Session 1 „Audience Development“
Between Fundraising, Crowdfunding, and Crowdraising
By Irena Alperyte and Lina Sakalauskaite
What is in common between fundraising, crowdfunding and ‘crowdraising’?
Since the regaining of the Independence, the Lithuanian state has been confronting an increasingly dramatic challenge because of the lack of funding for the film industries. Moreover, not only quantity but also the quality of the national films decreased. During the Soviet times Lithuanian film was a vassal of the Soviet film industry. Finance and marketing were non-existent in filmmakers’ lexis, and the state had a monopolistic responsibility to make movies. The filmmakers’ community of the newly independent state needed to learn new qualities such as fundraising skills, coproduction and marketing techniques.
Currently Lithuanian film is experiencing the third phase concerning its funding: it is exploring the possibilities of motivating the public to invest in entertainment via crowd funding and crowd sourcing techniques and creating a way to the ‘crowd raising’ out of these activities.
We have aimed to examine the existing film financing practices in Lithuania and abroad, and want to offer some recommendations on how to improve the alternative Lithuanian film financing strategy via employing new possibilities, such as crowd funding and other alternative marketing tools.
Our broad objectives were and in the future will be:
1) To examine the theories on creative industries and possibilities for their application: the creative industries theory (R. Florida); concepts of globalization (Z. Bauman); the networking theory (M. Castells); cluster concepts (M. Porter); the crowd funding phenomenon and fun theory (J. Schmidhuber)
2) To analyze the current situation in the film industry Lithuania: scrutinizing the Lithuanian film policy framework;
3) To analyze the statistical data, as well as data on the Lithuanian movie theater visitors and Lithuanian cinema demand;
4) To discuss alternative options for the financing system;
5) To look through alternative funding strategies tailored for Lithuanian film industry: influence of foreign models on the Lithuanian market; 6) To propose recommendations for alternative funding strategies to improve in Lithuania, exploring possibilities to apply more creative attitude towards fundraising.
The theoretical background: between fun and ‘edutainment’
Among other renowned authors, we have found the writings by Juergen Schmidhuber of particular interest and have been exploring his formal theory of creativity, fun, and intrinsic motivation. He has published more than 200 peer-reviewed scientific papers on topics such as machine learning, mathematically optimal universal AI, artificial curiosity and creativity, artificial recurrent neural networks, adaptive robotics, algorithmic information and complexity theory, digital physics, theory of beauty, and the fine arts. Schmidhuber’s findings encouraged us to look at fundraising processes from the unexpected angle (motivating investors). For instance, his work “How the Theory Explains Music” questions why some musical pieces are more interesting or aesthetically rewarding than others. He states that listeners and creators are interested in melodies that are unfamiliar enough to contain unexpected harmonies or beats but familiar enough to allow a quick recognizing of a new regularity or compressibility in the sound stream. This is a novel pattern in which the predictor tries to compress his memory of acoustic and other inputs whereever possible while the action selector tries to find history- influencing actions to improve the growing historic data and thus the performance of the predictor. The interesting or aesthetically rewarding musical subsequences are those with previously unknown, yet learnable regularities because they lead to improvements. This idea makes us look for ways to defeat mundane practices for the sake of original solutions, including fundraising that might be fun, which is actually working in a similar way.
We also examined the case study of the advertising agency DDB Stockholm. In 2009 it launched “The Fun Theory” campaign, an initiative to get people to change their lazy behaviors. The experiment showed that often humor is the vital component in making a business idea attractive. One of the videos documented the Fun Theory tested on a staircase in a Stockholm subway station that was converted into working piano keys—an attempt to convince commuters to take the stairs instead of the escalator. The idea is intriguing, and the results even more: apparently, it made 66% of the people more likely to use the stairs! For this reason, the videos are highly entertaining, and their Internet sharing has soared, some having accrued over a million hits.
The other essential to our findings has been Raph Koster’s thesis that games are all “edutainment”, teaching us the skills we might need in real life in a safe, low-stakes environment. A good game, according to him, is “one that teaches everything it has to offer before the player stops playing.” Making fundraising a “game” can help attracting more audiences and generating more funds for new movies.
