Shockingly, Kickstarter Doesn't Work For Every Movie (Psst: Neither Does The Old System)

from the pointless-articles dept

Internet contrarian Evgeny Morozov has built something of a career out of being the online curmudgeon du jour when it comes to being skeptical about those who see benefits and opportunity on the internet today. So it comes as little surprise that he's now turned his "hype deflater ray" on Kickstarter, in an article for Slate that tries to bash Kickstarter for not funding every possible movie. I'm not joking. That's about the extent of the critique. He cites a study that finds that certain types of movies do well on Kickstarter (and other similar platforms), while others don't. Uh. Yeah.

...this revolution has a few mitigating circumstances. First, Kickstarter might produce many new documentaries, but the odds are that those documentaries will be of a very particular kind (this critique also applies to other sites in this field like indiegogo.com, sponsume.com, crowdfunder.co.uk, pledgie.com). They are likely to be campaign and issue-driven films in the tradition of Super Size Me or An Inconvenient Truth. Their directors seek social change and tap into an online public that shares the documentary's activist agenda. A documentary exploring the causes of World War I probably stands to receive less—if any—online funding than a documentary exploring the causes of climate change.

I see. And does the "old" system of Hollywood regularly make documentaries exploring the causes of World War I? I'm really not sure I understand how this is a criticism at all. Unless a platform can fund any and all types of movies, it's not really that big of a deal? Under those conditions, nothing is particularly good. Basically, what this paragraph seems to argue is that, "gee, Kickstarter is good at funding projects that lots of people want to see, but not so good at funding projects that people aren't as interested in." I'm not sure that's a critique. It seems to be the purpose of the site itself.

Second, some films require significant startup costs (think drama-documentaries or history movies) or involve considerable legal risks that may be hard to price and account for. Say you are making a film that includes an undercover investigation of the oil industry. When you have the BBC's lawyers backing you up, you'll probably take many more risks than when you are relying on crowdfunding. But if Kickstarter is your platform of choice, you'll probably forgo venturing into the thorny legal issues altogether.

I'm curious to know if there's any actual evidence to support this argument. One could just as easily claim that when your project has the backing of a big corporation with liability-averse lawyers, you're a lot less likely to be allowed to take risks, than when you rely on crowdfunding. I don't know which is true (though having spent too much time around movie industry lawyers, I'm pretty sure my statement is a hell of a lot more accurate than Morozov's), but where is the actual data to support this bizarre claim?

There are further complaints that seem equally silly. For example, Morozov points out that someone raised money on Kickstarter to help get his film on physical screens in movie theaters -- and that's somehow proof that Kickstarter isn't that special, since the "old" way of showing a movie is still involved. I'm at a loss as to how any of this is mutually exclusive. There is nothing inherent to Kickstarter that says if you use it, you can only do things online. What's wrong with using it to show a film in theaters?

All in all, this seems a lot like Morozov set up what he thinks Kickstarter should be about -- and then knocked that down. In the logical fallacy world, that's known as a strawman.

Filed Under: crowdfunding, documentaries, movies, popularity
Companies: kickstarter

Unfortunate: Kickstarter's Overaggressive Reaction To DMCA Notices

from the could-be-handled-much-better dept

Tim K alerts us to an interesting story at Wired concerning how Kickstarter handles DMCA takedown notices. The answer: not well. It seems to take DMCA notices at face value... and then immediately make the project disappear. It does not put up a notice that the project was taken down due to a DMCA notice. It does not alert backers of the project. It does not make it easy for the project owner to alert the backers of the project, or to accelerate the counternotice process. This is unfortunate.

While the story mentions that Kickstarter has disappeared at least 5 projects due to DMCA takedowns, the one it focuses on is a very recent one -- a project by a new design company called Vinted Bags, makers of interesting vintage-style leather goods (the same business my grandfather was in -- though, when he did it, the products weren't "vintage"). Vinted had put up a Kickstarter project that blew past its target, and seemed to get plenty of attention. And then, just hours before it was funded, it disappeared, replaced with a page that says: "Sorry, this project is no longer available."

