Kickstarter Helped Raise Nearly $100 Million In 2011… But There Are No New Business Models?

from the just-saying... dept

For years, we’ve been hearing how the new business models we talk about aren’t really “big enough” or that they’re just “exceptions” to the rule. Yet, every year we see more and more success stories involving those kinds of business models. Kickstarter, for example, has been quite successful building a platform that empowers exactly the kinds of business models we’ve described for nearly a decade — and it has found tremendous success doing so. It just posted some stats for 2011, showing that just under $100 million was pledged into projects this year (with approximately $84 million going into projects that were actually funded).

Perhaps most interesting of all? The two areas of the entertainment industry where we repeatedly hear the loudest cries of “there are no new business models!” — movies and music — were the two largest areas on Kickstarter. An impressive $32,473,790.40 was pledged for films and video — leading to 3,284 successful projects, involving 308,541 backers. For music, it was $19,801,685.21 pledged for 3,653 successful projects, involving 260,178 backers. The 2011 numbers roughly tripled the 2010 numbers, so this kind of thing is clearly growing quickly. And, remember, Kickstarter is just one company in this space, which has multiple other companies — such as IndieGogo and PledgeMusic — offering similar platforms.

And yet, we’re told that there’s no way to make money and that fans just want stuff for free? Perhaps it’s time to rethink some of those assumptions…

But the really key thing here is exactly what we’ve said all along: new business models develop. They always do. And part of allowing those new business models to develop is letting new startups, services, platforms and tools develop to meet the needs of the market. Kickstarter clearly meets a need. Things like SOPA and PIPA make it more difficult to start such a company or build such a platform these days (which is why both Kickstarter and IndieGogo have come out strongly against these bills). Let these new services live, and watch new business models succeed (and with them, all sorts of artists and creators).

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Companies: indiegogo, kickstarter

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Comments on “Kickstarter Helped Raise Nearly $100 Million In 2011… But There Are No New Business Models?”

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52 Comments
Joe Publius (profile) says:

Re: Re: Re:

True.

What I really like about this information, is the sheer amount of content thats being created through Kickstarter that would otherwise be:

– Underfunded.
– Self-funded at what could be a painful expense.
– Funded by middlemen who would likely insist on owning the content.
– Not created at all.

Never in human history has it been this easy to create content (art/knowledge/whatever) with a shot at getting the whole world to experience it. It’s really, really cool.

:Lobo Santo (profile) says:

Old World Blues

Fact: If I didn’t learn about it economics, it’s not a legitimate business model.[/snark]


Actually, I dig kickstarter, awesome idea carried to awesome execution. Moreso some of the stuff that’s come out of it–like the “GameTel” (bluetooth android EZ gaming-pad attachment thing) and the PumpTire (self inflating bicycle tire). One of which is one production, the other is not..

But yeah, super awesome.

Anonymous Coward says:

The only “business model” noted above is that of VC-equivalents raising money for projects that the classical VC would pass upon. VCs find investors, and the alternative fund raising mechanisms are a close analog. Obviously, there is at least one key difference. Whereas VCs can be perceived as demanding one’s “soul”, it does not appear the same can be said of the alternative.

Mike Masnick (profile) says:

Re: Re:

The only “business model” noted above is that of VC-equivalents raising money for projects that the classical VC would pass upon. VCs find investors, and the alternative fund raising mechanisms are a close analog. Obviously, there is at least one key difference. Whereas VCs can be perceived as demanding one’s “soul”, it does not appear the same can be said of the alternative.

1. You don’t seem to recognize the difference between an investment and a pre-purchase or pay-for-support — despite them being world’s apart.

2. You don’t seem to understand business models.

Anonymous Coward says:

Re: Re: Re:

I disagree with both of your comments.

Re classical VCs vs. the financing models noted in your article, in each instance funding is being secured in order to finance a project. Call it whatever you will, but I do not believe it can be denied that they each serve the same purpose…raise needed capital. Perhaps motivations are different in some cases, but that alone does not change the fundamental purpose of each approach.

I well understand the business model you describe in your article. My comment was simply to make a general observation that new means of financing relates to third party projects only in the sense money is now being raised from alternate sources.

nasch (profile) says:

Re: Re: Re: Re:

Re classical VCs vs. the financing models noted in your article, in each instance funding is being secured in order to finance a project. Call it whatever you will, but I do not believe it can be denied that they each serve the same purpose…raise needed capital.