Crowdfunding and the Lithuanian film sector
The existing schemes for film funding in Lithuania are very scarce and bureaucratic. The main sources are the Ministry of Culture and the Lithuanian Film Center that provides funding for film development, production, distribution, promotion, education, and the preservation of film heritage. State funding may not exceed 50% of the production budgets or 75% of a low-budget or experimental budget film. Not more than 20% of the Lithuanian state funding for film production may be used outside the country. Films produced under co-production conditions are given priority in allocating state funding. The submitted projects are evaluated by the Film Council, a collegial advisory institution of the Lithuanian Film Centre.
Statistics about Lithuanian film productions and consumption.
Published by Baltic Films and the Lithuanian Film Centre
To overcome these bureaucratic ways, we encourage spectators to “play” in the games, such as Kickstarter has initiated. In this context we discussed the “Kickstarter” internet platform and the Lithuanian movies’ participation as a case study in more detail. According to the statistics in 2012, Kickstarter was in the first place by supporting projects among this kind of platforms. The system here is simple: the initiators and developers of a project upload their description to the platform. In order to make a successful crowdfunding campaign properly preparations are needed in the following aspects:
- Financial goal. One should think realistic when it comes to money raising. Backers want to know what the amount of support will be used for.
- Idea and story. Campaign backers want the product to be amazing, and innovative, so a great story is needed.
- Being on top. A great project description, capturing video, and plot of the story to make a project stay on top will ensure the best visibility among potential investors.
- Communication, marketing and PR. Campaigns schould be briefly, straightforward and bravely presented to journalists, bloggers and influencers to bring a project out to the light of global media.
- Length of campaign. A golden midst has to be found to raise enough money and not keep the backers waiting and worrying about the products tangibility.
- Sharing updates. The initiators of a project are responsible to their investors and have to share as many updates as possible, whether related to product features, release dates, shipping and packaging etc. Social communication is essential in building up trust.
- Patents and trademarks. Patents to prevent the commercial exploits of an invention and the registration of a trademark make a product recognizable all over the world.
- Rewards. In a plan of how to thank the contributions every detail counts. It should show kindness and gratefulness. For every financial supporter to the project there should be a certain acknowledgement gift depending of the donated sum.
Taking account of these aspects will result in global awareness. A crowdfunding campaign can then shape the target market of future customers. It can end up making a huge impact on a product’s development, e.g. new partners or a investments from venture capitalists – a perfect opportunity to implement unconventional creative projects.
According to 2014 “Kickstarter” statistics, film and video projects are in the 6th place of successful projects that have received assistance percentage (40, 30 per cent). In our research we have examined the case of the short film “The Queen of England stole my parents”. This short Lithuanian movie had applied for a crowdfunding campaign. The plot is based on real facts about the lonely teenager girl Milda and her challenging journey to rescue her parents who were told to emigrate and abandon the girl. The main heroine of the film is a modern Pippi Longstocking, a lonely girl, who survives the story with a quiet realistic ending: she discovers the closest people surrounding her and learns her lesson. By taking part in the Kickstarter platform, the film collected 12,000 dollars in a period of 40 days.
Although the crowdfunding phenomenon is only counting its first years of existence in Lithuania, it demonstrates the potential of new forms of financing. Thus, this phenomenon is not only a substantial economic factor, but also a social one and not only helps filmmakers to achieve their financial goals, but also plays another function, e.g. helps to evaluate the creative process and the potential of the product, creates attention, and a fan base to ensure future support for the project. It is not perfect yet, because of the financial accountability the sponsors and analysts fear that their generosity can be quickly exhausted.
Analysis of Lithuanian filmmakers’ opinions on funding opportunities
Qualitative research as a method was chosen to conduct the structured indepth interviews with a total number of 10 experts of the field. With this technique we wanted to find out which methods of financing are known to Lithuanian film producers, and which ones are inefficient or have never been implemented in their fundraising process. The quantitative research included a questionnaire survey of the business sector in order to identify the criteria, which determine its motivation to support the Lithuanian film projects. This should help to construct further predictions of how the theories applied in the paper can suggest new ways for funding in the Lithuanian film industry. In the table below you can see the picture of the film producers’ understanding.
