CMF reports on the promise and pitfalls of crowdfunding

Copied from Media in Canada - Money

The Canada Media Fund is taking notice of Kickstarter, the American crowdfunding platform, as the the industry fund unveils research into the alternative for traditional film and TV funding sources.

The CMF on Thursday released a new study titled Crowdfunding in a Canadian Context: Exploring the Potential of Crowdfunding in the Creative Content Industries.

“Crowdfunding offers the additional advantage of direct audience building, audience engagement and market testing with the ability to leverage social-media to access those markets—all things that lend themselves well to projects that need to access niche markets or want to harness the support of a strong grass-roots movement,” the Nordicity report concluded.

At the same time, the study showed caution towards crowd-funding, given the potential for scam artists to exploit producers working on shoe-string budgets and looking to tap new financing sources.

“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 CMF-commissioned report stated.

“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,” it continued.

Crowdfunding has already taken off in Canada, with platforms like Haricot, Smallchange, Touscoprod, and more Hot Docs has embraced the concept.

The CMF ordered the study to offer an overview of crowdfunding to Canadian producers, as well as provide micro analysis on current practices and regulations in Canada.

The CMF study uncovered three Canadian crowdfunding models: a donation in exchange for a small reward and no expectation of repayment, financial gain or ownership; a lending model where contributors expect a repayment;  and an investment model where investors purchase securities.

“All three models have their advantages and disadvantages and some are better suited to the creative content industries than others,” the report argued.

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