Max Mogavero - IHRTLUHC Apple, Google, Facebook Professor Smith March 3, 2014 A Defense of Crowdfunding To say that the

internet has revolutionized the way humans socialize with each other, educate themselves, entertain themselves, and conduct business would be a staggering understatement. From the creation of online social networks, the scope of video games, the capacity to gain almost any piece of knowledge known to mankind, there is no doubt that the internet has accelerated human evolution beyond measure. However, some people are skeptical that the internet is entirely helpful, or even mostly helpful. One writer in particular, Jaron Lanier, believes that the internets attempt to create an open culture has reduced the humanity of its users. In his 2006 book, You Are Not a Gadget, Lanier states that at the start of the 21st century, the internet became a platform for crowd-sourcing, and that This ideology promotes radical freedom on the surface of the web, but that freedom, ironically, is more for machines than people (p. 3). Lanier feels that by trusting the upkeep of information, and economic flow to anonymous masses, there is a reduction in the value of genuine, rich, and intimate human interaction that he associates with his ideal internet. Laniers concerns are primarily focused on how the music industry works, now that it can be bought and distributed through online sources such as iTunes. His hypothesis seems to be that the openness of the internet is making it difficult for individual artists to make a living because of the lack of focus on authorship. However, this paper intends to demonstrate that,

while Laniers concerns regarding the struggles of individual artists are valid, he is misattributing the cause to the openness of the internet, rather than the attempt to make an antiquated business model work in a contemporary open medium. To serve this thesis, I will first enumerate Laniers main concerns with the open culture on the internet, and how he believes they are reducing the authenticity of online content, and making it difficult for genuine creators to make a living. Next, I will explain the crowdfunding model and how it differs from the traditional industry, and why it not only contradicts Laniers. Finally, I will describe three specific examples of successfully crowdfunded projects across not only the music industry, but the film and video game industry. Laniers Laments, the Pitfalls of Open Culture There are three major objections of Lanier to open culture and its effects on the industry that I would like to address. First, Lanier believes that open culture decreases the focus on individual creators, and thus a devaluing of genuine authorship and innovation. Lanier states that Authorshipthe very idea of the individual point of viewis not a priority in this new ideology (Lanier, 47). Lanier considers the open culture to be a purely anonymous one in which users contribute to a collaborative project, without either an interest in being recognized for what they are contributing, nor an interest in the identities and personalities of the others who are contributing as well. He makes the analogy that instead of many people writing books, each of which presenting a unique view, the open culture is writing one big book with no particular point of view. Second, Lanier sees the open culture movement as a disruption of the intimate connection between a creator and their fans. He says that I have always wanted a simple

thing, and the hive refuses to give it to me. I want both to encourage reuse of my music and to interact with the person who hopes to use some of my music in an aggregate work. I might not even demand an ability to veto that other persons plans, but I want at least a chance at a connection (p. 136). Lanier here feels that the, because easily obtaining the content doesnt motivate the user of the content to form a connection with the creator, open culture creates a lack of meaningful dialogue between creator and the person adapting or using the content. In this way, the users desire to find deep meaning in the source of the content they consume, and the creators desire to influence the context in which they produce the content are ultimately unfulfilled. Finally, Lanier fears that the abundance of the internet reduces the value created by scarcity. He says about free file-sharing The problem . . . is not that you stole from a specific person but that you undermine the artificial scarcities that allow the economy to function (p. 102). The traditional industry model for music, films, and video games is a long standing one. By producing content which is physically limited by licensed distribution of products, the value of anything is determined by supply and demand. However, with the abundance of ways to use the internet to record, copy, burn, pirate, stream, upload, download, edit, etc., the supply is artificially inflated, making it difficult for individual artists to make money. How Crowdfunding Works Where Laniers argument begins to fall apart, though, is not in the presence of these downfalls, but in his accusation of open culture being the source of the problems. Open culture is a social movement by which content is freely shared and modified (Lanier, 3). Laniers issues with this movement focus on the lack of individual authorship, the lack of intimacy between the

creator and those experiencing the content, and that the internet creates unlimited supply, making it difficult to earn revenue. In short, open culture seems to be a disastrous model to Lanier. And it is, but only if one adheres to the traditional hierarchy of the industry. This traditional model of industry, Fig 1., is what the music industry, the film industry, and the video game industry have all used until the rise of the open culture movement. In it, the Publisher/Record Company/Producers provide a creator with funding for the project, they also
Figure 1

