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Spare cash? Maybe you should back a Hollywood film

Spike Lee interviewed on CNBC at the NYSE, July 31, 2013
Spike Lee interviewed on CNBC at the NYSE, July 31, 2013

Hollywood filmmakers are moving online to raise funds through crowdsourcing, with even big-name directors finding it harder to fund their movies via traditional routes.

Oscar-award winning Spike Lee has become the latest high-profile director to take up the trend, announcing plans two weeks ago to raise $1.25 million for his latest film via Kickstarter, a crowdfunding platform where the public can pledge money towards the making of a movie. Lee follows in the footsteps of James Franco and Zach Braff, two other high-profile filmmakers looking to get their films financed through crowdfunding.

(Read more: James Franco joins Hollywood's passion for crowdfunding)

Lee told CNBC that his fans could use the platform to pledge as little as $5 towards his next film.

"I have amassed a base. So what I'm doing is going direct to the people, who've received humour, good feeling, joy, stuff to think about, and say, I've done this for you past, for as little as five dollars you can help me get my next film made," Lee told CNBC.

Users of Kickstarter have pledged nearly $60 million to film projects in the 12 months up until January alone. While it was originally seen as a way for independent filmmakers to raise money for their ventures, the crowdsourcing platform is gaining wider appeal with big name players.

(Read more: How Equity Crowdfunding Just Might Upend Film Financing)

Adrian Wootton, CEO of Film London, said that even established filmmakers such as Lee can struggle to find funding in an industry saturated with multi-million dollar budget blockbusters.

"Traditional models of funding are breaking down. Equity funding is harder to get. You can't get your budget in advance anymore through pre-sales. Therefore filmmakers are looking for any strategy that they can raise financing to help with their production which also isn't going to come at a tremendous cost," Wootton told CNBC.

He added that crowdfunding could also be used as a way of offsetting the financial risks of making films, because those who pledge money on platforms like Kickstarter are not entitled to equity in the production.

"If filmmakers can get 30 percent of their funding that isn't a commercial equity deal, it is kind of like free money," Wottoon said.

Crowdsourcing campaigns can be a way to do some market research and build or increase a director's fan base, said Olivier Kaempfer is the founder of Parkville Pictures, a BAFTA-nominated independent production company in London. He raised $22,000 through Kickstarter to fund the distribution of Parkville's first feature length film Borrowed Time, set to be released in September.

"You're building an audience that is there, who are giving money up front and you know there is a real demand for it. In a way, the film is made to order," Kaempfer said.

Those who donate money enjoy feeling connected with the film and the filmmaker, he added.

"When you're doing crowdfunding you're directly communicating with the audience and they are directly a part of the film getting out there. You feel that when it comes out, you are connected to the filmmaker. It reconnects you to the idea of what you're doing and you are engaging with the people you've made the film for which is exciting and energising," he said.

But prospects of a major impact on the status quo of movie funding may be overstated. Victor Fan, lecturer in film studies at Kings College London, said that crowdsourcing would not have a "dramatic impact" on the structure of the Hollywood funding market.

"Would it make a dent? It might," he said.


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