Crowdfunding’s lack of sophistication around risk: is staged-finance the answer?

“Staged financing must become the film business’s immediate goal.”
– Ted Hope, Producer & Head of Production, Amazon Studios, September 2013

Crowdfunding’s lack of sophistication around risk

Much, if not most, of investment strategy is about dealing with risk. A backer of a project – be that an equity or debt investor who is hoping to see some kind of profit, or a crowdfunding supporter who wants to get their perks and see the finished film – has to predict risk. Normally, the closer a project goes from idea to release – from pitch to screen – the lower that risk gets; it's reducing all the time. To reflect this, in the majority of business investments, the first ‘angel' investors will normally put in the least and get the most equity, and as subsequent funding rounds continue, new investors put in greater amounts and get less relative share, but more value as the business is now worth more. As risk decreases, the cost of participation increases, just as there are far more ideas that get turned into scripts than scripts that get made into movies, or movies that get a theatrical release.

But crowdfunding, not technically an investment, is flat and treats all types of backer the same. At the start backers have to decide if a project looks viable and convincing, pay their money and hope for the best. It’s an investment of faith and confidence when 75% of all crowdfunded projects arrive late and a quarter over six months late (according to a July 2013 study). Some end up cancelled (examples here or here), which damages the whole space as they will doubtless put some people off backing a crowdfunding project again.

The problem is arguably even more of a challenge with flexible crowdfunding where projects can miss their target and end up raising far less than they need but still cash in. On Indiegogo, 80% of projects raise less than a quarter of their target, meaning often there isn't the money to deliver the project or to do it to the standard promised. This is a problem both for the creative, on whose shoulder the stress and reputation rests, and the backer, whose money is at stake. Meanwhile, the crowdfunding space depends on people having a good experience, backing a project and doing it again.

Yet the money is almost never all needed at the very start. For a lot of creative projects, some money is needed to pay some wages and overheads over the many months or years it will take on an ongoing basis – so it could trickle in. Indeed, the bigger costs might be towards the end during post-production or when 1,000 DVDs & DCPs are needed or the soundtrack has to be cleared. By that time the risk is considerably lower – if a book is ready to print or a film fit to screen, there's less risk about delivery, while it’s easier to assess the quality at that stage.

Rolling with it

Is there space for a rolling or staged crowdfunding that dripfeeds money into the project throughout its creation much as development, production, completion & marketing finance are already separated? It seems to resonate with how Ted Hope has been arguing the indie film world needs to adopt staged investor financing to get more people investing in film.

It would support the kind of structure where, say, of 1,000 scripts or ideas that got funding, 200 might be supported to to do pre-production & shoot a promo, 100 get shot, 50 get full post-production and packaging for delivery and 10 get extra marketing and distribution support. Investors at each stage would be taking a smaller risk and would be putting in larger sums of money – while the backer who’d taken a risk and made a good choice at the initial idea stage could stand to make a bigger share of any profits.

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Film's monopoly problem

Not before time, the new year started with some promising news about selling films online. For the first time, the annual decline in DVD and Blu-ray sales in the US has been outstripped by the growth in digital sales, rentals and subscriptions. Home entertainment rose 0.7% in 2013 (PDF source). $6.5bn – over a third of total consumer spending – came from digital rental, retail and subscriptions, with download-to-own rising a hefty 48% on 2012. The figures don’t even include subscriptions bundled with other services (like a cable company’s deal with Netflix) or advertising-supported VOD like Hulu or YouTube.

Of course, a chunk of this growth has been for television and traditional film, and the biggest beneficiaries continue to be the studios and large rights owners. For independents – as Scott Harris detailed in his frank description of the struggles self-distributing Being Ginger – digital distribution is typically a lot of work for limited gains. Why is this?

Indeed, why – unlike many other industries online – does the small, agile film producer not have a bigger advantage online over the studio giants? If film behaved like publishing, software development or countless other industries, then being a small, low-overhead, low-budget independent outfit would offer a significant upside over being a major film studio. Standard network effects online have consistently empowered the garage-based agile and innovative players, who not only compete with, but out-sell ‘legacy’ businesses in their industry. 