This is the same Kickstarter who also claims:

Projects are not closed or taken down, they remain on site for reference and transparency.

For the same reasons, projects cannot be deleted, even if they were canceled or unsuccessful.

Except, apparently, if someone files a hugely questionable DMCA takedown... The Vinted team provides some troubling background info on its own site. First, it notes that two Vinted designers did an unpaid internship with a bag company, where they worked and learned for a few months, considering the founder of that company to be a mentor. Months later, after that internship had ended, they founded Vinted. They worked on that for a while, and it was only once the Kickstarter project took off and got attention that suddenly the legal threat showed up:

Then we received a letter from a law firm; a cease and desist letter from the mentor with threats to sue. We were very surprised. It consisted accusations of infringement from the mentor. He laid claims to a number of our designs such as our website utilizing a top navigation bar, our photo of the designer operating a sewing machine, etc.

Note that there are no accusations concerning the products themselves. While Vinted doesn't name the guy, the Wired article names Spencer Nikosey, who runs Killspencer. Looking over their products, there doesn't seem to be any copying there. While there are a few similar bags, they are pretty standard and Vinted's are distinguished by their use of leather patches. In terms of website design, there are some similarities, but nothing that should come close to meeting the qualifications to be copyrighted (remember, copyright covers the actual expression, not the idea). Ditto a photo of the designer operating a sewing machine, which is obviously not infringing. Even if the ideas are similar, that's not infringement.

And yet... Kickstarter took the project down. Again, I'm having trouble understanding why it would do so. You might be able to make an argument that if Spencer Nikosey had claimed that the products themselves were infringing, Kickstarter should take it down -- but even then, there should be a clear notification from Kickstarter to its users about what happened, as well as a notice on the site (a la YouTube) highlighting why the project no longer existed.

But, in this case, even that doesn't apply, because there is no infringement in the product. Instead, the concerns appear to be about web design and how the company is presenting itself. But Kickstarter doesn't host Vinted's website. And if there was concern about certain images, at most, Kickstarter should just remove the image in question, rather than the entire project. The whole thing seems quite crazy and a case where Kickstarter both could have and should have stood up for itself, for Vinted and for its users, and told Nikosey "too bad." Instead it pulled the project.

Vinted has filed a counternotice, and Kickstarter passed it on to Nikosey. If Kickstarter is following the DMCA counternotice process, it should put Vinted's project back online on September 27th -- unless Nikosey goes to court and files a lawsuit against Vinted, seeking an injunction barring the return of the campaign. Of course, Kickstarter could also realize that the original takedown appeared questionable and put the campaign back. What's not clear, however, is how that would work. There were just a few hours left in the campaign before the plug was pulled. Would they put it back with a few more hours? A few extra days? Or would they just charge those who bid? Hopefully they can put it back, and didn't just delete the whole thing.

Looking over the details, it's difficult to see this as anything other than yet another in a long line of unfortunate examples of companies or individuals using the DMCA to stifle competition, rather than for any sort of legitimate purpose. That Kickstarter is complicit in this process is unfortunate, because it need not be. There are better ways to handle such situations and it's a shame Kickstarter has chosen not to do so.

Filed Under: bags, counternotic, crowdfunding, dmca, takedowns
Companies: kickstarter, killspencer, vinted bags

Kickstarter Introduces New Rules To Try To Limit Disappointment

from the some-good,-some-bad dept

There have been a few stories of late about the possibility of backlash over failed Kickstarter projects. After all, for all the cool things about Kickstarter, anyone investing in a project there is taking a risk, and some of that risk leads to dashed expectations. Kickstarter has apparently been taking those concerns quite seriously, and issued some rule changes directed at hopefully limiting the disappointment factor for supporters of physical products, mainly by doing more to highlight the risks and current state of the offerings.