VCs get equity and kickstarter participants do not, correct? That seems like a pretty major difference right there.

nasch (profile) says:

Re: Re: Re:3 Re:

Perhaps you missed my comment about selling one’s soul, the likely outcome of virtually all classical VC investments in a project.

No, I just didn’t realize you were using “soul” to mean equity.

Other than that, however, there is fundamentally no difference other than different “banks” are involved, each having its own terms and conditions.

So other than that really major difference, they’re the same. OK. 😉

Mike Masnick (profile) says:

Re: Re: Re: Re:

Re classical VCs vs. the financing models noted in your article, in each instance funding is being secured in order to finance a project. Call it whatever you will, but I do not believe it can be denied that they each serve the same purpose…raise needed capital. Perhaps motivations are different in some cases, but that alone does not change the fundamental purpose of each approach.

It’s not that motivations are different, it’s that the entire structure is different. Look, there are all sorts of ways you can get money. For example: equity, debt, as payment.

Those are three very different things. VCs do equity (some do debt, but that’s besides the point). But this is as payment. Totally different.

I well understand the business model you describe in your article. My comment was simply to make a general observation that new means of financing relates to third party projects only in the sense money is now being raised from alternate sources.

Okay, now you’re just being stubborn and stupid at the same time.

Look, at the end of the day, ANY business model is about getting money. For you to say “that’s not a new business model because it’s about getting money” makes you look stupid. If you don’t want to look stupid, perhaps don’t say stupid things.

Anonymous Coward says:

Re: Re: Re:2 Re:

Yes, it is a “payment”, but then again so is every scheme for raising capital to help run a business project. The primary difference is the consideration one receives for writing a check. Classical VCs, within which I include, with some modifications, studios and labels, typically include things such as equity, shareholder agreements covering all manner of subject matter, participation (if not outright control) of selecting key executives, etc. The above model induces investors via offerings of a different nature.

Importantly, I am not at all leveling any criticism at the Kickstarter model. Quite the contrary. It enables the participation of a wider financial base than is otherwise the case with the classical VC model.

I admit that my comparison is a generalization associated will all investment schemes, but where we do differ is your generalization that legislation such as SOPA and PIPA (or whatever they eventually morph into) somehow makes it more difficult for a group like Kickstarter to get started, and as a consequence of which you note that it and another company do not support the pending bills.

As for startups far removed from what Kickstarter is all about, I remain of the opinion that legislation such as the pending bills would represent but a minor pertubation that would be directed at sites who predicate their business plan of plainly infringing activity. As for others, legislation such as the pending bills would simply not be applicable. To say otherwise is, in my view, an overstatement that many are using to create an unwarranted and unnecessary moral panic.

These are my observations and opinions. Please note I have not made any comments casting personal aspersions, and would greatly appreciate reciprocity.

nasch (profile) says:

Re: Re: Re:3 Re:

where we do differ is your generalization that legislation such as SOPA and PIPA (or whatever they eventually morph into) somehow makes it more difficult for a group like Kickstarter to get started, and as a consequence of which you note that it and another company do not support the pending bills.

Why do you suppose they’re against it?

As for others, legislation such as the pending bills would simply not be applicable.

Do you have some reason to think SOPA will not be abused as the DMCA has been?

Anonymous Coward says:

Re: Re: Re:4 Re:

I do not know why they are against it. Certainly there is nothing in the bills placing them at risk in any meaningful sense of the word. Perhaps they are concerned because some future project may run into difficulties downstream if it is based upon a business model that might be effected by the legislation. Of course, this is just conjecture. Only the sites know for sure.

You note that the DMCA is abused. I note that on sites such as this it is regularly said that the abuse of the DMCA is quite substantial. I wish I had a copy of a study I read some time back by a law professor who had studied the DMCA and determined that the abuses complained of were very limited, and nowhere near the magnitude that many seem to believe is the case. I will keep looking, and post a link to his paper should I find it.

nasch (profile) says:

Re: Re: Re:5 Re:

I wish I had a copy of a study I read some time back by a law professor who had studied the DMCA and determined that the abuses complained of were very limited, and nowhere near the magnitude that many seem to believe is the case. I will keep looking, and post a link to his paper should I find it.

