Crowdfunding has experienced a tremendous year. Over three million people pledged more than $480 million dollars to Kickstarter projects alone. The overall global crowdfunding industry saw funding volume rise to $5.1 billion dollars, and grow to $15 billion by 2015. YouTubers continue to flock and leverage the crowdfunding model to support and offset the growing production costs to create, edit and produce videos for their fans.
Many YouTubers have successfully raised six figures from their fans. This didn’t go unnoticed by an industry that has had its fair share of problems with declining CPM rates, profitability and increasingly unhappy video creators. Whether to finance the production of a new web series or to boost the sale of merchandise, many YouTube MCNs are turning to crowdfunding to increase their creators’ bottom line.
What Makes Crowdfunding Attractive To MCNs?
While many YouTube creators think that MCNs are making money hand over fist, reality is that a lot of them are not breaking even (yet). Original content is a loss leader and is a risky business. For the most part, MCNs are facing the same dilemma of declining CPM rates and the increasing amount of quality content vying for viewers as independent creators do. Even creators with a million subscribers find it hard to get funding for new content, support their business off of AdSense and YouTube is no longer handing out grants to produce original content like they used to.
New funding methods are needed, and crowdfunding is emerging as the model with the most potential to generate new, sustainable revenue streams for content creators.
1. Get Funding From The Crowd
This is a no-brainer. Why pay for a production yourself if your fans, who love your content, can help support and offset production expenses. If an MCN can help their creators successfully raise money from the crowd, the MCN is supporting their content creator, which results in happy creators, happy advertisers & sponsors, higher production value, more content and higher CPM rates. Everybody wins.
2. Subscription Based Crowdfunding
Using what Tubestart has coined as “Subscription Based Crowdfunding” creators can set up monthly recurring campaigns that fans can subscribe to with a monthly contribution. Fans stay subscribed and automatically pay every month until they cancel their subscription. Each donation is stored as credit in the user’s perk wallet and as soon as enough credit is accumulated, it can be exchanged for a custom perk by their favorite creator.
3. Market Validation
Crowdfunding is not only about raising money, it also serves as an easy and cost effective market validation mechanism for new ideas. Running a crowdfunding campaign to see how many people are willing to get behind a project helps to mitigate the risk of failure.
4. Sell More Merchandise
Merchandise sales account for a significant portion of revenue for many successful YouTubers and MCNs. Custom shirts, hats, mugs or DVDs make for great perks that supporters actually like to spend money on. Key is to employ a platform with an automated perk fulfillment mechanism, that is fully integrated to create custom perks, increase funding volume and eliminate any and all hassles with fulfillment.
5. Revenue Split
All crowdfunding platforms charge a 5%-10% platform fee on all campaign money raised, varying across platforms and crowdfunding types. Innovative platforms offer a revenue split of this fee with the affiliated MCN for any given content creator.
6. Data Transparency
Using an API or CSV data export, creators and MCNs can access data on their supporters, including name, email, gender, financial and statistical information. This data is used to analyze and improve campaigns, as well as demographic purposes.
7. Innovative Brand Sponsorship Opportunities
MCNs are always looking to be innovative and have unique, high engagement deals for advertisers. Co-funding campaigns are quickly becoming a great new way for creators to raise 50% of their required funding goal from the crowd and get the other 50% from a brand sponsor who gets the benefit of being integrated in the campaign’s promotion and data transparency.
8. Non Competitive with AdSense
Crowdfunding supplements AdSense revenue, creates innovative opportunities for brand sponsors to come on board and allow creators to raise money directly from their supporters.
9. No Paywalls
Crowdfunding allows fans to support the content they love on a voluntary basis, and enables the creator to keep their content accessible to anyone. This ties in well with the open sharing culture of web 3.0, and allows the content to generate additional ad revenue instead of being hidden behind paywalls.
What Are The Challenges?
Crowdfunding for a tangible product or raising money for a feature film is a whole different game than crowdfunding for a web series. YouTubers’ campaigns need to be honed and catered for their audience, which is why platform choice is imperative in running a successful crowdfunding campaign. YouTubers benefit from being on a platform that gets YouTube and the struggles of creating original, compelling content, and therefore caters to their special requirements and opportunities, as opposed to being tucked away in a subcategory of one of the mainstream platforms.
Crowdfunding is a team sport, meaning everyone needs to be involved from friends and family, to the content creator and the MCN. Understanding how to leverage your crowd/fanbase/audience, crafting a story to ask for their support and providing tangible perks is essential to being successful. Crowdfunding is a very new alternative funding method that carries a lot of potential, but just like anything as new and complex as crowdfunding it must be well understood to be mastered and resources must be allocated to develop and run successful campaigns.
What’s Next In Crowdfunding For Web Series?
In October 2013 the SEC (Securities and Exchange Commission) released proposed rules for so called “Equity Based Crowdfunding” and “Royalty Based Crowdfunding” regulated in Title III of the JOBS Act. In a nutshell, all of this means is that it will be possible to raise up to $1 million dollars for a web series in exchange for a percentage of the royalties that series will generate. The final regulations are pending, but something along these lines will allow normal people like you and I to invest in a web series and get a share of the profit.
At Tubestart we focus on building the best crowdfunding platform for web series and YouTube creators. All we do is crowdfunding for web series, and we do it by offering all the same funding models offered by the mainstream platforms as well as our own funding models and unique features designed to help YouTubers run better crowdfunding campaigns and the best, hands on support in the industry.