New projects will be required to detail what the risks and challenges of the project are, and how they intend to overcome them. It should be pretty interesting to see how those sections turn out. To be honest, I could actually see that being really useful for people behind these projects, as it's not uncommon for enthusiastic creators to not even want to confront the risks and challenges they're facing. Forcing them to do so will hopefully lead to more realistic assessments of what can be done.

The other rule changes seem a bit strange to me, and I'm not sure they'll be as effective. The first is to ban renderings or simulations of products:

Product simulations are prohibited. Projects cannot simulate events to demonstrate what a product might do in the future. Products can only be shown performing actions that they’re able to perform in their current state of development.

Product renderings are prohibited. Product images must be photos of the prototype as it currently exists.

I can certainly understand why they're doing this, as it will clearly give a much more realistic picture of where things are at the moment. But it seems like requiring renderings and simulations to be clearly marked as such might be a more effective solution -- along with showing what the actual current state of the technology is. Since many of these projects need money to finalize development, it seems fair to show what they intend the final product to look like.

The other ban is on offering multiple quantities of a reward, unless it really only makes sense that way (like where you need a pair of devices to make something work). That's to reinforce the idea that this isn't a "store" for pre-buying things, but to really get people to invest in the project itself. While it does often feel that projects got a bit lazy with upper tiers that were little more than "5 of x," I'm also not sure that this one really makes that much sense. Kickstarter defends the decision this way:

The development of new products can be especially complex for creators and offering multiple quantities feels premature, and can imply that products are shrink-wrapped and ready to ship.

I understand the line of thinking... but I could see that taking away value from potential buyers who are willing to take the risk and buy in on a product early, where they'd like multiple quantities.

Either way, it's fascinating to watch how Kickstarter continues to evolve -- and to note that the company (as it has for a long time) seems very keen on listening to what people are saying, and figuring out reasonable ways to avoid any problems.

Filed Under: crowdfunding, products, rules
Companies: kickstarter

And... The Bureaucrats Begin Spreading FUD About Crowdfunding

from the run-for-your-lives dept

We've been waiting patiently for quite some time now to see the SEC's "rules" for equity crowdfunding. As you hopefully recall, earlier this year, the JOBS Act became law, and one part of that was the legalization of certain forms of crowdfunding for equity (i.e., ownership of a company). You're probably already familiar with crowdfunding for things like pre-sales. And you may be familiar with things like crowdfunding loans, via services like Prosper and LendingClub. The JOBS Act is supposed to enable a different form of crowdfunding: for equity investments. Thus, in theory, a startup could not just let people pre-pay for a product they're developing, but could also actually purchase a tiny bit of stock in a company. Other countries already have this, but in the US it went against SEC regulations concerning the hoops you have to jump through to offer any of your equity to the public, rather than just a smaller group of accredited investors.

There's been a fair amount of talk about this effort, and a bunch of companies chomping at the bit to get into the market once crowdfunding for equity is officially in place. The main holdup? The SEC. As part of the law, the SEC is supposed to put forth rules for how such crowdfunding can work. But the SEC made it quite clear before the law passed that it didn't like this idea -- not one bit. So I've been quite curious to see what rules it would eventually put out... and so far all it's done is keep stalling. The rules were supposed to come out yesterday (which was already postponed from the original date), but instead, the SEC pushed things back another week.

While everyone waits for the SEC rules, various state securities regulators, in the form of the North American Securities Administrators Association (NASAA), are ramping up the FUD about such equity crowfunding. They released a report on the top investment scams... and crowdfunding in general is near the top of the list. They seem especially worried that the space is quickly going to be overcome by fraud:

"The number of entities out there already pitching themselves as crowdfunding entities online has risen in a significant fashion," said Matt Kitzi, NASAA Enforcement Section Chair and Missouri Securities Commissioner. "Just look at web domain names: it has gone from a couple hundred to well over 1,600 in the past year. They are staking up a position to enter crowdfunding market. There will be a lot more to come on this."

In early in August, the Massachusetts Securities Division charged a Lowell, Massachusetts man for a crowdfunding scam, bilking 20 investors who thought they were investing money in a gaming site of $153,396.

