COMMENTARY | Things evolve quickly on the Internet. When Facebook began, for instance, it was a social networking site intended for students at certain colleges and universities. Eventually, it grew to incorporate everyone. While this has led to many improvements and successes, some critics would say that it also led to some failures. Some critics even predict that Facebook is doomed over the long term, having become the hangout for parents and driving away the cool kids. Once something loses its “cool” factor web traffic goes elsewhere, spelling digital death.
Crowdfunding sites like Kickstarter and Indiegogo are at a critical juncture following a second major celebrity success: The Veronica Mars movie, resurrected from the defunct TV show through Kickstarter donations, is hitting theaters this week. In January, the Zach Braff film Wish I Was Here, another Kickstarter project, hit the Sundance Film Festival and distribution rights were quickly sold for millions. People are now wondering, says HLN, when profit-sharing for crowdfunders is appropriate…or expected.
Does it depend on the project and the wealth or status of its creators? Does it depend on the profits generated? Does it depend on the type of project? A plethora of questions arises that make it difficult to determine when a crowdfunding “donor” should be considered a crowdfunding “investor.”
Obviously, we are much more inclined to feel that wealthy project creators, such as celebrities or other elites, should reward their crowdfunding donors. But does a T-shirt suffice? Tickets to the movie that was made? Or, in the near future, will money be expected? We don’t want the one-percenters to be making big bucks from our donations scot-free. Heck, we’re not even sure if it’s ethical for rich people to be trying to crowdfund projects, anyway!
On the one hand, it may be unethical for wealthy one-percenters to not reward rank-and-file crowdfunding donors. On the other hand, however, it may similarly harmful and unethical if one-percenters do start rewarding those donors. Netizens cruising Kickstarter may start to only donate to the projects of the elite, knowing they are likely to get something in return. Why donate to a project by someone you’ve never heard of when your favorite celebrity might give you a T-shirt in exchange for your dollars?
Basically, crowdfunding is at risk of being overrun by celebrities and other elites who can use their name recognition, and promises of rewards, to soak up donors’ dollars and leave true “indie” projects penniless. What began as a way to help the little guy will have been co-opted by the wealthy. Can, or should, limits be put in place to help prevent this from happening?
Again, a conundrum occurs: Crowdfunding sites need press and publicity, which better occurs when celebrities use the sites. Be unfriendly to celebs and you run the risk of obscurity or, perhaps worse, bad press. It could also make entrepreneurs and philanthropists wary, worried that they might someday become “unwelcome” on crowdfunding sites if they pass a certain threshold of success or wealth.
So, what fair and commonsense limits could be imposed to allow elites to continue to use crowdfunding sites without ruining the chances of individual entrepreneurs and nonprofit creators? Answering the question quickly is in the best interest of sites like Kickstarter, which run the risk of having a tarnished brand in the near future.
One proposal would be to require project creators on crowdfunding sites to disclose their respective net worth and other sources of project investment. A second proposal would be to limit “rewards” received by donors, regardless of the net worth of the project creator or profit of the venture, thereby providing less incentive for crowdfunders to only frequent celebrity projects. A third could be a “donation-splitting” or “donation-matching” policy where celebrities and elites would be expected to contribute a portion of their crowdfunded revenue to a fund for non-wealthy projects. For example, a celebrity quickly raising a million dollars on Kickstarter would have a percentage of that placed into a fund for non-celeb projects.