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Understanding DRM: back to the days of Edison & the Motion Picture Patent Company

The monopoly that created the independents that created the studios

Imagine having to pay a license fee every time you filmed something or screened your work. At the start of the 20th century, the Motion Picture Patent Company (MPPC) in America controlled patents around cameras, film and projectors, and demanded fees for anyone screening or filming anything. The MPPC were able to dictate what could get filmed and screened, telling a young Alfred Zukor who had just bought the rights to a big French success: “The time is not ripe for features, if it ever will be” (as described in Timothy Wu’s excellent Master Switch).

Zukor, who would later head Paramount, became an early rebel who refused to play along, as was Carl Laemmle who declared himself ‘an independent’ – the first to use that name. Laemmle wasn’t independent for long, his company Universal became one of the biggest studios on the planet, as did those from other ‘rebels’ and ‘independents’ Willhelm Fuchs (20th Century Fox) and the Warner brothers Jack, Sam and Henry. When Laemmle started to make ‘independent films’ without paying a licence, he was sued 289 times in a three-year period by the Edison Trust, and eventually fled New York to the west coast with Fuchs, Zukor, the Warners and others, further from the MPPC ‘spies’ and lawyers, and closer to the Mexican border if a quick escape was needed.

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Lessons from TV: pirates compete on 'quality, price, and availability'

Perhaps no sector has been more involved in shifting the debate around video piracy than the TV industry. It perhaps began in late 2006, nine months after Steve Jobs had sold Pixar to Disney, joined their board and become more involved in their operations. Disney co-chair Anne Sweeney declared at a conference that piracy was not simply a threat, but a competitor – that pirates competed on quality, price and availability. On all of these levels, she recognised, Hollywood was losing: "We don't like the model but we realise it's competitive enough to make it a major competitor going forward." Hulu launched five months later and competed on all three levels with free, ad-funded, flexible streams; the BBC’s iPlayer arrived not long after.

Piracy "better than an Emmy"

Then in August 2013, Time Warner chief Jeff Bewkes appeared to jump the shark when he announced that piracy was "better than [winning] an Emmy." Time Warner/HBO’s Game of Thrones is one of the most-pirated TV shows of the last few years, and possibly one that has gained the most free marketing from piracy. "We’ve been dealing with this issue for literally 20-30 years," Bewkes said. "Our experience is, it all leads to more subs."

The difficulty with Bewkes’ argument, when related to independent feature films, is that he’s talking about episodic TV. A percentage of the people who got hooked on early episodes and seasons of Game of Thrones, Breaking Bad or The Walking Dead through pirate copies will subscribe to channels and services offering the latest episodes so they can watch them first. Their fandom expressed on Twitter and Facebook also builds awareness and might convince their non-pirating followers and friends to tune into those channels.

But one-off dramas, documentaries and features can’t benefit from these effects; a pirate stream or download will rarely translate into further money for the filmmaker other than occasionally through a future crowdfunding campaign, or platforms like Vodo or BitTorrent that let people Donate-After-View (DAV).

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Subject of new doc Dead Donkeys jailed in Ethiopia on 'terrorism' charge

Dead Donkeys Fear No Hyenas website screengrab

Last year I built the website for a new documentary due to premiere this year about the issue of land-grabbing in Africa. I'd first been introduced to the production team at an remarkable week as part of the Swim Lab, and been struck silent as the director, Joakim Demmer, explained in plain terms how while we are sending billions in aid to countries like Ethiopia, we are also, inadvertently, helping big foreign companies take people's land, throw them off it, and even imprison them if they complain. I still can't quite believe this happening, inadvertently with our help - and so can't wait to see the film which explains the process. At a time where economic migrants are coming from so many countries where the locals livelihoods have been ruined this issue would seem to be one of great relevance to anyone trying to offer a solution to the #migrantcrisis other than 'let them drown' or 'let them come here'.

