Crowdfunding vs Free

The digital age has opened a flood gate of experimental business models as indie filmmakers forge their way into the future. In one camp we have crowdfunding, that seeks money from fans before the film has even been made, and at the other end of the spectrum there are people giving their content away for free, hoping to upgrade a small portion to paying customers. On the surface these two philosophies seem contrary. However, I believe there's a way to harness the best of both worlds simultaneously.

Crowdfunding has two primary benefits: a) raising money, and b) creating a dedicated fanbase. The downside of crowdfunding is that the higher entry point minimises the audience size.

The key benefit of Free is that your content reaches a far larger audience, and a proportion of these will upgrade to paying customers. The obvious downside is the huge financial risk.

So, how do you gain maximum audience while minimising your own financial risk?

Let's compare a couple projects. Biracy and Fandom require a membership fee to participate. Before people are willing to part with their cash, they require a huge amount of persuasion, transparency, information, legal t&cs, etc. While I'm not sure how many people have paid for membership, going from Facebook, Twitter, and Youtube views:
Biracy - 856 & 453 & 1000 views
Fandom - 426 & 129 & 100 views 

In roughly the same period of time a mysterious indie project called The Artifice has a teaser campaign that has attracted 3,139,986 fans on Facebook and 106,395 Youtube views!!!

I would love to tell you exactly how The Artifice achieved this phenomenal following, however the filmmakers behind it are keeping their lips sealed until after it has been launched on April 5th. [Watch this space, as they have promised to fill me in afterwards.]

However, I can take an intelligent guess. It is so much easier for someone to sign up to something when it is free  - there is no psychological or financial risk attached. The Artifice didn't have to complicate the relationship with a huge amount of information, or contracts, or terms and conditions - they have only given a teaser campaign. 

It's not even clear if it's a film, or a game, or an ARG, or an art project, or a mashup... it's all so very mysterious. But, with no money on the line, it's something that an audience can happily join out of curiosity.

While The Artifice has not asked for any money from these people, reading the producer's website, it's hinted that there will be a crowdfunding element at some point in the future. I suspect that The Artifice will give some content online for free, building a community of fans around the project, and then request fan funding for a larger component to be created. 

This method makes a huge amount of sense to me. It's pretty hard to ask strangers for funding, but by first creating a community around free teaser content, building a relationship with a large audience, all you would need is a small proportion of these to upgrade for you to gain crowdfunding for the rest of the project.

Let's run some purely hypothetical figures: 

Biracy = 1000 members x $25 = $25,000

Fandom =  600 members x $25 = $15,000

The Artifice (3 million with just 5% upgrade to pay) = 150,000 x $25 =  $3,750,000

Even if The Artifice doesn't turn to crowdfunding, having 3 million facebook fans will open doors to other funding money. What investor wouldn't be impressed by a ready and waiting audience of that size?