Secretary of the Commonwealth William Galvin, who brought the case, wrote to the SEC urging regulators not to let the JOBS Act changes become a tool for financial fraud and abuse. "Longstanding problems in the markets for small and speculative stocks show the pitfalls of relying on the wisdom of crowds."

Here's the thing: there are always scammers out there. And that's going to be a big part of the challenge for any of the platforms that are jumping into the equity crowdfunding space to deal with. They're going to have to distinguish themselves by how they enable trust between buyers and sellers and how they prevent fraud. But, some fraud is going to happen -- just as some fraud is always going to happen in just about any market. That doesn't mean we don't let the market itself develop.

In the end, I'm guessing that the SEC rules will be fairly strict, and may limit this kind of market. Also, contrary to some expectations, I doubt that many will see this as a true replacement for angel or VC financing. It seems like the sort of thing that will likely be more useful for small businesses (such as local businesses) rather than traditional high growth enterprises which are the kinds of "startups" that usually attract angel and venture money. Surely, some people will set up scams and get tricked. But there have been scams in the startup world for ages, and there are likely already some scams that have made it through existing crowdfunding platforms. But that's the nature of risk. Sometimes you lose.

While most people focus on how this will compete with angels and VCs, I'd think that it's much more a form of competition for the crowdlending platforms, since those are more about investment as well, just with debt financing, rather than equity financing. And while there certainly have been cases of fraud that came about because of those platforms, for the most part it hasn't sunk the top players in that space, because they've been able to try to minimize the likelihood of fraud while educating the market on investing wisely. There's nothing to suggest that the top players who emerge in the equity crowdfunding realm won't be able to do the same.

Filed Under: crowdfunding, investments, jobs act, regulations, rules, scams, sec

Amazon Stops Processing Payments For Crowdfunding Platform For Creative Commons Books

from the weird dept

So this is a bit strange. Unglue.it is a cool crowdfunding platform that focuses on raising money for authors/rightsholders so that they'll release an edition of their books under a Creative Commons license. We've seen a few similar offerings, but Unglue.it seemed really interesting (and to be getting some attention/traction). Basically, they would work with rightsholders, to find out at what price they'd be willing to put their works out under a Creative Commons license, and then try to crowdfund that amount. Neat idea. However, as Jack Allnutt alerts us, despite having already been processing payments for Unglue.it, Amazon has cut the service off, with a bizarre claim about how they don't want to work with any new crowdfunding platforms:

Amazon Payments has informed us that they will no longer process pledge payments for Unglue.it, forcing us to suspend all active ungluing campaigns. According to a Senior Account Manager at Amazon, Amazon has decided against “boarding fresh crowdfunding accounts at this time”. Amazon has been providing payment services for Unglue.it, as it does for the popular crowdfunding site Kickstarter.

Of course, that statement doesn't make much sense, given that it was already processing payments for Unglue.it. In fact, part of this news was that Amazon is requiring Unglue.it to void all payments for existing campaigns (i.e., those not yet funded). So the idea that this is about not "boarding fresh crowdfunding accounts" doesn't make much sense. Amazon has been the only choice for payments on Kickstarter since the beginning, and that seems to have gone well, so it's odd that they're now cutting off others (and, of course, opens up Amazon to wild conspiracy theories). I contacted Amazon to get their side of the story, and they provided the following comment:

We support a wide variety of businesses, but we have regulatory obligations as a licensed money services business for how we operate. Unfortunately, Unglue.it’s model is not the same as some other crowdfunding services and at this time does not allow us to meet those obligations.

That statement makes this all the more... confusing. They're clearly implying that there are regulatory issues preventing them from supporting Unglue.it, though I'm not sure I can think of what the concern here might be. There have been some regulatory issues around equity funding via crowdfunding, but that doesn't seem to be an issue here. If they're just working out deals for licensing books... I'm at a complete loss.

