they can support creat|ve projects they
careabout|nth|sway,|eta|onewheretheycangotodoso.
s ! $ A M A G E D 2 E P T A T l O N lfacontentcreatorstartsacampa|gn
and does not meet h|s/her fund|ng goa| or rece|ves very ||tt|e
support,th|s|saverypub||cfa||ure.There|sacerta|nmeasure
ofapprehens|onamongproducersaboutwhat|mpactth|stype
of pub||c fa||ure cou|d have on the|r reputat|on. Producers are
a|soconcernedaboutwhatcou|dhappentothe|rreputat|on|n
theeventthattheysuccessfu||ygathera|argeamountofpub||c
support for a project but are not ab|e to comp|ete |t for some
reason. S|m||ar|y, producers are concerned about not meet|ng
theexpectat|onsofthe|rsupportersoncetheproject|scomp|ete.
s = O S T A N D R E T R N O N l N v E S T M E N T Many producers are
apprehens|ve about the costs |n resources and effort that
are needed |n order to manage a successfu| crowdfund|ng
campa|gn.F|rst,therearehardcostssuchasthecostofcreat|ng
promot|ona|mater|a|e.g.apromov|deo}andthoseassoc|ated
w|th produc|ng and sh|pp|ng any tang|b|e goods |ncent|ves.
Second, there |s the t|me and effort cost assoc|ated w|th
creat|ng and promot|ng the campa|gn as we|| as the ongo|ng
effortneededtoengageandupdatecontr|butorsontheprojects
progressbothdur|ngandafterthecampa|gn.Onthef|ps|de|s
theever-presentr|skthatthecampa|gnw|||beunsuccessfu|and
thatanyt|me,effortorotherresources|nvested|nthecampa|gn
wou|dhavenoreturn.
s 3 K l | | S G A P Many producers do not have the necessary sk|||s
tocarryoutthevar|ousact|v|t|esre|atedtothecampa|gne.g.
promot|on, aud|ence engagement, fu|f||ment management
re|ated to honour|ng |ncent|ves} and wou|d need to engage
add|t|ona||nterna|humanresourcesorpayforexterna|serv|ces
justtobeab|etomanagethecampa|gn.
s } 0 P R O T E O T l O N Manylnteract|veD|g|ta|Med|alDM}deve|opers
and content producers are re|uctant to pub||c|y announce the
deta||s of a project before product|on starts due to concerns
about|deatheftandprotect|ngthe|rlPfromp|ag|ar|sm.
72
However,crowdfund|ngwou|dnotcompeted|rect|yw|thventure
cap|ta| fnanc|ng because trad|t|ona| venture cap|ta||sts vO} do
not typ|ca||y |nvest |n projects, they |nvest |n compan|es and
most content creators are us|ng crowdfund|ng for |nd|v|dua|
projects. Nor do trad|t|ona| vOs typ|ca||y |nvest |n an |n|t|at|ve at
theconceptstage,wh|ch|swherethemajor|tyofcreat|veprojects
enter a crowdfund|ng campa|gn. Furthermore, trad|t|ona| vOs
do not typ|ca||y make |nvestments of |ess than $1 m||||on, wh|ch
|s s|gn|fcant|y h|gher than the average crowdfund|ng goa| or a
creat|ve project typ|ca||y $20,000$50,000}. For most vO frms
|ook|ng for h|gher returns, h|gher |eve|s of |nvestment are more
attract|ve.lnvestmentsthatfa||under$1m||||onwou|dtyp|ca||yget
p|cked up by the bout|que vO commun|ty or ange| |nvestment
network.79Onthef|ps|de,vOsm|ghtbeneftfromacrowdfund|ng
campa|gnbecause|tcany|e|dusefu|marketana|yt|csthatcou|d
he|pva||datethecasefor|nvestmentata|aterstage.
80
Beyond the c|ear |ega| restr|ct|ons assoc|ated w|th equ|ty-based
crowdfund|ng, there are concerns among stakeho|ders about
howchangestosecur|t|es|awscou|daffectthepub||csprotect|on
aga|nst|nvestmentfraud.There|san|nherentr|skoffraude|ther
or|g|nat|ngw|thprojectownersorw|ththep|atformsandserv|ces
thathostcampa|gns.However,proponentsofthemode|c|a|mthat
crowdfund|ngactua||yencouragesgreatertransparencybecause
of the |arger ro|e that trust p|ays |n |nfuenc|ng an |nvestors
dec|s|on, thereby ma|nta|n|ng a re|at|ve|y |ow r|sk of fraud.
81
The
JOBSAOT|ntheShasanumberofprov|s|onstohe|pm|t|gate
the|ncreasedr|skof|nvestorfraud,asout||ned|nsect|on1.3.1.
There |s a|so the r|sk of un|ntent|ona| fraud wh|ch can happen
whenasuccessfu||yfundedprojectnevergetsproducedforsome
reasonorwhenthefna|productde||vered|snotqu|tewhatwas
or|g|na||yenv|s|onedandadvert|sed.