The interviews showed that Lithuanian film producers’ do know and see the opportunities that crowdfunding is opening to them to finance their work and put their ideas into practice. Nonetheless most of them haven’t yet tested crowdfunding themselves. The reason for this mainly seems to be the missing practice but most of the producers do intend to try a campaign when there is a project fitting into the conditions. This means, they are aware that not every campaign does work and that success highly depends on the kind of film and the effort that is invested in the promotion of the campaign. So to the filmmakers, state or regional funding, private support or sponsorship currently still seem to be more promising in comparison to crowdfunding.
Legal aspects as a challenge
The Internet portal of the Lithuanian Film Centre publishes data on main film institutions and their activities. To receive data comparable to the Lithuanian film frameworks, we checked the cases of crowdfunding in other countries.
The Finnish author Maija Oksanen says in her blog: “Positioned somewhere in the gray areas of economy, crowdfunding is not impossible nor illegal in Finland, but it usually involves handing over a hefty check to a legal adviser who can help a project navigate through the messy jungle of legislation and avoid stepping into the traps of wording’s and false expressions that could result in unpleasant dealings with the authorities.”
Lexia portal adds to it: “At the moment there is no separate specific law on crowdfunding in Finland, which means that many different laws have to be taken into consideration. Cross-border funding adds its own challenges, when funding is received from outside Finland. In these cases the legislation of other countries also has to be taken into consideration.”
For a better understanding we scrutinized portals such as Mesenaatti.me, the first Finnish crowdfunding platform that is open for everyone. We learnt that the beleaguered Finnish mega-production “Mannerheim” had incurred debts of nearly seven million euros, as revealed by the bankrupt’s estate administration. While the production was suspended in 2009 amid financial problems, dozens of creditors are still awaiting money from the production company Liberty Production. As this example shows, the legal knowledge and Copyright issues may hinder successful crowdsourcing campaigns and should be considered beforehand.
Summary of main conclusions
English writer, director and actor Jennifer Drewett summarizes the current situation for film makers that to make “a successful film, whether it be a feature film or otherwise, you have to go through very specific funding channels and major film companies in order to get what could potentially be your magnum opus into fruition”. She continues that a “magnum opus may not be the money generator that they (the state funding institutions and film companies) want to produce so your original idea gets altered, sometimes beyond all recognition, in order to be the crowd pleasing, money making product the company may want.” In this context websites like Kickstarter are opportunities to facilitate filmmakers’ financial situations and spread their artistic ideas, but they have to be aware that the chances of success aren’t high as “you rely on the good will of the public to donate money”, Drewett continues. That’s why “a film project, in order to get any chance of funding, needs to be interesting and necessary”.
For the film industry in Lithuania it can be concluded that
1) it is still developing, and the state financial assistance, although still necessary, in the long term, should be replaced by other sources of finan ce such as the business sector and foreign partners along with alternative sources, including crowd funding.
2) Film projects receiving public assistance should be focused on the advancement of criteria for filmmakers’ competencies, and include elements of activities providing more motivation and fun.
3) The crowd funding technique should be applied more extensively in Lithuania.
4) To run successful crowdfunding campaigns, legal expertise is critical along with business skills.
5) Producers should master the basics of entrepreneurship and the ability to assess the future revenue based on the customer involvement in fundraising, if they wish the Lithuanian film to be more competitive.
The film “You Can’t Escape Lithuania” by the Lithuanian director Romas Zabarauskas was successfully financed via Kickstarter in December 2014. The plot is around a fictionalized version of the director and his life as a gay filmmaker. It shows that film concepts of high political and artistical relevance as well as quality do have good chances to be crowdfunded and that even if they won’t change the whole film sector of a country they are able to change at least the situation for individual artists. That’s why the answer to the conference question „Is it all about money?“ in arts and culture is “Not Only.” The most valued and one of the most demanded features of the modern culture manager is storytelling skills.
Emerging Markets and the Digitalization of the Film Industry: An analysis of the 2012 UIS International Survey of Feature Film Statistics. 2013.
Lorenzen M., On the Globalization of the Film Industry. Copenhagen Business School, 2008.: