Canada Media Fund | Fonds des mdias du Canada

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

traditionally, crowdfunding is used to raise money to fund

the development of a well-defned, singular projectanother
keycharacter|st|cofcrowdfund|ngbe|ngthat|t|sanexanteform
of fnanc|ngmean|ng that sponsors, backers, customers or
|nvestorsfnanceaprojectthat|sst||||nthedeve|opmentstage}.
4

As such, |t has become part|cu|ar|y effect|ve |n projects where

|nd|v|dua|shaveanaffn|tyforthecauseorforthecreat|veteam
|nvo|ved.Act|ngasasoc|a|med|ap|atform|nthe|rownr|ght,some
crowdfund|ngp|atformsfac|||tateawor|dofcommun|t|eswhere
|nd|v|dua|scanfundthe|r|nterestsandpass|ons.
the new form of crowdsourced private fnancing has
lowered the barriers to entry not only for fnancing projects,
but also for the average citizen to play the role of investor.
Producers of a|| s|zes have |ncreased the|r access to fnanc|ng,
contr|but|ng to the democrat|zat|on of content product|on.
lncreas|ng|y,newentrantshavethepotent|a|toberecogn|zedand
rewardedforthe|rcraft,wheretheymaynothaveconvent|ona||y
beenab|etosecurefund|ngord|str|but|onforthe|rprojectsdueto
trad|t|ona|va|uecha|nbarr|ers.
crowdfunding also has a unique dual function of providing
both private financing and generating publicity and
attention for a project.Thepowerofthe|nvestorasambassador
|s fue||ed by the h|gh |mpact of soc|a| med|a, where projects or
the fundra|s|ng |n|t|at|ve have the opportun|ty to go v|ra|. Often,
beforeaproduct|onhasevenbegun,crowdfund|ngcangenerate
3
Crowdfunding Plan may Open Pandoras Box for Investors.RobertJMetz|er.Apr||16,2012.
http://hbweb.sx2.at|.pub||cus.com/art|c|e/20120416/PRlNTEDlTlON/304169981.
4
Crowdfunding: Disintermediated Investment Banking.Br|anJ.Rub|nton.McG|||n|vers|ty.Apr||,2011.
5
Putting your money where your mouse is: Crowdfunding: Artists, musicians and writers are using the Internet to aggregate
lots of small donations to fund their work. The Econom|st.Sept02,2012.www.econom|st.com/node/16909869.
aud|enceengagementthroughtheprojects|nvestors,whow||||n
turnbecometheconsumers.Acrowdfund|ngnetworkcanbea
projectsbestsourceofcost-freepromot|on.lnvestorsandfunders
become ambassadors of the cause, |nfuenc|ng the|r networks
throughsoc|a|med|aandwordofmouth.lndeed,duetothetrust
|nvo|ved|npersona||zedendorsements,soc|a|med|acanbemore
|nfuent|a| than many promot|ona| campa|gns, comm|ttees, ORM
networksandwebs|tes.Orowdfund|nga|soa||owsprojectcreators
to engage more c|ose|y and more d|rect|y w|th those aud|ences
andambassadors,whoare|ncreas|ng|yattractedtoth|stypeof
d|rectconnect|onanddeeperengagementw|ththedeve|opment
andproduct|onprocessofthecontenttheyareconsum|ng.
5