82
Furthermore,|t|scommon
that a creat|ve project never generates revenue or proft mak|ng
|tr|skytoprom|serevenueorproftsharereturnon|nvestment.
83
74
A case for crowdfunding.Ohr|st|neDobby.F|nanc|a|Post.Apr||18,2012.http://bus|ness.fnanc|a|post.com/2012/04/18/a-case-for-crowdfund|ng/.
75
A case for crowdfunding.Ohr|st|neDobby.F|nanc|a|Post.Apr||18,2012.http://bus|ness.fnanc|a|post.com/2012/04/18/a-case-for-crowdfund|ng/.
76
A case for crowdfunding.Ohr|st|neDobby.F|nanc|a|Post.Apr||18,2012.http://bus|ness.fnanc|a|post.com/2012/04/18/a-case-for-crowdfund|ng/.
77
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
78
Venture capital rejection leads to funding record.Wa||acelmmen.TheG|obeandMa||.Apr||18,2012.http://www.theg|obeandma||.com/report-on-bus|ness/sma||-
bus|ness/sb-money/bus|ness-fund|ng/venture-cap|ta|-reject|on-|eads-to-fund|ng-record/art|c|e2405552/.
79
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
80
Venture capital rejection leads to funding record.Wa||acelmmen.TheG|obeandMa||.Apr||18,2012.http://www.theg|obeandma||.com/report-on-bus|ness/sma||-
bus|ness/sb-money/bus|ness-fund|ng/venture-cap|ta|-reject|on-|eads-to-fund|ng-record/art|c|e2405552/.
81
The Crowdfunding Revolution Will Democratize Venture Investing.Kev|n|aughton.HuffngtonPost.December08,2010.http://www.huffngtonpost.com/kev|n-|awton/
democrat|z|ng-venture-cap_b_792498.htm|.
82
US: State acts to boost start-ups through Funding Portals.Ohr|ssNutta||.F|nanc|a|T|mes.Ju|y12,2012.http://www.ft.com/|nt|/cms/s/0/79363204-aff5-11e1-b737-
00144feabdc0.htm|=axzz1ypg3rmO5.
83
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
27 Crowdfunding for the creative content industries in a Canadian Context
legal consIderatIons for canadIans
usIng KIcKstarter
Whi|eKickstarterisnotaccessib|etoCanadians,
manyCanadianproducershavehostedcampaigns
fortheirpro[ectsonthepopu|arp|atform.However,
thereareanumberofconsiderationstotakeinto
accountforproducers|ookingtoaccessKickstarter.
K|ckstarter|son|yava||ab|etoprojectownerswhocomp|y
w|ththefo||ow|nge||g|b|||tyrequ|rements:
s ! R E A P E R M A N E N T 5 3 R E S l D E N T W l T H A 3 O O l A | 3 E O R l T
Number
s A v E A 5 3 S T A T E l S S E D l D E N T l | O A T l O N E G D R l v E R S
||cense}
s A v E A 5 3 B A N K A O O O N T A N D A M A J O R 5 3 O R E D l T O A R D
ordeb|tcard
s A v E A 5 3 A D D R E S S
The e||g|b|||ty requ|rements ||sted above ex|st pr|mar||y
|n order to comp|y w|th the requ|rements of Amazon
Payments,K|ckstarterspaymentprocess|ngpartner.
84
84
K|ckstarterannounced|near|yJu|y,v|aTw|tter,thatprojectownersbased|nthe
Kwou|dbee||g|b|etohostprojectsonthep|atformbeg|nn|ng|nFa||of2012.
85
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
86
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.May-June,2012.
28 Crowdfunding for the creative content industries in a Canadian Context
4.2 the creative content funding ecosystem
Asare|at|ve|ynewphenomenon|nOanada,thererema|nsagreat
dea| of amb|gu|ty about crowdfund|ng and what the broader
fnanc|a||mp||cat|onsm|ghtbeforproducerswhow|shtoaccess
bothcrowdfund|ngandothermoretrad|t|ona|sourcesoffund|ng
for the|r projects.
87
Many of the stakeho|ders |n the fund|ng
ecosystemarecurrent|ye|therrev|ew|ngthecrowdfund|ng
quest|onorus|ngawa|tandseeorcase-by-caseapproach.
However, |n the absence of c|ear pos|t|ons and gu|de||nes to
fo||ow, producers who are a|ready access|ng funds through
crowdfund|ngcampa|gnsdonotknowhowtoreportthesefunds
|n the|r fund|ng or tax cred|t cert|fcat|on app||cat|ons. As such,
theycou|dbeatr|skofpena|t|esshou|dtheybeaud|tedata|ater
dateand|t|sfoundthatcrowdfund|ngdo||arswerenotreported|n
theappropr|atemanner.