Anyway, in clips from the film, Pastor Omot Agwa, explains his dreams of creating a safe national park after a million hectares of indigenous land was sold off to investors and the people who've lived there for generations, kicked off. Omot talks about not fearing death as much as fearing torture, but now he's now been imprisoned, facing both his own - and the filmmaker team from WG Films' - worst fears He was arrested while heading to a workshop about food security - he's never, as far as I know, had any link to anything other than peaceful campaigning. But he's now facing charges of terrorism simply because he dissented! How can that word be an acceptable label given to an activist in a country trying to be taken seriously in the world. In my simple understanding, because Ethiopia participates in world trade, whose coffee, music and culture I was drawn to, it is hard to reconcile. Lem Sissy's R4 Homecomings where he described traveling to Addis Ababa were brilliant - I sat in the audience for one rehearsal.

A million hectares of indigenous land has been sold off

But this is someone seemingly standing against a cruelly corrupt sector, driven with bribes, backhands and lots of foreign meddling. I'm very naive about these things, and perhaps I'm missing something, but clearly he shouldn't be in prison for trying to go to a workshop in Kenya. Is Ethiopia part of the wider world or not? He's an important voice in helping us in the west figure out how to treat developing, majority-world countries like Ethiopia better. The only people who can suffer from his free speech are the rich foreign businesses (or perhaps the officials so dependent on their bribes as to not be able to cope without).

Dead Donkeys Fear No Hyenas - TRAILER from WG Film on Vimeo.

Anyway, it's still a bit unclear to me what the best thing is to do other than bring your attention to an Indiegogo fundraising appeal for the families of him and the other defendants. The families are worried for their security, and each have lost their income. Once their safety is ensured I imagine the next priority is to petition the Ethiopian embassies and relevant ministries for the release of Omot, Ashinie, and Jamal but imagine Human Rights Watch and Front Line Defenders, who are working to raise awareness around the case will suggest the best approach.

Meanwhile there's a number of issues that I think are relevant to us (in documentary, human rights or just with a heart):

  • If the subject of your documentary is imprisoned and charged with terrorism, perhaps because they spoke in your film, what should you do? Ideally before this happens.
  • To anyone who cares about human rights, what can we do about campaigners being imprisoned under terrorist charges?
  • And to anyone concerned by the ongoing migration and refugee crisis, or just rising inequality in the world, what are our responsibilities as relatively wealthy westerners, when the (unintended) consequences of globalisation can lead to significant suffering and injustice, to the profit of companies whose tax revenues fund our own services.

Still from Dead Donkeys Fear No Hyenas

Support the families of Omot, Ashinie and Jamal here: https://www.indiegogo.com/projects/support-ethiopian-food-land-rights-activists#/

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What is open source? Five analogies.

Open source is one of those phrases that gets thrown around, from the Cabinet Office now asking for it in government ICT contracts, to cyber-libertarians saying it heralds the start of a post-capitalist age. But what does it actually mean? And given how much of the for-profit digital world depends on open source - from Android phones to the Safari browser, Facebook’s servers to YouTube’s interface - is it another example of an economy wanting something for nothing?

In simple terms, an Open Source License allows people to view, modify, copy and share computer code, usually without restriction. To understand what that means in practice, it’s helpful to use five analogies:

Transparency: a car. 

An open source license is like having the right to lift your car bonnet to view the engine. If you use software but can’t see what it’s doing behind the scenes, then it’s impossible to know what it’s doing with your data or even if it’s secure. By making code viewable by all, it’s much easier to spot and fix security flaws and bugs, which is why many cryptographic and encryption standards are open source.

Modification: a house

Open source is like buying a house and being free to decorate it however you want, to build extensions or demolish walls. Closed source software strictly limits what you can do with it.

Accumulative: DNA

Like a genome that keeps evolving, or the way academia builds upon prior knowledge, open source is a way of ‘standing on the shoulder of giants’, by building on what exists, rather than starting from scratch. This applies to everything from coding languages to design elements, which can develop in an accumulative way, with anyone free to improve on the work of those previously.