As such, crowdfund|ng |s redefn|ng the re|at|onsh|p between

producer, |nvestor and consumer, often resu|t|ng |n some form
of convergence and democrat|zat|on of the three. Producers
are compe||ed to be as open and honest as poss|b|e |n the|r
crowdfund|ng campa|gns |n order to earn enough trust from
aud|ences to secure the|r fnanc|a| support. lt |s therefore |n the
producersbest|nteresttoma|nta|nh|gher|eve|softransparency
and accountab| | | ty | n the| r pract| ces. However, | eve| s of
transparency can vary and can become the object of pub||c
scrut|ny. For examp|e, the crowdsourced fundra|s|ng campa|gn
beh|ndthelnv|s|b|eOh||drenlnc.,andthe|rshortf|mKony2012,
hasbeencr|t|c|zedfora|ackoftransparencyonexpend|tures.
crowdfunding has also provided many creative content
developers with a means of concept validation or beta
testing. Through crowdfund|ng campa|gns, content creators
can crowdsource pub||c react|ons and cr|t|ques to a projects
concepts and features. ln th|s way, creators are equ|pped w|th
v|ta| |nformat|on to he|p w|th bus|ness and ed|tor|a| dec|s|on-
mak|ng that respond d|rect|y to the|r aud|ences expressed
needs and des|res. sefu| back-end ana|yt|cs that can come
from crowdfund|ng campa|gns |nc|ude c||ck-through rates, t|me
spentonthes|te,theamountofmoneyra|sed,andthenumber
ofcontr|butorsaswe||asmoreopen-endedqua||tat|veaud|ence
feedback |n the form of comments, suggest|ons, commun|ty
promot|onandv|ra|market|ng.
6 Crowdfunding for the creative content industries in a Canadian Context
2.1 crowdfunding Models
Three mode|s of crowdfund|ng are emerg|ng for the creat|ve
|ndustr|es: The Donat|on Mode|, the |end|ng Mode| and
the lnvestment Mode|. Each mode| has |ts own un|que
features, funct|ons, |eve|s of app||cab|||ty, and advantages and
d|sadvantages.
2.1.1TheDonat|onMode|
TheDonat|onMode|encompassesapproachestocrowdfund|ng
thatarebasedondonat|ons,ph||anthropyandsponsorsh|p.lt|s
a|sosomet|mesreferredtoasm|cro-patronage.
In the donation Model, individuals make a financial
contribution to a project without any expectation of a
fnancial return on that contribution.Thepr|marydr|verbeh|nd
|nd|v|dua|contr|but|ons|nth|smode||sapersona|des|retosupport
thedeve|opmentandrea||zat|onofaprojectthat|s|nsomeway
mean|ngfu|tothecontr|butor.Projectsandp|atformsthatemp|oy
thedonat|onmode|typ|ca||ya|sousearewardor|ncent|vesystem
tohe|pst|mu|atecontr|but|ons.lncent|verewards,g|ftsortokens
canrangefromnamedrecogn|t|onofcontr|butors|ntheprojects
cred| tsoracknow| edgementstobrandedmerchand| seor
opportun|t|estomeetw|thcreatorsand/orattendspec|a|events
re|atedtotheprojectsuchasa|aunchpartyorprem|erescreen|ng
event. Typ|ca||y, a range of |ncent|ves |s offered for any g|ven
project and contr|butors rece|ve d|fferent rewards depend|ng on
theamountthattheycontr|bute.
W|th|tsroots|nph||anthropy,theDonat|onMode||sder|vedfrom
theon||nedonat|onmode|usedbychar|t|es.Thekeytoth|smode|
|sthatwh||econtr|butorsm|ghtrece|verecogn|t|onorrewardsfor
the|r contr|but|on, they do not rece|ve any r|ghts or equ|ty |n the
project.TheDonat|onMode|ofcrowdfund|ng|scurrent|ythemost
commonmeansofcrowdfund|ng|nOanadaandaroundthewor|d,
duepr|mar||ytosecur|t|esregu|at|ons.lndeed,arecentreportby
Masso|ut|on/Orowdsourc|ng||Odeterm|nedthatdonat|on-based
crowdfund|ng|n|t|at|vesra|sedthemostmoney|n2011atatota|
$676m||||onSD}fromp|atformsaroundthewor|d.
6
6
Crowdfunding: $1.5B Raised, 1M Campaigns Funded In 2011; Figures Set To Double In 2012.
R|pEmpson.TechOrunch.May08,2012.http://techcrunch.com/2012/05/08/crowdfund|ng-state-of-the-un|on/.
7 Crowdfunding for the creative content industries in a Canadian Context
7
How Double Fine Raised $3.3 million on Kickstarter and Changed Game Financing Forever.DaveThe|r,Forbes.com.March14,2012.
http://www.forbes.com/s|tes/dav|dth|er/2012/03/14/how-doub|e-fne-ra|sed-3-3-m||||on-on-k|ckstarter-and-changed-game-fnanc|ng-forever/.
8ecerd-breaking0enatien-basedcrewdfanding
campaign:0eablerineAdventare{Kickstarter}
1ypeefpredactien/preject:0igitalNedia{game}
randing1arget:8400,000{080}
rands8aised:88.8millien{080)
1he0empany:0eablerine
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ve|eran1in8haler,Pcu|leIineisanawarawinnin
inaeenaen|anesaevelcnen|ccnanywi|has|rcn
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XB0XanaPlays|a|icn.
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K IIK HP H3 X3 T PHK P T H0I00X1 P H3
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7
8 Crowdfunding for the creative content industries in a Canadian Context
7MPMTOWNWMNMM
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ccnscicuscl|hecssi|ili|yclacncrla|iueanaacnc|wish|c
c|ack|c|hesanecclclsucr|erslcraaai|icnallunas.
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isanauaiencelcrTi|hinIveryTcnan,|u|aue|ci|swe|
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0.8.|aseachari|a|lecraniza|icn|ha|in|urnalreaaywasin
ar|nershiwi|hcnecl0claenFue|s0anaaianar|ners.
8|ill|c|eaaaresseais|hes|a|uscl|hiraar|ylunain.I|is
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allec|arcaucersa|ili|y|csecurea|rcaacas|inlicense
F 3 T 0 I0 IPT 3 3 T II K IH3
9 Crowdfunding for the creative content industries in a Canadian Context
2.1.2The|end|ngMode|
the lending Model of crowdfunding is similar to any typical
lending scenario, where individuals lend money to a project
or company with the expectation that it will be repaid.lnthe
contextofcrowdfund|ng,the|end|ngmode|cantakeanumberof
forms,shownbe|ow:
s ! T R A D l T l O N A | | E N D l N G A G R E E M E N Tstandardtermsareused
and there |s an expectat|on for a monetary re|mbursement
|n the form of |nterest. ln th|s case, the |oans may or may not
be guaranteed, depend|ng on the crowdfund|ng p|atform
be|ngused.
s ! F O R G l v A B | E | O A Ncontr|but|onsarere|mbursedtothe|ender
on|y|foneoftwoposs|b|econd|t|ons|smet:a}|fandwhenthe
projectbeg|nstogeneraterevenueorb}|fandwhentheproject
beg|nstomakeaproft.
s 0 R E S A | E S the fn|shed product |s prom|sed |n return for the
contr|butors p|edge. ln the case of a pre-sa|e |end|ng mode|,
the contr|but|on amounts are determ|ned accord|ng to an
assessmentofthefa|rmarketva|ueoftheproduct.lnadd|t|on,
|arger contr|but|on amounts are typ|ca||y accompan|ed by a
prom|seofmorecop|esoftheproductequa|totheva|ueofthe
amountofthecontr|but|on.
Accord|ng to Masso|ut|on/Orowdsourc|ng ||O, |end|ng Mode|
campa|gns tend to reach comp|et|on |n ha|f the t|me |t takes for
lnvestment Mode| campa|gns.
8
The |end|ng Mode| |s s|m||ar to
m|cro-fnanc|ng schemes common |n deve|op|ng countr|es or
m|cro-|end|ng p|atforms, such as K|va, wh|ch a||ow |nd|v|dua|s
to so||c|t and prov|de m|cro-|oans to support |nd|v|dua|s or
commun|t|es|ndeve|op|ngcountr|esorsupportsma||bus|nesses.
Thesem|cro-|end|ngp|atformshavehe|pedp|oneertheconcept
of|nd|v|dua||nvestmentthroughm|cro-|end|ng.
|end|ng-based crowdfund|ng a|so accounted for $522 m||||on
SD}ofthecrowdfund|ngmon|esra|sedg|oba||y|n2011,mak|ng
|tthesecond-|argestformofcrowdfund|ng|ntermsoftheamount
ofmoneyra|sed.
9