That would be great. I’m sure the great majority of DMCA requests are legitimate, but that doesn’t mean there isn’t a problem. Some abuse of any law is inevitable, but if the law is written in such a way as to allow more abuse than necessary, then it’s a problem. And SOPA is written very vaguely, allowing all sorts of opportunity for abuse.

Anonymous Coward says:

Re: Re: Re:6 Re:

I believe what you are trying to say is that laws should be written to reduce the likelihood of abuse, and as to those who unmistakeably and deliberately abuse the law, there should be meaningful penalties. Of course, I am inclined to believe this should be a two way street because abuse is not limited to just some rights holders.

ChurchHatesTucker (profile) says:

Just a note

The two areas of the entertainment industry where we repeatedly hear the loudest cries of “there are no new business models!” — movies and music — were the two largest areas on Kickstarter.

Kickstarter’s mission is to fund “creative endeavors.” While that definition is often stretched (one project was a solo circumnavigation of the globe) it’s not surprising that movies and music top the list. (I helped fund JourneyQuest’s second season, myself.)

Anonymous Coward says:

Great stuff, but...

Legitimate question here, not a troll or anything like that:

Isn’t this just crowd-sourced commissioning? I agree it’s cool and I’m ecstatic that it’s becoming a hot trend and folks are using tools like this, but I don’t know if I’d be inclined to call it “new”. Certainly “updated”. i.e. we have web-based markets where people can hunt for a commission to support and artists can submit ideas for commission.

nasch (profile) says:

Re: Great stuff, but...

Isn’t this just crowd-sourced commissioning? I agree it’s cool and I’m ecstatic that it’s becoming a hot trend and folks are using tools like this, but I don’t know if I’d be inclined to call it “new”.

Had there ever been crowd-sourced commissioning before these web sites started up a few years ago? I think it’s pretty new.

Anonymous Coward says:

Re: Re: Re: Great stuff, but...

Perhaps you should try this on for size. At the macro level, movie studios and record labels are in large measure the functinal equivalent of classic VCs.

I say macro only because the studios and labels provide more than just investment capital. They also have on hand facilities, equipment, services, and other necessities for movie and music production.

PaulT (profile) says:

Re: Great stuff, but...

The certainly were “crowd sourced” movies and music before Kickstarter. I remember reading horror magazines in the early 90s and seeing people advertising for people to pay ?500 to try and get low budget movies funded in return for a producer credit, for example.

But as with everything else in this life, while the idea itself isn’t 100% unique, the execution is what matters. The point isn’t that Kickstarter are doing something that has never existed in the history of mankind, but they are successfully helping independent artists from achieving their goals with funding from fans in a way that benefits both, all without having to sign away their rights.

PaulT (profile) says:

Re: Re: Re: Great stuff, but...

To be fair, that’s from memory and I’m not even sure if the funding was successful. I’ll have to dig up some back issues and check them out over the weekend, perhaps. But yeah, it was a neat way to get horror fans involved in raising funds.

I’d have donated myself if I had the money at the time or could have gone a more granular route a la Kickstarter but, alas, the student me didn’t have ?500 lying around…

John Doe says:

I wish I had something to kickstart

I love kickstarter. I have never pledged to it and haven’t even looked at it much, but I love that people are funding people.

I do wonder if some of it is a fool and his money though. For example, there are some guys who far, far exceeded their funding request to create parachute fabric hammocks. There are already lots of hammock makers and most of them sell for half the price these guys are selling for. They even imitate the color patterns of the existing manufacturers. If there was some new innovation here, I could see why they were so successful, but there isn’t except maybe their tie to charity. But as long as you get what you pay for and you are happy with the price and the product then to each their own.

Violated (profile) says:

A New World

Little makes me more happy than to see people getting active and reshaping the World while they create. To raise $100 million is very impressive considering that most Net citizens have yet to hear about them.

So they funded 3284 film and video projects which works out as $9888.49 average per project. Let us hope they can pony up some serious funding for very serious people with very awesome projects.

From what I can see the market still has a long way to reshape and to get the right people doing the right jobs to benefit the whole community.

One point of happiness I enjoy these days is Imgur. This website clearly shows a free sharing culture. What is most interesting is that when people upload a photo others with impressive photo editing skills can edit these to make the photos more enjoyable for the benefit of the whole community.

This reflects key attributes of the new market where people join the community and offer their skills simply because they want to where them being part of that community provides its own rewards.