Collaborative: a coop 

Like a co-op, but without membership. While code authors may still own copyright on their code, by providing an open license, assets are kept public and the user community can offer improvements, fixes, language translations, design improvements, documentation and so on. Eric S Raymond describes open source development as “a great babbling bazaar of differing agendas and approaches out of which a coherent and stable system could seemingly emerge only by a succession of miracles”.

Democratic: a landslide 

Like a democracy where anyone can setup their own country if they don’t like the leader. Open Source projects have core maintainers who have final say over the suggestions and contributions from the user community but if they aren’t responsive, people can ‘fork’ the software and build their own ‘branch’. The content management system Joomla, for instance, was forked from Mambo, after its owners started charging developers big fees.

— 

For the non-profit, coop or social enterprise sectors these principles dovetail with many values, and offer advantages. For the profit-world however, open source’s freedom around IP has created much debate about its strengths and weaknesses, with critics - and some companies whose models are threatened - saying open source projects offer worse support and less-developed user interface and documentation. In reality there’s a huge range in quality and business models - from a content system like Wordpress that powers 23% of the world’s websites (and made $45m in 2012) - to Wikipedia, where the ability for anyone to contribute is perhaps both its great strength and weakness .

What needs to be remembered, as the creator of the main open source license Richard Stallman says, is that it’s freedom as in ‘free speech’, but not necessarily ‘free lunch’. Some open source companies turnover hundreds of millions a year, and charge thousands for a user-license and support, while others depend on donations and goodwill. The community has depended on new business models, from crowdfunding (which helped build Facebook alternative Diaspora) to licensing features in the way Mozilla Firefox sells their default search box to Google.

Perhaps the most interesting part about open source is the contradiction woven into it’s heart: where it can be viewed as the idealogical end-point of both communism and of liberalism: it’s both both anti-private-property and anti-centralisation - yet it powers the hugely profitable private,and monopolistic digital economy. Either because of swimming against the current of free market capitalism - or in spite of - it’s proven remarkably successful at getting disparate groups of people who’ve often never met to collaborate on building something that no-one fully owns, but that frequently solves technical and engineering problems better than either the market or the state. 

And for that alone it deserves some attention.

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Site back, upgraded

Netribution 1 was great in that it was all HTML and a bit of CSS – 15 years on not a single page has ever been hacked and most of them are still there.

Netribution 2.0 launched in 2006 on a CMS and unless CMSs get regularly upgraded they eventually get hacked or break. This just happened here, so as tempting as it has been to leave this space as an archive and change nothing, reality refused: I had to either take the site down and lose everything, or fix it. It's been rebuilt from scratch with an upgraded dbse (to the shiny joomla 3.3), and the user profiles & community section is now offline as it would cost $99 to upgrade it - but overall I've committed to a responsive redesign that risks looking a little like a rebirth, even if it isn't. To preserve a past I would sometimes rather forget, Netribution 2 continues in some form. Hopefully I'll re-theme it soon.

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Why Selma's not a 'challenging race biopic'; it's much more

SELMA: How Peaceful Protest WorksThere's a rather funny viral doing the rounds by UK blog the Shiznit about what if the 2015 Oscar nominations told the truth, following similar posts they've done in previous years. I didn't feel like sharing it however because their poster for Selma ('Challenging Race Biopic: if you don't like it then you basially hate black people') troubled me somewhat. I had to see it to be sure - and no longer on the press list for freebie previews, I got my chance when Pathé's advertising on the #MLK hashtag alerted me to UK previews for Martin Luther King day (a rare case of social media targeted advertising winning me). And I came home compelled to write, because it feels there's a risk people might think the film was a biopic or even specifically about race, as opposed to a story about the universal struggle for justice, and methods to achieve that.

SELMA Shiznit posterTo be clear - I'm not trying to pick the Shiznit up for what it created - it was part of a trio of jokes alongside 'challenging gay biopic' and 'challenging disability biopic' - and perhaps the authors hadn't even seen the film. And of course if we were fool enough to try PC-one-up-manship, well Netribution published Andrew Cousin's spoof about September 11: the Musical barely weeks after the tragedy, while some of the cartoons we ran such as the crucifixion of Lars von Trier cut somewhat crudely - not to mention much of the crap I must have spouted over the years. However, in this year when BAFTA voters refused to grant Selma even one nomination (despite a mostly British cast - from MLK and his wife to Lyndon Jonson and the Alabama governor), and where the Academy Award voters gave it only two - there seems a real danger that people think the Shiznit poster is accurate and don't get round to seeing the film. So for the avoidance of doubt:

  • Selma is not a Biopic. A biopic is the story of someone's life - true for Theory of Everything and Imitation Game - but not Selma. Selma covers one episode in Dr King's life - the attempts to peacefully march between the city of Selma and Montgomery in Alabama to change the law around all Americans' right to register to vote, creating a piece of legislation considered the most effective civil rights legislation in America's history.
  • It's not only about Race. As a white guy I don't  want to labour an "and it's also about us!" angle, but Dr King campaigned almost as hard on poverty as on race, pointing out in the film how the poor white person is encouraged to be racist by the super-rich whites in order to keep the poor in general disunity, a theme as relevent today as migrants get blamed for a financial crisis not of their creation (and a view well expressed by a rapping Warren Beaty in Bullworth).
  • And while it's certainly challenging to watch parts of this film, witnessing scenes of brutal and senseless violence, it's it's also un-apologetically inspiring, showing - at a time where our news is full of scenes of violence, and terrorism - [SPOILER] that non-violence works [/SPOILER]. Massively, and perhaps disarmingly, to some people in power.

And it's this last point - that the film is a genuinely inspiring examination of the power of non-violent resistance, of mass protest in the face of brutal state violence - that should make all of us who care, more sensitive to any efforts to belittle such an important film. Whether that's the backlash from Lyndon Johnson's people that the film didn't present him as faultless (he came off pretty well IMHO), or voters of the awards ceremonies using that as an excuse (as if accuracy stopped Braveheart getting five wins), or even just this casual cynical-but-comic putdown of the film as just another worthy race biopic, as if to say we all need to pay lip service to it only to offset some privilege guilt - rather than, 'here is an inspiring TRUE story of how people uniting and acting peacefully changed the world' - as relevant today as ever, perhaps even more urgently so, given how successful Dr King was back then. And doubtless as unnerving to some people in power as it was then.

Ava Du Vernay by Marie MayeThere is, of course, another reason why the film is inspiring - from the perspective of this website's traditional focus - and that's the story of writer/director Ava DuVernay. Indeed if Netribution was still a weekly magazine rather than an occasional echo chamber for my lingering thoughts, I'd be doing everything I could possibly do to get an interview with her for a future edition - as she seems to represent everything good and inspiring about the independent spirit of filmmaker. It was only in 2008 that she quit her job as a publicist, and taught herself filmmaking while directing a documentary on a micro-budget, before making her narrative film debut in 2011. She self-distributed this and then made another feature - winning Sundance Best Director award (the first time it was ever won by an African-American woman), and self-distributed that as well, creating a distribution network for African American films to find and connect with audiences, creating a network of cities to screen in and group of backers for future projects. In short she's part of a new generation of filmmaker who, using modern tools and technology, and of course considerable hard work and determination) floated straight up through the a number of traditional glass ceiling. She talks inspiringly about how exactly she did this at the Film Forum (video).

And of course, there's still the tiniest of chances that Selma could become the fifth film in Oscar history to win Best Picture without a best director nomination - after Argo, Driving Miss Daisy, Grand Hotel and Wings - the voting doesn't take place for almost another month.

So please see this film and talk about it if you want to believe that change is possible but aren't sure how to achieve it, or if you have any doubt about the power of non-violence. You could also see it if you want to get a little better understanding of someone as significant as Martin Luther King, or even simply to watch a brilliantly-made and gripping film. Failing that, please just see it if you want to witness evidence of how much one person can achieve when they put their mind, body and soul into doing something for all the right reasons, be that Dr King or Ava DuVernay.

 

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