8 Crowdfunding Industry Report: Market Trends Composition and Crowdfunding Platforms.Orowdsourc|ng.org.May2012.P.22.

9 Crowdfunding: $1.5B Raised, 1M Campaigns Funded In 2011; Figures Set To Double In 2012. R|pEmpson.TechOrunch.May08,2012.http://techcrunch.
com/2012/05/08/crowdfund|ng-state-of-the-un|on/.
10 Crowdfunding for the creative content industries in a Canadian Context
Asaccessfal0IYlending-basedcrewdfandingcampaign:
NyNillien0ellarNevie{0IY0ampaign}
1ypeefpredactien/preject:reatareLengthNevie
randing1arget:81millien
rands8aised:81.0millien
NV LN8 2 LK N2 INa I1 8N2
N8 2 8 NK ALittle8it2embie
1he8tery:In8006,0anaaianairec|cr0aseyTalkerlaunchea
aPci|cursellcrcwalunaincanain|clunaaninaeenaen|
FHI3 H1 H0P 1 0 . HaHI3 1 IH3 P HI1 1 a 3 HIK P HI
hislunaincalana|eanrcauc|icn.
Talkersinsira|icnlcr|heHyHillicnPcllarHcviecanain
lrcnawe|si|ehehaaccneacrcsswhereas|uaen|sclaixels
cnhiswe|si|elcr$1each,callin|hecanain1heHillicn
PcllarEcneae.Ins|eaaTalker,aaa|ea|heccnce||c
F 3 I0 HT F P H1 0 P K P P HT 1 I I3 T 0P 1 a XH3 F 3 I0 H
0cn|ri|u|crswhcurchasealranesreceiveacreai|asrcauc
ersanawerealscrcniseaarein|ursenen|cn|helunas|hey
K T 3 HI P HF P H1 0 0HH3 IH3 H HH1 II I T
P T 1 I P HX3 T PHK HK T 0 HX3 T I1 HK T 3 T 3 I3 HX3 T 0 HI
IP I3 HT F P HX3 T P K P 1 1 HI T IHI T IK P I3 a T F
|heirchcice.
Analysis:0aseyTalkerenccun|ereaaruninwi|h0anaaian
8ecuri|iesAaninis|ra|crswhen|heyaccuseahinclsellin
HK 3 HI H3 P HIXK HT F H1 1 0F 3 I0 HT F P H1 0
Incraer|caaaress|heissue,Talkeraac|eaalenainncael,
wherelranehclaerswcula|erein|ursealcr|heirccn|ri|u
T T K HP H1 0 H0IT 0HH3 IH3 H HH)T P H3 H
P K I0 XI0IP HX3 T 0 HT F X3 T P I3 0IHI T P H
nun|ercllranes(shares)hela|yaccn|ri|u|cr.Incraer|c
ensure|ha||hisrcniseaianc|vicla|esecuri|ieslaws,
I1 8H3 I HHI I0 T I H1 P H3 HIa X3 T I I HI II3 I HI
|clranehclaerswcula|eacna|ea|cachari|ycl|he
ccn|ri|u|crschccsin.

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
. 3 T 0 P H3 I Ia T F K 3 T I F I 0K I0 XI0I
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 high quality promotional materials and high level

of promotional effort. Successfu| campa|gns typ|ca||y
resu|tfromstrongpromot|ona|effortsbytheprojectowners
throughouttheent| redurat| onofthecampa| gn.ln
add|t|on, the qua||ty of promot|ona| mater|a|s, such as a
promot|ona| v|deo or tra||er, need to be of good qua||ty.
The promot|ona| mater|a|s need to |nsp|re confdence
amongpotent|a|contr|butorsthatthefna|productw|||be
worththe|rcontr|but|on.
63

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 ! R E A | l S T l O F N D l N G G O A | Projects that succeed |n

reach|ngthe|rfund|nggoa|tendhaveagoa|thatmakes
sensefromtheperspect|veofpotent|a|contr|butors.An
amountthatappearstooh|ghcanmake|tseem||kethe
creatore|therdoesnothaveagoodunderstand|ngofthe
costofproduc|ngh|s/herprojectorthattheyares|mp|y
greedy. A fund|ng goa| that seems too sma|| s|m||ar|y
makes|tseem||ketheproducerdoesnotknowtherea|
costofproduc|ngthe|rprojectandcou|dcreatedoubt|n
acontr|butorsm|ndaboutwhetherornottheprojectw|||
actua||ygetmade.
66

