Mob money

Crowdfunding to boom?


Tang Wei, who appears in Golden Era

American television network The CW scrapped Veronica Mars in 2007 as the teen noir drama was falling off in the ratings. The show’s diminished but loyal viewership then called out for a movie sequel to their beloved series. And their wish was finally granted this year, thanks to crowdfunding service Kickstarter.

The show’s star Kristen Bell (who plays the title character) launched a fundraising campaign in 2013. Incentives such as T-shirts and cinema tickets were offered to fans who would donate more than $10. Although its backers wouldn’t receive any financial return, the project sailed past its $2 million fundraising goal within 10 hours. Over 90,000 devotees contributed to the tune of $5.7 million. And thus in March Veronica Mars became the first crowdfunded project to reach cinema screens.

The project’s success has inspired other filmmakers to turn to websites like Kickstarter and the trend is catching on in China too. There, it’s not only about diehard fans resurrecting a much-missed franchise. Powered by the leading internet firms and trust companies, Chinese investors are looking at channelling some of their savings into the world’s fast-growing movie market.

Baidu is one of the internet giants that’s leading the charge. This month the web search company launched a film investment unit known as Baifa Youxi together with China Film Group and Citic Trust (both are state-backed leaders in their respective industries).

The first project raised cash for Golden Era, starring Tang Wei and directed by Ann Hui (see WiC251), and got flagged to investors as a Chinese version of Gone With the Wind.

Golden Era is one of the fortunate films scheduled for showing during the week-long National Day holiday period (see previous article). Baifa Youxi allowed investors to put up as little as Rmb10 ($1.65) but earn up to a 16% return linked to box office performance. The Rmb15 million funding target was met within minutes, raising a total of Rmb18 million from over 3,300 supporters.

Baifa Youxi offers multiple plans for investors. They can choose to bet on different income streams generated by Golden Era, (such as its internet broadcasting copyright fee). More personal perks range from getting the storyboards, free membership of Baidu’s video sites and even a personalised message from popular starlet Tang Wei herself.

Li Zimin, general manager of Citic Trust, told Xinhua that the crowdfunding initiative is a “win-win combination of the film industry and consumer finance”.

In April, e-commerce firm Alibaba also launched a similar crowdfunding unit known as Yulebao, which for the time being is focusing on financing TV content.

China Film Group is also hyping Baifa Youxi as a new platform for creative marketing. “It allows production firms and celebrities to understand the consumer better and thereby meet their needs. It is a good start to build a dream factory for different elites, investors and users,” the company’s CEO La Peikang said.

Movie producers aren’t the only ones reaching out to micro-financiers. Vanke, the biggest real estate developer by sales, is also testing the water. Last week, the property firm launched a crowdfunding project to invest in a single 100-square-metre apartment at one of Vanke’s residential projects. The apartment is worth Rmb900,000, Vanke claims, so investors that contribute to the Rmb540,000 fundraising target (the minimum commitment is Rmb1,000) can expect a 40% return when the apartment is then resold via an internet auction.

The results? More than 500 investors filled the fundraising quota in less than nine hours. Better still, the scheme helped generate huge publicity for the developer. More than 30 million netizens forwarded news of the offer on social media (prompted perhaps by the chance of winning film tickets by doing so). Similarly, Vanke’s scheme featured on the front pages of 120 newspapers, National Business Daily has reported.

Critics questioned the deal, however, including the China Daily, which classed it as a “publicity stunt that offers little real benefit to consumers”.

Strictly speaking, these crowdfunding projects fall into the scope of shadow banking, as most are effectively wealth management products sold through trust firms or insurers. The Securities Times said the China Securities Regulatory Commission is still compiling its rulebook on these schemes so as to provide a legal basis for the activity – so as to better protect the rights of retail investors.

Other observers wonder if crowdfunding might serves as another way in which policymakers might try to erode some of the dominance of the state banks in China’s financial sector. Conor Roche, a British researcher who is working to launch an equity crowdfunding platform in Shanghai’s free trade zone, told Forbes that the trend could kick off a new wave in crowdfunding that might leave European and US-based equivalents in the dust. Southern Weekend agreed. “It is going to be the golden era for crowdfunding in China,” the newspaper predicted.

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