My only concern is that it is a long, long, long way to go before the Internet can turn out something like Avatar. Let us keep in mind one fact though when this $9888.49 average is not far below the budget for the first Paranormal Activity movie.

So what the Internet most needs now is a creative genius to produce a movie of like-standard that uses the Internet to become viral. Then the World and Congress would sit up and take notice.

Scott@DreamlandVisions (profile) says:

Re: A New World

Take a look at the just completed and going on tour next month fan-funded movie, Iron Sky. From everything I’ve seen, it’s on part with most mid budget sci-fi comedies and better than most of what comes out of the Syfy channel now.

There will always be room at the top of the budget for the movies that push the very bleeding edge of film making technology. Look at the history of ILM, Pixar, BlueSky, Weta Digital and others.

That same tech very rapidly moves into the realm of affordability to the garage production company, usually within 12-18 months, if not sooner.

As for budgets, keep in mind that a huge chunk of the hundreds of millions goes to actors, marketing and other such costs. With alternative means of marketing, alternative casting, etc.. you can create something with the visual and production quality of the big budgets without spending the big budgets.

Scott

PaulT (profile) says:

Re: A New World

“My only concern is that it is a long, long, long way to go before the Internet can turn out something like Avatar”

Well, to be honest, that isn’t necessarily a bad thing. Avatar, quite frankly, was an impressive tech demo but little else in plot, characters, etc. Keep those movies for the corporations, independently produced movies tend to shine when they aren’t trying to emulate those who think that throwing money at the screen makes a good movie. While effects movies can be great, they’re not the only thing out there (and even so, I’d personally rather watch a Monsters or Splinter than Battle Los Angeles for example).

“Let us keep in mind one fact though when this $9888.49 average is not far below the budget for the first Paranormal Activity movie.”

Indeed. For all the talk of $100 million dollar movies, the ones that tend to be most profitable (as in percentage return on investment, rather than sheer dollar return) are the low-to-mid range genre pics. PA and Avatar are probably outliers on either end of the spectrum, but at low budgets all a producer needs is a couple of medium-to-large hits to be able to fund future project and make a healthy profit in return. Much better than ploughing ridiculous amounts of money into a film that would have to become the highest grossing of all time to make a profit (a gamble that happened to pay off for Avatar, but could have gone so wrong…)

Kick Push says:

Re: Re: A New World

But don’t forget that Avatar didn’t win the Academy Award — The Hurt Locker did. 🙂 Not only was it an indie flick made with a microscopic budget and no-name actors, compared to J-Cam’s B.S. CGI-fest but… it was directed by his ex-wife. Oh, see, can you say PWN3D!!!

Rumor has it J-Cam has a documentary about this ordeal coming out… called The Butthurt Locker. XD

By the way, speaking of no more original content, they’re re-releasing Titanic in 3-D for the 100th anniversary of the actual event. Maybe this time they’ll throw Celine Dion off the ship first. XD

Sarah (user link) says:

Kickstarter connects investors emotionally to products.

I’ve only invested in two Kickstarter projects, neither more than 20 bucks each, and I can say that I have a definite feeling of pride and personal connection to each of these projects (both documentaries). I’m much more emotionally invested to the end result knowing that I helped pay for its production than if I had simply found and purchased a finished product — if businesses want brand loyalty, this is an incredible phenomenon to pay attention to!

Suzanne Lainson (profile) says:

Follow along with the comments on the article.

In the article comments, it is pointed out that although $100 million was pledged, that amount included projects where the goal was not met, and none of the pledges for those projects were collected.

Elsewhere in the comments, someone from Kickstarter said “84% of dollars pledged on Kickstarter are eventually collected,” which seems to suggest that even though only 46% of projects are successful, they account for 84% of the total amount of money pledged. At any rate, it’s more like $84 million actually passing through Kickstarter rather than $100 million.

I think Kickstarter is great, so I’m not pointing this out to suggest any problems. I just think it is useful to have an accurate understanding of the numbers.

Anonymous Coward says:

I will NOT contribute to fund the development of a song I have never heard. This business model might work for some people, but it’s not the way I want to invest my money. I prefer to hear the song before I spend money on it. Kickstarter is great for some people and I would contribute to some projects that help bands I know, but not necessarily to create a song I have never heard.

I don’t think anyone is for limiting options. You dont see the RIAA trying to shut down Kickstarter. Who are you quoting saying that alternative business models don’t exist? They are ALTERNATIVE business models because they are outside the norm.

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