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

s $ O N O R E H A S T l O N There |s a|ways the r|sk that |f a content

creator reaches out to the same network mu|t|p|e t|mes, that
networkw|||eventua||yceasetosupp|ythenecessarysupport.
When producers are |everag|ng the|r ex|st|ng on||ne networks
to promote the|r crowdfund|ng campa|gns, there |s a r|sk that
thenetworkw|||ceasetobesupport|ve|ftheyareapproached
too many t|mes. ln add|t|on, as crowdfund|ng grows and the
number of p|atforms and projects to choose from |ncreases,
|t w||| become |ncreas|ng|y d|ffcu|t for projects to d|st|ngu|sh
themse|vesfromthemassesandattractthenecessarysupport.
s 0 B | l O F E A R O F A B S E Amongst the |nvestors and venture
cap|ta||sts that we |nterv|ewed, there was a shared concern
thatw|thoutaregu|atoryframework,the||ke||hoodofascamor
abuseoffundswasqu|teh|gh.Th|sva||dconcerncou|dbecome
a barr|er to pub||c engagement and fund|ng |f the regu|atory
framework|nOanadadoesnotqu|ck|yaddresstheadd|t|onof
crowdfund|ngfnanc|ng|nanon-accred|ted|nvestorcontext.
71
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
72
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
25 Crowdfunding for the creative content industries in a Canadian Context
4. IMpleMentatIon consIderatIons
for the canadIan tV and dIgItal MedIa
IndustrIes
There are a number of structura| cons|derat|ons to take |nto
account when th|nk|ng of how crowdfund|ng app||es to screen-
basedcontentcreators|nOanada.Duetotheemergentnatureof
crowdfund|ng,part|cu|ar|y|ntheOanad|anmarket,|t|sd|ffcu|tto
fu||yunderstandwhat|mp||cat|onstherem|ghtbe|nthebroader
|ega|, regu|atory and fund|ng ecosystem. That be|ng sa|d, there
are a few potent|a| |mp||cat|ons that are common|y ra|sed |n
d|scuss|onsoncrowdfund|ng|nOanada.
crowdfundIng platforMs: structure
There are three types of crowdfunding platforms,
basedonwhattypesofprojectstheyfeature:
s 3 P E O l A | l Z E D P | A T F O R M S Oerta|ncrowdfund|ngp|atforms
cater to spec|fc |ndustr|es such as mus|c record|ng
Se||ABand},v|deogamesGamb|t|ous},or|ndependent
te|ev|s|onMobcaster}.
s ! O T l v l T S P E O l | O P | A T F O R M S Other p|atforms cater
to a var|ety of |ndustr|es but focus on certa|n types of
projectse.g.creat|veprojects,techno|ogyorhardware
deve|opment}. For examp|e, K|ckstarter on|y features
creat|veprojects,thoughtheycanft|nanynumberof
categor|ese.g.Mus|c,Art,F||m,v|deoGames}.
s E N E R A | 0 R P O S E P | A T F O R M S Thesep|atformshaveno
restr|ct|ons on what they w||| feature. These p|atforms
featurecampa|gnsthatrangefrom|nd|v|dua|sso||c|t|ng
supportforamed|ca|procedureorawedd|ngtoart|sts
seek|ng to fund creat|ve projects and techno|ogy
start-ups seek|ng to fund the deve|opment of a new
|nnovat|veproduct.
a fourth option is for project owners to set up their
own do-it-yourself platform on their company
or project website. Th|s requ|res a great dea| more
adm|n|strat|veeffortfromtheprojectcreator,buta||ows
them to engage d|rect|y w|th the|r supporters rather
than go|ng through a th|rd-party p|atform} and means
that100%ofthefundsra|sedgotothecreatorw|thout
hav|ngtopayacomm|ss|ontothep|atformoperators.
Therearetwo ways in which crowdfunding platforms
typically structure the allocation of funds:
s 4 H E M A J O R l T O F P | A T F O R M S S E A T l M E D F N D l N G R O N D
typ|ca||yrang|ngfrom30-90days.
s the as-it-comes-in model. Some p|atforms award
anyfundsra|seddur|ngthefund|ngper|odtotheproject
ownere.g.lnd|egogo}.
s the all-or-nothing model. Many p|atforms on|y
award funds to the project owner |f the or|g|na|
fund|nggoa||se|thermetorsurpassedw|th|nthepre-
determ|ned fund|ng per|od e.g. K|ckstarter}. ln the
eventthattheprojectdoesnotmeet|tsfund|nggoa|,
contr|butors are e|ther re|mbursed or the|r p|edges
are never fu|f||ed |.e. cred|t cards or other payment
accountsarenevercharged}.
cr owdf undi ng pl at f or ms t ypi cal l y use a
commission-basedbusinessmodelwherethe
p|atformrece|vessomewhere|ntherangeof2%-5%of
the tota| amount of funds ra|sed dur|ng the campa|gn
from the project owner. However, a few p|atforms have
adopted a fxed-fee approach where a project creator
paysapre-determ|nedfxedfeetothep|atformoperator
|nexchangefortheserv|ceofhous|ngthe|rcampa|gnon
thatp|atformswebs|te.
73
73
Orowdfund|nglndustryReport:MarketTrendsOompos|t|onandOrowdfund|ngP|atforms.Orowdsourc|ng.org.May2012.P.23.
26 Crowdfunding for the creative content industries in a Canadian Context
4.1 canadian securities law and
private financing
As d|scussed |n sect|ons 1.1.3 and 1.3.3, under current
canadian securities laws it is illegal for a company to sell
equity in a project or company through crowdfunding.
ndercurrent|aws,thereare||m|tedc|rcumstancesunderwh|ch
pr|vate |nvestors can buy secur|t|es |n a company w|thout that
company|ssu|ngan|n-depthprospectusused|natrad|t|ona||n|t|a|
pub||c offer|ng.
74
There are some exempt|ons to the prospectus
requ|rement, but these vary across prov|nces/terr|tor|es and are
typ|ca||y||m|tedtoFr|endsandFam||ycontr|but|ons.Neverthe|ess
there are two exempt|ons that do app|y |n a|| of the prov|nces
andterr|tor|es:1}Accred|ted|nvestorsthosewhohavee|ther
a net worth of more than $1 m||||on or annua| |ncome of more
than $200,000 or 2} |f an |nvestment |s a m|n|mum of $150,000
or more.
75
Ourrent |aws a|so proh|b|t pub||c so||c|tat|on of equ|ty
|nvestments, wh|ch makes the soc|a| network|ng aspect of the
crowdfund|ngconcept|nherent|y|||ega|whenequ|ty|sbe|ngso|d.
the canadian advanced technology alliance is currently
engaged in a large-scale lobbying campaign in an effort to
have the 13 provincial and territorial securities regulators
change the securities legislation |n a manner s|m||ar to how
thefedera|secur|t|es|eg|s|at|on|scurrent|ybe|ngchanged|nthe
S|nthewakeofthenewJOBSAOT.lnadd|t|on,theOanad|an
Secur|t|es Adm|n|strators the umbre||a group for the countrys
13prov|nc|a|andterr|tor|a|secur|t|escomm|ss|ons}|sa|so|nthe
process of a |arge-sca|e rev|ew of the prospectus requ|rement
exempt|ons w|th the |ntent|on of broaden|ng them to potent|a||y
|eave room for crowdfund|ng.
76
And the Ontar|o Secur|t|es
Oomm|ss|on has offc|a||y subm|tted a not|ce of rev|ew of the
exempt|ons|nOntar|o.
77
lf|tweretoeverbecome|ega|tose||secur|t|esv|acrowdfund|ng,|t
wou|dcome|ntod|rectcompet|t|onw|thseedorange||nvestors.
78

