Crowdfunding is a new financial instrument for funding entertainment projects online by attracting large affinity groups, or fans, to a Web site and capitalizing on their interest in a company or specific project in order to fund it. It typically involves a massive number of online fans, each of whom can purchase a small incremental interest, or participation unit, in an entertainment project in order to fund it.
- Entertainment companies that desperately need new capital for highly risky investments in movies, record albums and NASCAR teams, and,
- Their fans that desperately want to be part of the action.
Crowdfunding is already being used by a wide variety of online companies worldwide. For example, www.Sellaband.com and www.SliceThePie.com offer music fans the opportunity to invest in up-and-coming BANDS seeking funding for their next album. On these Web sites, a band posts a demo of their music that they would like to record professionally. If a fan thinks the band’s demo has promise, he or she can pay as little as $10 and buy a participation unit in the band and later receive a free download of the band’s album when it is released. The fans thereby fund the albums they want to hear, by buying them before they are made.
In addition to receiving their free album as a dividend, a fan’s “investment” in a band also entitles them to also receive some interactive benefits during the making of the album such as video downloads of rehearsals, printable autographed pictures, a free download of the band’s music video, contests to meet the band in person, or sometimes feedback to the band through online voting. A fan is also offered cash dividends from their band’s earnings, if it is successful. But perhaps even more importantly, the fans receive the tremendous satisfaction of knowing, that even in a small way, they are partly responsible for their band’s success.
What does the band receive? Most importantly: funding! No one need mention the difficulty (and cost) of launching a new band in the current market. However, even with major music company backing, many bands often die on the vine, never to be heard from again. With Crowdfunding, once a band is funded, it has a following…a massive following…and one that can certainly be monetized. Do you think for a moment that these fans that financed “their” band won’t buy a hat or a T-shirt? Do you think they won’t buy tickets to “their” band’s local concert? In short, what the band has received is instant loyalty from a massive number of their online fans that have a vested interest in, and a desire to share in, their band’s ultimate success. It is therefore a win-win scenario for both parties.
Another VERY important element of this scenario is that with Crowdfunding no one loses! The band gets a bunch of fans and the money necessary to please them. The fans get a product dividend (the album) that is worth their small investment. So even if the band’s album never reaches the top ten, or even fails to return the original investment necessary to make the album, neither party goes away completely empty-handed.
Crowdfunding can also be applied to MAJOR MOVIES.There are a number of companies worldwide who have already started Crowdfunding movies besides www.CinemaShares.com. Take www.IndieGoGo.com for example. This is a site for Crowdfunding movies on a smaller scale.
We must also mention one of the most successful online game sites related to Crowdfunding movies - www.HollywoodStockExchange.com or www.HSX.com. However, this Web site does not really finance movies, as it is just a game for people who want to pick which movies and which stars will succeed at the box office. The site is so successful that over 700,000 users spend an average of 30 minutes per day on the site, pretending to invest in movies. Word has it that they are developing a system to compete with CinemaShares.com for Crowdfunding movies in the not-too-distant future.
In the U.S., no one (that we know of) other than CinemaShares.com has perfected the mechanism of selling single shares of fully registered NASDAQ-listed stock in a movie to online fans through an IPO. We have developed our method of selling stock online using Direct Registration/DRS. Our online affinity groups replace the typical network of brokers working for investment-banking firms that underwrite the offerings. CinemaShares holds a U.S. Patent (# 6792411) for our new method of selling stock online and giving a free DVD as a stock dividend for each share purchased.
Like the other Crowdfunding examples above, our business method also builds and fully monetizes massive online communities around each entertainment company by offering each fan tremendous value for their single share purchase. In addition to their stock, participants in one of our offerings also receive such benefits as:
- Daily Video clips and pictures from the movie set
- Contests to be in the movie or have dinner with the stars
- Voting on certain non-essential but fun items
- Participation in online chat groups and forums
- E-mails from the stars and producers
- Special merchandise offers of discounted hats and T-shirts
- Discounts to affiliated retail merchants
- E-mailed autographed pictures of the stars
These benefits are in addition to the free DVD dividend and the cash earnings that each fan receives. We also provide a similar package of benefits to fans purchasing stock in our other entertainment projects such as NASCAR Teams.
The management of CinemaShares.com believes that we offer tremendous value for the purchase of a single share of our preferred stock and we feel that anyone would agree that this is a truly remarkable value for a mere $22 investment.
Crowdfunding is not limited to just bands or movies. It is already being applied to a variety of entertainment projects - wherever a large online affinity group exists.
Take for example FORMULA ONE TEAMS: Justin Wilson financed his F1 team through online stock sales to his fans, and was very oversubscribed (not enough stock to sell to everyone that wanted it). See: www.JustinWilson.com.
What about SPORT FANS? Well, take a look at http://www.myfootballclub.co.uk. Here is a football club in the U.K. owned by its online fans.
How about FASHION? Here’s a Web site allowing fashion fans the opportunity to finance a designer’s next extravaganza: www.catwalkgenius.com
How about thoroughbred HORSE RACING? Check out http://www.racingshares.co.uk/ where the fans can share in their horse’s winnings.
So why is this new financial model of Crowdfunding not being more widely used in the U.S.? The principal reason is that the world of online stock sales is a highly regulated environment. In the U.S., a company cannot take money from the public as an investment without registering with the SEC (donations are okay as long as no investment return is promised). Crowdfunding as an investment makes it necessary to sell fully registered stock to fans in order to receive their investment in an entertainment project. Due to the complexities of registering with the SEC and its extensive financial reporting requirements, most companies have tried to avoid selling stock here, and perhaps this is why the companies named above are outside of the U.S.
MediaShares.com has perfected, and has an issued U.S. Patent for our unique new method of Crowdfunding or Fan-financing. (# 6792411) Our business plan includes licensing our patent to owners of entertainment projects seeking financing.
For many more examples of Crowdfunding, click on this link:
http://crowdfunding.pbworks.com/
MediaShares.com would love your feedback on fan financing or Crowdfunding of movies. Please respond to Gene Massey, the originator of MediaShares.com’s unique and U.S. Patented business method by e-mailing: gene@CinemaShares.com or by calling (310) 476-3668
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