The| ssuesre| at| ngtohowcrowdfund| ng| mpactscontent
creators access to other forms of fund|ng |s on|y app||cab|e to
producers who wou|d be access|ng both trad|t|ona| and non-
trad|t|ona|sourcesoffund|ng.However,assect|on2.1d|scusses,
thoseprojectsandproducersthatarebestsu|tedtocrowdfund|ng
may be the very projects that cannot access trad|t|ona| fund|ng
sourcestobeg|nw|th.
That be|ng sa|d, stakeho|ders d|d |dent|fy key cons|derat|ons
or potent|a| |mp||cat|ons that shou|d be noted |n cases where a
producerm|ghtwanttoaccessbothcrowdfund|ngandtrad|t|ona|
fund|ngsources.
4.2.1Oert|fedlndependentProduct|onFundsand
otherfund|nggrants
Ourrent|y,therearenoc|earrestr|ct|onsontheuseofcrowdfund|ng
|n terms of how |t |mpacts a producers e||g|b|||ty for fund|ng
grants.
88
Mostfund|ngbod|escurrent|ya||owproducerstoengage
|n crowdfund|ng w|thout |t |mpact|ng the|r e||g|b|||ty for fund|ng.
However,manyarea|sowa|t|ngtoencounteranapp||cat|onthat
c|tescrowdfund|ng|nordertomakeadec|s|onforhow|tw|||be
treated.
89
87
Time to Join the Crowdsourcing Trend?.P|ayback.Spr|ng2012.P.13117.
88
Time to Join the Crowdsourcing Trend?.P|ayback.Spr|ng2012.P.13117.
89
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
29 Crowdfunding for the creative content industries in a Canadian Context
4.2.2Prov|nc|a|andFedera|TaxOred|ts
thereremainsagreatdealofambiguityaroundhow
crowdfunding might affect a producers eligibility and
access to provincial and federal tax credits.
lnfact,the canada revenue agency is currently conducting
a revi ew and exami ni ng questi ons rel ati ng to how
crowdfunding revenues should be treated for the purposes
of production tax credits.
90
ln the meant|me, prov|nc|a| and
federa|taxcred|tadm|n|stratorsarewa|t|ngforthedec|s|onbefore
theytakeact|ontochangethe|rowncert|fcat|ongu|de||nes.lt|s
unc|ear whether or not tax cred|t adm|n|strators have rece|ved
app||cat|ons from producers who have accessed crowdfund|ng
as they may have accounted for that revenue |n any number of
ways on the|r app||cat|ons e.g. as ass|stance, as a producer or
d|str|butorarmcontr|but|on,asrevenuesfromsa|es,etc}.
91
Thekeycons|derat|onsregard|ngcrowdfund|ngwhen|tcomesto
taxcred|ts|nc|ude:
s ! S S l S T A N O E } F T H E = 2 ! O O N O | D E S T H A T O R O W D F N D l N G D O | | A R S
ra|sed v|a a Donat|on Mode| campa|gn shou|d be reported as
ass|stancemuch||kerece|v|ngfund|ngthroughafund||ketheBe||
Fund},thatamountwou|dbecomededuct|b|efromtheprojects
e||g|b|e expenses.
92
ln add|t|on, the ORA cou|d conc|ude that
fundsra|sedv|aa|end|ngMode|crowdfund|ngcampa|gnwh|ch
takes the form of a forg|vab|e |oan wou|d a|so be cons|dered
ass|stanceforthepurposesoftaxcred|tca|cu|at|ons.
s 2 E v E N E S F R O M T H E E O H A N G E O F G O O D S A T A F A l R M A R K E T v A | E
TheORAcou|dconc|udethatunderaDonat|onMode|orpre-
sa|e-based|end|ngMode|,theexchangeof|ncent|vesorpre-
so|dcop|esofaproductfa||sundertheprov|s|onofexchange
of goods at fa|r market va|ue. ln th|s case there wou|d be no
|mp||cat|ons regard|ng e|ther e||g|b|||ty or ca|cu|at|ons for tax
cred|ts.Norwou|dtherebeany|ega||ssuesundersecur|t|es|aws
becauseth|swou|dbecons|dereda|eg|t|mateexp|o|tat|onofthe
producers r|ghts for money revenue}. However, th|s part|cu|ar
pos|t|oncou|dbecomecomp||cateddueto|ssuessurround|ng
how the fa|r market va|ue of certa|n |ntang|b|e |ncent|ves e.g.
acknow|edgement |n the cred|ts, a d|nner w|th the creat|ve
team,acharacternamedafterthecontr|butor}|sascerta|ned.
93
lntang|b|e|ncent|vesare|nherent|yd|ffcu|ttova|uate.Moreover,
therem|ghtbesomegreyareasaboutthetruefa|rmarketva|ue
of goods |n the crowdfund|ng wor|d, wh|ch cou|d d|ffer from
the va|ue of the same goods |n a reta||, e-commerce or d|g|ta|
d|str|but|oncontext.
94