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

ln order to host a campa|gn on the K|ckstarter webs|te,

Oanad|ancontentcreatorsneedtoengageath|rd-party
based |n the Sbe |t a fr|end or fam||y member or a
partner company. Engag|ng a th|rd-party partner |n th|s
waycomesw|thanumberof|mp||cat|ons:
s ! T H l R D P A R T M A N O T O W N T H E R l G H T S T O P R O M O T E A N D
d|str|buteaproductonbeha|fofthecreator,and
thereforenothavethe|ega|r|ghttodoso.
s 4 H E R E l S A M B l G l T A B O T O W N E R S H l P O F T H E P R O J E O T A N D
the|ega|re|at|onsh|pbetweenthep|atform,thecreator
andtheth|rd-partypartner.
Funds ra|sed through K|ckstarter wou|d have to be
transferred from a partners fore|gn S} bank account
to the or|g|na| project owners Oanad|an bank account,
wh|chhasanumberof|ega||mp||cat|onsregard|ngdut|es
and |ncome taxes when money crosses borders |n that
way.85 For examp|e, revenues ga|ned from a reward-
based and/or pre-sa|e-based crowdfund|ng campa|gn
cou|d be cons|dered revenue from the sa|e of goods
andwou|dbesubjectto|ncometax,|fthemoney|snot
proper|yreportedassuchwhen|t|spassedfromtheS
partner to the Oanad|an project owner th|s cou|d have
|ega||mp||cat|ons.
86