pay for advertisement to drum up interest in the market. Once the creator finishes the product, the publisher distributes the content to the market. The revenue is then distributed between the publisher, the creator, and other organizations who had a hand in the process. This is a reasonable business model, because it takes the pressure off of the creators, and allows for a well-established publisher to handle the technicalities. In addition, since it is the publishers substantial financial resources that are being used, a large advertising budget can reach a proportionally large market, and thus expect a good return. However, since the publisher creates demand based on the scarcity of the product, the publisher must control the intellectual property, and prevent it being exploited for unauthorized monetization. This is why open culture becomes problematic to the traditional model. When creators allow the market creative license to modify their work, the intellectual property can be used in ways that do not benefit the publisher, whose job is to distribute the content for monetary gain. Likewise, distributing the content for free means that there is at no

point scarcity or monetary gain, making any publishers investment have a 0% return , and thus there is no reason for a publisher to even invest in such a venture. Its easy to see why open culture is a senseless movement when applied to the traditional model. However, there is an alternative to this industry which works very well with open culture. And this is what Lanier fails to understand. Since the internet is by its very nature a platform for sharing freely, its next to impossible to prevent content from being distributed freely regardless of whether it was licensed to do so, therefor its difficult for smaller artists to make a living using the publication model. Crowdfunding, instead of combatting this issue with the threat of lawsuits, takes full advantage of the internets open nature and in doing so creates a very powerful means of gaining funding, advertisement, and profit, all while
Figure 2

maintaining the prestige of the authors and an

intimate connections with the market it serves! The crowfunding model, Fig 2., begins by the creators addressing the market directly, giving a pitch about what sort of content they would like to create, and subsequently asking for donations that will go towards funding the project. Once the creators receive funding, they create the content and then directly distribute it to the market. The crowdfunding model has a number of distinct advantages. First, the funding for a project does not come from a publisher, so there is no influence from a publisher in regards to the direction of the project. Thus the integrity of the creators as the authors of the content is maintained. Second, there is no security for the investment. So anyone who donates

understands that they may not necessarily see the project come to fruition. While this can alleviate the stress of pleasing corporate investors, the effects of failure are still there and provide proper motivation for the creators to create a valuable product. If they do not succeed in creating a product that the market is satisfied with, they lose the trust of their fanbase, rather than the trust of their corporate investors. However, this is better than the traditional model, because the creators are held accountable by their fans, rather than a board with is chiefly interested in profit. This establishes and maintains an intimate relationship based on trust between the creators and their fans. In addition to being investors, fans play another important role. Since fans are, by their nature, enthusiastic about the content of the creators, it is in their best interest to promote the content to others. In this way, even fans who dont invest directly into a project, will happily advertise to people who may become investors. In this way, fans become free advertisement and a self-sustaining market. One last advantage, is that in the traditional business model, the publisher takes a substantial cut. This means that even if the product is very successful, the creators only receive a portion of the profit. In the crowdfunding model, however, assuming that all of the donations made by fans are used in the development of the product, any and all revenue made post-release is entirely profit. This makes it a potentially lucrative business model that emphasizes authorship, establishes and maintains an intimate relationship between fans and creators, and optimizes profit by eliminating financial middle-men. Successful Crowdfunding There are plenty of examples of successful crowdfunding, but to better illustrate how it works across a variety of industries, I will demonstrate crowdfundings success as a whole, and

then show three examples of particularly successful ventures: one in the music industry, one in the film industry, and one in the video game industry. There are three major sites for crowdfunding projects. The first is Kickstarter, the second is IndieGoGo, and the third is RocketHub. According to its website, Kickstarter, since its foundation in 2009, has raised over $1,000,000,000 accumulatively. Thats right, one billion dollars! To put that in perspective, thats the unit in which the United States federal budget is measured. As far as film is concerned, its odd to imagine that people might pitch a film project on a crowdfunder, because its difficult for a market to predict whether they would like a film before its even in production. However, the independent film industry has experienced a surprising degree of success. Matt Vancil is a writer and producer for the company Dead Gentlemen Productions, a company that creates webisodes which are all released under a creative commons license. He explains that the strength of crowdfunding in the film industry is that is, out of necessity, it listens very closely to the desires of the fans (Vancil 2012). He uses Firefly as an example. Since Firefly was such a popular show, the backlash from the fans when it was cancelled created a lot of demand for the show to return. The fans, in fact, wanted to fund the continuation of the television show, and if it used crowdfunding, would have sustained itself. Another show Veronica Mars, was wildly popular. When it was cancelled, a Kickstarter project began to make a feature film and received $5,702,153 out of its $2,000,000 goal, demonstrating that fans are not only willing to fund projects that they want to see happen, but