Filed Under: crowdfunding, payment processing
Companies: amazon, kickstarter, unglue.it

Penny Arcade Shooting For A Crowdfunded Ad-Free Website

from the working-for-the-readers dept

Ever since the internet became a thing, websites have funded their operations primarily through advertising placed around the content they publish. Unfortunately, this business model is not particularly liked among those browsing the web. It's not just the web surfers who hate this way of doing business either. Many website operators merely tolerate advertising as a necessary evil, something that must be done in order to continue publishing the things people love. So, is it even possible to operate a popular website without running ads alongside the content?

Enter Penny Arcade, home to one of the most popular web comics on the entire internet. Early in its life, it operated solely on the donations of its readers. As it grew, it transitioned to a more traditional ad-based model. Now, the creators want to return to that idyllic era of a user funded site via Kickstarter. And they're doing it with a hilarious video, showing off their personality (which is always a good way to connect with fans). More seriously, they talk about why they are considering this form of funding when advertising is the norm:

Would scouring ads from Penny Arcade, with everything that entails, be something you'd be willing to reach into your pocket for? The more we considered it, the more we agreed it might just be. Not only would you no longer have to look at advertising when browsing Penny Arcade, but not having ads would create a chain reaction that would lead to a bunch of other interesting stuff. Without the almighty "pageview" to consider, why not populate the RSS with full comics and posts? Why not enable and even encourage apps, first and third party, for people to read it however they damn well please?

Basically, it frees them up to do a lot of things that advertising has hindered in the past. Think about this. Currently, they believe they cannot offer full comics or articles in their RSS feeds because doing so cuts into ad revenue. They cannot allow the use of 3rd party comic readers because doing so may eat into ad revenue. They cannot offer their fans the experience they deserve because they fear that doing so eats into ad revenue. But if ad revenue is no longer a consideration, all these features (and more) are back on the table. If this Kickstarter succeeds, they will no longer need to worry about making advertisers happy and can focus on making their fans happy.

The campaign is not without its critics, though. In fact, there are already several arguments against what Penny Arcade is doing here. The first argument is the idea that the Penny Arcade crew doesn't really need the money because they are already successful. We have seen this argument made before. But just like that situation, crowdfunding is not just about raising money: it's a way to connect with your fans and let them get invested in you and your work.

Another common argument is that this Kickstarter campaign violates Kickstarter's own rules. Specifically, critics claim that it violates the rules against using Kickstarter to fund ongoing projects, or projects without an end. This might seem like a good argument against it, but if it truly did violate Kickstarter's guidelines, it wouldn't have been approved. Additionally, Penny Arcade is producing a product with these funds. They are producing a year's worth of content that would not have been created without it. So, there is a product goal here.

Something else that isn't quite a complaint about the Kickstarter campaign but more of a sustainability question is that of non-paying readers. This campaign is not just a benefit for backers. All changes made to the site and its operations will be available to all readers. Some claim that because of this free-rider problem, the ability operate under this model is not sustainable in the long run. However, we have seen many areas where this is not the case. On Twitter, Gabe compared this campaign to that of NPR fund-raising drives. We know that the vast majority of public radio listeners do not pay at pledge time, but the stations are still able to raise the majority of their funds from those who do. Another great example comes from free-to-play video games, in which the majority of players will never spend money. Many of these games are still able to make a profit operating this way.

Regardless of the complaints, this is a really bold move for any major brand to make. If they succeed in raising all the money needed to run ad-free for a full year, we will be able to return in a year's time and gauge its success. If they don't succeed, then it will be business as usual and we will have to watch for further funding experiments. Hopefully, we will see the former and that success will spark a new wave of advertising-free content publishing.

At the very least, this is a reminder that we're seeing new business models pop up all the time. Some people claim that advertising is "the only" business model online, but clearly that's not true. That doesn't mean that this or any particular Kickstarter campaign will always succeed -- but that's true of any business model. What Kickstarter allows, however, is the rapid prototyping of a business model like this, and that's really disruptive.

Filed Under: advertising, crowdfunding, membership drive, web comics
Companies: kickstarter, penny arcade