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

s , O A N S A |end|ng Mode| campa|gn that fo||ows a trad|t|ona|

|end|ng agreement wou|d ||ke|y be counted |n the same way
as trad|t|ona| |oans, wh|ch wou|d have no spec|fc |mp||cat|ons
when|tcomestoca|cu|at|nge||g|b|eexpensesforthepurposes
oftaxcred|ts.
95
s % l T O R O W D F N D l N G Accord|ngtotaxcred|tadm|n|strators,
an lnvestment Mode| campa|gn wou|d ||ke|y automat|ca||y
d|squa||fyaproducerorprojectfromaccesstotaxcred|ts.There
areverystr|ctregu|at|onsunderthetaxcred|tgu|de||nesabout
whatent|t|esarea||owedtoho|d|nterest|naproduct|on.
96
s 0 R O D O E R O R D l S T R l B T O R O O N T R l B T l O N lfaproduct|oncompany
|sstructured|nsuchawaythatthere|saparentcompanyand
then a s|ng|e product|on corporat|on for a spec|fc project,
thenproducerscou|dconce|vab|yco||ectcrowdfund|ngdo||ars
on beha|f of the parent company and count |t as a producer
contr|but|onfromthatparentent|ty.S|m||ar|y,forcompan|esthat
havesetupad|str|but|onarm,thecrowdfund|ngcampa|gncou|d
be done under the d|str|but|on arm of the company and any
mon|esra|sedwou|dbecountedasad|str|butorscontr|but|on.
lf the ORA dec|des to sanct|on th|s way of account|ng for
crowdfund|ng do||ars then |t wou|d not run counter to any tax
cred|tregu|at|onsandwou|dbecons|dereda|eg|t|matewayof
co||ect|ngandreport|ngcrowdfund|ngdo||ars.
97
90
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
91
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
92
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
93
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
94
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
95
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
96
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
97
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
30 Crowdfunding for the creative content industries in a Canadian Context
4.2.3 BroadcastandD|str|but|onPartners
Broadcasters and distributors have yet to take a frm
stance on how crowdfunding might affect their willingness
to engage with a production. For the most part, though
broadcasters are caut|ous|y observ|ng the deve|opments, they
genera||y agree that the money ra|sed through crowdfund|ng
|s |eg|t|mate and do not current|y have any reason to reject
a product|on on the bas|s that |t |s not a |eg|t|mate source of
fund|ng. However, one cons|derat|on that broadcasters do take
|nto account |s whether crowdfund|ng wou|d |mpact the ab|||ty
to access any necessary add|t|ona| fund|ng for the product|on,
therebyputt|ngtheproject|njeopardy.
Thatbe|ngsa|d,thereareanumberofothercons|derat|onsthat
m|ghthavethepotent|a|tobecomebarr|ersforproducersut|||z|ng
crowdfund|ng when |t comes t|me to engage broadcast and
d|str|but|onpartners.
s / W N E R S H l Pofri ghts. l nanl nvestmentMode| , where
contr|butors rece|ve equ|ty |n the company or r|ghts to the
product |n exchange for the|r contr|but|on, a producer wou|d
||ke|yjeopard|zeh|s/herab|||tytoestab||sha||cens|ngagreement
w|thabroadcaster.Broadcasteragreementstyp|ca||ycomew|th
very spec|fc and very str|ct ||m|tat|ons on who can own r|ghts
to the product.
98
They typ|ca||y do not a||ow any pr|vate th|rd
party|nvestment.
s O R N A | l S T l O standardsandartisticlicense.Oneofthe
major concerns from the perspect|ve of broadcasters |s the
r|skthatcrowdfund|ngcou|dposetojourna||st|cstandardsand
po||c|esregard|nged|tor|a|contro|.
99
Anycampa|gnthathasthe
appearanceofg|v|nguporshar|ngacreatorsart|st|cdec|s|on-
mak|ngpowerw|thcontr|butorscou|dmakebroadcasters
nervous. Any percept|on that the content of a project was |n
anyway|nfuencedbycontr|butorse.g.advocacythroughthe
sponsorsh|pof|deas}orthatacontr|butorhasaspec|fc|nterest
|nthecontentcou|dbev|ewedverynegat|ve|ybybroadcasters
and those projects are ||ke|y to fnd |t d|ffcu|t to engage a
broadcastpartner.
s % P | O l T A T l O N O F R l G H T S Producerswhouseapre-sa|e-based
|end|ng Mode| cou|d encounter d|ffcu|t|es secur|ng broadcast
||cense agreements because the broadcaster cou|d perce|ve
th|sasanexp|o|tat|onofr|ghtsthatd|m|n|shestheva|ueofthe
r|ghtstheywou|dbepurchas|ng.
100
Broadcastersm|ghtfee|that
the market for a product|on has a|ready been tapped through
the pre-sa|e fund|ng efforts. S|m||ar|y, |t m|ght be d|ffcu|t to
securead|str|butoradvance|ftheproducer|sa|readyengag|ng
|n d|rect d|str|but|on v|a the pre-sa|e mode|.
101
However, under
a Donat|on Mode| broadcasters and d|str|butors may actua||y
va|ueaprojectfundedthroughcrowdfund|ng.Ontheonehand,
a successfu| crowdfund|ng campa|gn prov|des the d|str|but|on
or broadcast partner w|th ev|dence that there |s an ex|st|ng
aud|encefortheproduct|on.Ontheotherhand,theproduct|on
w||| a|ready have been promoted as part of the crowdfund|ng
campa|gnwh|chmeansthatthebroadcasterord|str|butorhave
|essworktodo|npromot|ngtheproduct|on.
98
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
99
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
100
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
101
Stakeho|der|nterv|ews.OonductedbyNord|c|ty.MayJune,2012.
31 Crowdfunding for the creative content industries in a Canadian Context
5. suMMary and conclusIons
