Should Kickstarter’s Commission Rate Be Reduced on Big Money Projects?

Nobody in their right mind would ever give a money finder a flat “finder’s fee” when the finder is raising large amounts of money (see “Lehman Formula“).  After the religious experience of the Amanda Palmer Kickstarter project, followed by Veronica Mars and Zach King, it occurs to me that Kickstarter is making too much money on these deals.  (This assumes, of course, that experienced Hollywood types just hand over Kickstarter’s 5% vig without question–which is itself a question, but one I cannot answer yet.)

When these stars–yes, the hated star system–come to Kickstarter, they could literally go to any of several sites to raise their money.  Or do it themselves as Lewis CK demonstrated.  The fact that it’s Kickstarter is of no significance at all.  Kickstarter’s 5% would mean it made $285,000 and counting off of Veronica Mars for doing essentially the same amount of work as they would do to make a documentary about Veronica’s dog.  (Because as we all know, on the Internet, their marginal cost would be zero, right?)

This isn’t to say that Kickstarter doesn’t provide a valuable service, but it is to say that the reason that Kickstarter made bank on these deals has nothing to do with Kickstarter, and everything to do with the brand value of the project that pre-existed the fund raising.

So Kickstarter should start taking less the more that’s raised like anybody else.  The normal Wall Street finder’s deal starts at 5% and goes down 1% in million dollar increments to a 1% floor.  Given that the vast majority of the projects on Kickstarter raise less than $100,000 and only 28 have raised more than $1 million, it seems that the reduction in commission should start earlier to be democratic so it’s not only the 1% who would get the finder fee reduction.

I don’t know what the right formula is, but what I know is that it is absurd for Kickstarter to be taking 5% of multi-million dollar projects to which they add no value.

4 thoughts on “Should Kickstarter’s Commission Rate Be Reduced on Big Money Projects?

  1. why use Kickstarter at all? it is after all a choice. I will be using indiegogo for my project.


  2. What are you talking about, Chris? It’s the Internet. Don’t you know you can rip people off with impunity here? [/sarcasm]

    Shouldn’t KickStarter be doing it for free anyhow, and use their limelight as promotion to sell T-Shirts?


  3. I think Veronica Mars (et al) will be writing that 5% off as awesome advertising. Forget the money, think about the traction you can get from a lot of eyeballs on (any) major websites. Since half the expense of a film is advertising, what’s not to love about advertising that pays you! (Yes, I’m sure google shares that shiney theory). No one is forcing anyone to use KS (there are viable alternatives) – I think a flat fee is fair, and transparent – and way more than many other sites can offer with their ‘mates-rates’ and under the table deals with major players.


  4. “Forget about the money…” now that’s a profound summary of online royalties if I ever heard one! Is that a Tim Quirk line?

    Perhaps there is value in “advertising” on Kickstarter, but Veronica Mars, Amanda Palmer, Zach King et al are already famous for various reasons (some of which have to do with distributors spending money to get the word out about them at different points in their past).

    The question is, why should a crowd funding platform make money off of that? It has nothing to do with them.

    I agree that whatever the rate is, it should be transparent, but a sliding scale is just as transparent as a flat fee–if it’s disclosed. And I don’t know that Kickstarter is doing a sliding scale deal in the background (what used to be called “under the table”). But I would be surprised if they weren’t.


Comments are closed.