they willing to virtually throw money at a project even when the project has successfully been funded. Another great example of successful crowdfunding is in the video game industry. Of Kickstarters 20 most funded projects, 7 are video games. Perhaps the most striking example of successfully funded video games is the space-simulator game, called Star Citizen, being developed by Roberts Space Industries, a company with no history, no prior games, but full veteran developers who have enthusiasm for producing a unique and groundbreaking game. They started a Kickstarter project for Star Citizen, asking for $500,000 to fund the production of the game. However, by the time the funding deadline arrived, they had received $2,134,374. Even after the project was taken down from Kickstarter to begin development, Roberts Space Industries continued to accept donations and by the beginning of 2014 had received over $40,000,000, which is 80 times what they asked for. To say that this is pure altruism would be misguided, the true power of crowdfunding in video games is that the creators can offer rewards to donors in the way of novelty items, or even some sort of recognition encoded into the game software, be it a character named after them, or the ability to directly contribute content to the games design. This reward, if offered to the mass market, would be ineffective, but because crowdfunding attracts people who are emotionally invested in a product, consider the opportunity well-worth the risk of investing. What of music, though? Laniers chief concern seems to be with the music industry, so how does the crowdfunding model work there? Independent musician Amanda Palmer proposed an album on Kickstarter asking for $100,000. She and her band received $1,192,793 by the end of the funding deadline. In a TED talk presentation Palmer made in 2013, she

described the crowdfunding process as being like crowd surfing. In order for it to work, when a musician falls into the hands of the audience, there must be an implicit and sacred trust between the surfer and the fans, because when there is, they will carry you with love and honor. But Palmer also highlights what holds the world back from truly making use of the crowdfunding power, and its the sense of pride, the feeling that by asking for people, you are admitting weakness. However, by asking, you invite fans to share in the experience of creating something, and developing a connection that is more intimate than any traditional business model can handle. Conclusion Initially, it is easy to see how Lanier objects to the open culture. We can see how collaborative projects may ignore the significance of individual contributions, we can see how the right to freely obtain and modify content might demotivate users from seeking to understand the creative source of the work, and we can see how piracy may undermine an economy based on scarcity. But as weve seen, the crowdfunding business model that grew out of open culture itself allows fans to directly interact with a creator rather than be filtered through the bureaucracy of the production business model, thus amplifying the individual above all. Furthermore, the fact that funds and content are exchanged directly between fans and creators, means that interaction and emotional connection is stronger and more easily inforced. And finally, while its true that open culture undermines scarcity, the internet makes scarcity impossible, and thus it is by embracing open culture that one finds that the culture is open because it wants to support. Amanda Palmer closes her presentation with a very powerful quote which captures the core of the crowdfunding and open culture philosophy. She says, I

think people have been obsessed with the wrong question, which is, How do we make people pay for music? What if we started asking, How do we let people pay for music? (Palmer, 2013). This highlights the most important aspect of crowdfunding. The production model operates under the principle that the market must be tricked into paying for something that they may not necessarily want. But crowdfunding starts with a democracy of money, where what people want the most gets more money than it even needs, and even so is created and supported by people who are intrinsically and emotionally motivated to respect each other, share a connection, and where money flows, but only, and especially, when it deeply wants to.

Works Cited Amanda Palmer: The new RECORD, ART BOOK, and TOUR. Kickstarter. Kickstarter, Inc., 2014. Most Funded. Kickstarter. Kickstarter, Inc., 2014. Star citizen. Kickstarter. Kickstarter, Inc., 2014. The Veronica Mars Movie Project. Kickstarter. Kickstarter, Inc., 2014. Lanier, Jaron. You Are Not a Gadget. New York: Vintage Books, 2011. Print. Palmer, Amanda. The Art of Asking. Ted Conference, LLC, Feb. 2013. Web. 3 March 2014. Vancil, Matt. Film + Music + Interactive Happy Hour, 29 Feb. 2012. Web. 3 March 2014.