Orowdfund|ng|sanemerg|nga|ternat|vefnanc|ngveh|c|ethathas
exper|encedarecentboom|nEuropeandNorthAmer|ca,pr|mar||y
dr|ven by recent mu|t|-m||||on do||ar record-break|ng successes
on p|atforms |n the S. lndeed, crowdfund|ng has become a
s|gn|fcantwayforpeop|etofundthe|r|deasandprojectsacross
anumberof|ndustr|es.lnpart|cu|ar,|thasbecomepopu|ar|nart,
f|m,mus|cand|nteract|ved|g|ta|med|a.
ln the wake of the |ncreased med|a attent|on for h|gh-prof|e
campa|gns and recent changes to secur|t|es |aws |n the S to
accommodate crowdfund|ng, th|s new fnanc|ng mode| has
becomemorev|s|b|e|nOanadaaswe||.AnumberofOanad|an-
based crowdfund|ng p|atforms have emerged and d|scuss|on
hasbeenabundantamongregu|atoryand|ndustrybod|esfrom
the tech sector to the creat|ve med|a sectorregard|ng how
crowdfund|ng fts |nto Oanadas current |ega|, regu|atory and
fund|ngenv|ronment.
There are three bas|c crowdfund|ng mode|s: |} The Donat|on
Mode|whencontr|butorsofferacontr|but|onoften|nexchange
for a sma|| rewardw|th no expectat|on of repayment, fnanc|a|
ga|n or ownersh|p, ||} The |end|ng Mode| where contr|butors
expect a repayment of the|r contr|but|on |n some form, and |||}
ThelnvestmentMode|wherecontr|butorspurchasesecur|t|esbe
theyequ|tyorother.A||threemode|shavethe|radvantagesand
d|sadvantagesandsomearebettersu|tedtothecreat|vecontent
|ndustr|esthanothers.
Ourrentsecur| t| esregu| at| ons| nOanadamake| t| | | ega| for
compan|es to se|| secur|t|es through crowdfund|ng, mean|ng
that an lnvestment Mode| |s not current|y feas|b|e for Oanad|an
creat|ve content creators. Furthermore, an lnvestment Mode|
|s not we|| su|ted to the creat|ve content |ndustry because |} |t
wou|d comp||cate the fnanc|a| structure of compan|es for f|m/
Tv producers and ||} |t does not ft the project-based bus|ness
structure of |nteract|ve d|g|ta| med|a and sma|| |ndependent
product|oncompan|es.ThelnvestmentMode|a|socarr|esmany
r|skswhen|tcomestoaccess|ngfund|ngorbu||d|ngre|at|onsh|ps
w|th broadcast or d|str|but|on partners because of restr|ct|ons
aroundth|rd-party|nvestmentandth|rd-partyownersh|p|nfund|ng
gu|de||nesand||cens|ngagreements.
|end|ngMode|sarenotburdenedbythesamerestr|ct|onswhen
|tcomestoaproducersab|||tytoaccessothertypesoffund|ng.
However,theycomew|thadd|t|ona|adm|n|strat|veeffortto
contractandmanagethe|end|ngre|at|onsh|p.
TheDonat|onMode|,w|thac|earexchangeofgoods|ntheform
of |ncent|ves, or the pre-sa|e |end|ng Mode| are the two best
su|ted crowdfund|ng mode|s for content creators |n Oanada.
Wh||etherearest|||anumberofoutstand|ngquest|onsonhowa
Donat|onMode|m|ghtaffectproducersab|||tytoaccessex|st|ng
fund|ngsources.Theser|sksbecome|esss|gn|f|cantwhen
the mode| |s accompan|ed by an |ncent|ve program because |t
becomesanexchangeofgoodsformoney|nadefnedmarket.
ln add|t|on, a pre-sa|e |end|ng Mode| |s a s|mp|e exp|o|tat|on of
projectr|ghtsandcomesw|ththe|eastamountofr|sk,barr|ngthe
poss|b|||tythat|tm|ght|mpactnegot|at|onsforbroadcast||censes
ord|str|butoradvances.
There |s certa|n|y a demand for crowdfund|ng among Oanad|an
creat|ve content creators. However, the h|ghest demand seems
tobeamong| ndependentproducersor| nteract| ved| g| ta|
med|a content deve|opers work|ng w|th sma||er-sca|e budgets.
Orowdfund|ng|styp|ca||ymosteffect|veforra|s|ngsma||eramounts
of money from $5,000$50,000, a|though there are except|ons
to th|s genera| ru|e. ln add|t|on, emerg|ng content creators who
cannotaccessordonotyetknowhowtonav|gateotherfund|ng
sourcestendtobemost|nterested|nexp|or|ngth|snewfund|ng
veh|c|e. Projects that dea| w|th n|che content or content w|th a
veryspec|fcgrass-rootsfo||ow|nga|sotendtobemorecommon
on crowdfund|ng p|atforms. Orowdfund|ng offers the add|t|ona|
advantageofd|rectaud|encebu||d|ng,aud|enceengagementand
markettest|ngw|ththeab|||tyto|everagesoc|a|-med|atoaccess
those marketsa|| th|ngs that |end themse|ves we|| to projects
thatneedtoaccessn|chemarketsorwanttoharnessthesupport
ofastronggrass-rootsmovement.
That sa|d, stakeho|ders |n the creat|ve content |ndustr|es
whether content creators, |ega| experts or |ndustry support
organ|zat|onsa|so expressed a |ack of understand|ng for how
crowdfund|ngfts|ntothebroaderfund|ngecosystem|nOanada.
There |s a va||d concern that gu|de||nes surround|ng tax cred|ts
andotherfund|ngsourceshavenotyetbeenestab||shedforfunds
ra|sedv|acrowdfund|ng.
G|ven the |ack of c|ar|ty regard|ng |ega|, fnanc|a| and po||cy
|ssues re|ated to crowdfund|ng and the re|at|ve nove|ty of the
concept, producers exp|or|ng the potent|a| opportun|t|es offered
by crowdfund|ng shou|d adopt a ph||osophy of exper|mentat|on.
ln add|t|on they shou|d proceed w|th caut|on, ensur|ng they are
awareofa||theassoc|atedr|sksofengag|ng|nth|stypefnanc|ng
act|v|tybefore|aunch|ngacampa|gn.
32 Crowdfunding for the creative content industries in a Canadian Context
P|atform Focus Jurisdiction FundingMode|
andStructure
Feestructure Additiona|
Features
DocIgnite Documentary On|yavai|ab|e
toCanadian
pro[ects
DonationMode|
(rewardbase
Pro[ectsreceiveanyand
a||fundsraised,without
restriction
Nofees On|yfeaturesonepro[ect
atatime
HotDocsprovidessupportto
producersthroughoutthe
campaign
HotDocsprovidesadditiona|
incentivesinkindtothepro[ects
contributors
Springboard Genera|Purpose(e.g.
techno|ogy,games,music,
retai|services,pub|ishing,
photography,hospita|ity,
food,design,|m,artand
community}
G|oba| DonationMode|
(rewardbased}
A||orNothingfunding
oftota|fundingamount
forspringboardAdditiona|
3forPayPa|
Feesareon|ypaidifa
pro[ectissuccessfu|
Contributorscanoptoutof
therewardsandmakean
anonymousdonation
Minimumcontribution|eve|of1
Ideavibes Genera|Purpose G|oba| Customiab|e permonthfora
year|ysubscription
00setupfee
Acrowdsourcing,and
crowdfundingsoftware
so|ution.Customerscanhost
crowdfundingcampaignson
theirownwebsitesorcreate
apurposebui|tsite.
Acceptsfundsviaa||ma[or
creditcardsandINTERAC
directpaymenton|ine.
SoKap Creativepro[ects
(e.g.design,music,|m,
pub|ishing,food,fashion}
G|oba| HybridLendingMode|
(pre sa|e}and
InvestmentMode|
(promotiona|rights}
A|| or nothing
funding
Duringfundraisingmode
SoKapchargepro[ect
ownersafeewhichis
app|iedtoproductsa|es
andtown|icenses
Duringdistributionmode
SoKapchargespro[ect
ownersa10feeonthe
se||ingpriceofgoodsor
servicesso|d
Additiona|3CreditDebit
cardtransactionfee
On|yfeaturespro[ectsor
productsthatcanbeso|don|ine
Doub|esadistributionp|atform
Usesamicro|icensing
(geographica||ybycity}and
presa|emode|
Hasanadditiona|Distribution
Modefeaturewherecreators
canso|icitpromotiona|support
frombackerstomarketthe
productintheir|icensearea
Featuresapromotebuttonthat
a||owsindividua|stodrivetrafc
toapro[ectandco||ectareferra|
bonusoraf|iatefeeforhe|ping
thecampaign
Pro[ectownerscana|sosetupa
virtua|storefrontandraisefunds
byse||ingotherexistingproducts
thattheyown
Ho|dexcessfunds(over
origina|fundinggoa|}unti|
thepro[ectownerde|ivers
thecomp|etedpro[ect
TABLE2CROWDFUNDINGPLATFORMSINCANADA.SAMPLELIST
appendIX a
canadIan crowdfundIng platforMs
33 Crowdfunding for the creative content industries in a Canadian Context
P|atform Focus Jurisdiction FundingMode|
andStructure
Feestructure Additiona|
Features
Crowdventure Crowdventureiscurrent|yinstea|thmodeandthereisnoavai|ab|einformationaboutthestructureofthep|atform(asofJu|y2012}.
Haricot Genera|Purpose Notspecied DonationMode|
(rewardbased}
A||orNothingfunding
oftota|fundsraised
forpro[ectsthateither
reachorexceedtheir
fundinggoa|
Additiona|PayPa|
transactionfee
na
FundWeaver Genera|Purpose,focused
onInuit,Metisand
FirstNationspro[ects
andcauses
On|yopento
Canadian
pro[ectsorinitia
tives
DonationMode|
(rewardbased}
Pro[ectsreceiveanyand
a||fundsraised,without
restriction
Fundweaverco||ects
fundsraisedifapro[ect
reachesitsorigina|funding
goa|andifthepro[ect
doesnotreachitsgoa|
Additiona|
transactionfee
Wi||on|yfeaturedenedpro[ects,
notcompanies(e.g.wi||not
supportfundraisingforgenera|
operationa|costs}
Fundchange Charitab|eorganiationsand
socia|changepro[ects
On|yavai|ab|e
toCanadian
pro[ects
Donationmode|
Noincentives,
puredonation
Pro[ectsreceiveany
anda||fundsraised,
withoutrestriction
Sma||ChangeFund
chargesa10feeto
pro[ectownersonany
fundsraised
Offerstheaddedserviceof
advisors,sub[ectmatter
expertswhoprovidefeatured
pro[ectswithadviceandsupport
C|osesfundingassoonasa
pro[ectreachesitsfundinggoa|
Minimumdonationof
Pro[ectownershavetobe
charitab|eorganiationsor
ua|ieddonees
Podium
Ventures
Euityinvestmentfor
hightechstartups
Notspecied InvestmentMode| Notspecied Databaseofaccreditedinvestors
Bringseuitybased
crowdfundingtoanetwork
ofaccreditedinvestors
ArtMarket
Canada
Creativeandartisticpro[ects On|yavai|ab|e
toCanadian
pro[ectsor
initiatives
DonationMode|
(reward based}
A|| or Nothing
funding
.commissiononfunds
raisedifacampaignis
successfu|(inc|udesany
transactionorpayment
processingfees}
Additiona|onetime
xedfee(forbackground
check}
Pro[ectshavetoab|etobe
fu|||edinCanada
Artiststhatdidnotreachtheir
fundinggoa|inthea||otted
timebutwhoachieved2or
moreoftheirfundinggoa|are
giventheoptiontore|aunch
theircampaign
A||pro[ectownersaresub[ectto
abackgroundcheckinaneffort
topreventfraud
34 Crowdfunding for the creative content industries in a Canadian Context
P|atform Focus Jurisdiction FundingMode|
andStructure
Feestructure Additiona|
Features
Kivendi InformationforKivendiisnotcurrent|yavai|ab|eontheKivendiwebsite(asofJu|y2012}.
Ideacious Genera|Purpose,
tangib|eproducts
G|oba| HybridLendingMode|
(pre sa|e}and
InvestmentMode|
(revenue sharing}
A|| or Nothing
funding
100do||arxedfee,
reimbursedtothepro[ect
ownerifthepro[ect
reachesitsgoa|
1commissionon
sa|esfromaproducts
rstproductionrun
10commission
onthemarginfrom
subseuentproduction
runs
Doub|esasanecommerce
p|atformfornishedproducts
Individua|swhopreordera
productearntherighttoearn
revenueoneveryproduction
runoftheproductfor10years.
Revenueshareamountsare
negotiatedonacasebycase
basis
Usesadepositbasedpreorder
mode|.Buyersputdown
toguaranteetheirpositionin
|inefortheproductonceitis
comp|ete
Ideacioushasanetworkof
creative,|ega|andprofessiona|
serviceprovidersthatpro[ect
creatorscanaccessforsupport
Ideaciousretainsnonexc|usive
distributionrightsfortheproduct
canada Media fund
450 Wellington Street East,
Toronto, Ontario M5E 1C8
cmf-fmc.ca
info@cmf-fmc.ca

Tel.: 416-214-4400
Toll free: 1-877-975-0766
Fax: 416-214-4420
OanadaMed|aFund @OMF_FMO