It’s hard to predict how important Kickstarter, the buzzy crowdfunding site, will ultimately prove to be (ask me in three years), but, for the moment, it seems to deserve all the accolades it’s scooping up. The bake-sale-at-web-scale operation is reportedly distributing cash donations to artists and other creative types worth about as much as the the total funding doled out by the National Endowment for the Arts — and Kickstarter is growing in a way the NEA is not. At a time when taxpayers and politicians are cutting back public support of the arts and many creative industries are in a state of uncertainty, if not disarray, having a simple means of pitching a project to millions of generous would-be donors seems like a godsend. The fact that Kickstarter is a for-profit company backed by millions in venture capital makes the phenomenon seem all the sweeter in a way. The rich capitalist and the struggling artist lie down peacefully together in the Internet meadow, like the fabled lion and lamb.
To all appearances, Kickstarter provides a welcome relief from the pervasive Web 2.0 digital-sharecropping business model, in which a company like Facebook gives people a little plot of online turf and a set of tools to work it, and then, through ad sales or other commercial means, reaps the monetary rewards from the combined labor of all its sharecroppers. The “users” who “generate content” for social media companies may attract attention or prestige as a result of the work they do, or simply gain the satisfaction of being part of a community, but what they don’t get is paid. Kickstarter, by contrast, gives the bulk of the cash it generates to the creators, with the company and its partners pocketing just a modest vig, a mere 10 percent of the proceeds. When we sign up with Kickstarter, it feels liberating, writes Josh MacPhee in the new issue of The Baffler, because we’re “rejecting the usual game of winners and losers that comes with capitalism and turning to a model that allows everyone to win — one that combines the freedom of self-employment with the shared experiences of community building.”
But is it really so simple? After MacPhee recently raised money for a project through Kickstarter, he began to get a little suspicious of the company. In his article, he peels back the layers of Kickstarter’s economic onion, and what he discovers is something a good deal less pure and a good deal more complicated than what appears on the surface. The company, he writes, “cultivates the illusion that when you use its fundraising tools, you are opting out of wage labor.” But in fact Kickstarter ”manages goods, services, and labor in ways that are quite familiar”:
The Kickstarter platform and website might not look like a shop floor, but when you are there, you are working. The exchange goes like this: rather than work for a wage with minimum protections and some semblance of benefits, you marshal all your friends, and their friends, to ante up small amounts of money for your project. If you reach your goal, you get to keep the money you raise, but Kickstarter peels off a dime for every dollar your family and friends chip in. Then a nickel of that dime goes to Kickstarter’s exclusive money broker, Amazon.com, for processing the financials. So Kickstarter’s gross revenue is 5 percent of all the money brought in by all of our projects. (On four recent, celebrated, multimillion-dollar projects alone, Kickstarter brought in more than $1,175,000.) Since Internet infrastructure is relatively inexpensive, the costs of running a website that doesn’t produce or distribute any material goods is limited. The scaling up of web traffic doesn’t translate to an equal scale-up in costs, and at a certain point, costs max out, and profit skyrockets.
But, still, you keep 90 percent of what you raise, assuming you reach your goal. That’s a pretty good return on your efforts, right? MacPhee has doubts:
Well, say you run a campaign for $10,000—somewhere between a third to two-thirds of what a struggling artist might make in a year. You send out thousands of emails about your campaign, post it on dozens of friends’ Facebook pages, send out lots of tweets, talk it up with everyone you meet, and try to get as many people as possible to do the same. You’re a popular person living in a major city, with an active social network and a compelling project, so you hit your mark—$10,000 is pledged. Kickstarter and Amazon take 10 percent right off the top, so now you are down to $9,000. If the money is coming in to you as an individual, Kickstarter treats you like a self-employed contractor, so it’s on you to figure out your tax burden and pay it, likely at least another 15 percent, so now you’re at $7,650. For a $10,000 campaign, you will have around 200 donors, of whom 150 will want rewards. If your rewards are physical objects, and you were generous in your offerings (a good idea when raising money), you’re going to have to wrap 150 packages, all of which need shipping supplies and postage to get to their destinations. On average, you’re likely spending $8 per package, so that’s another $1,200 off your total; so now you’re at $6,450. Within a few weeks a third of the money you raised is gone, and you haven’t begun to spend it on the project you were raising it for.
Odds are, MacPhee continues, you’ve probably also asked some of your friends to help you out with your little fundraising drive. That’s more unpaid labor — maybe a lot of it. You and your pals may not think of what you’re doing as “unpaid labor” — except maybe as a labor of love — but that’s what it is to the small group of entrepreneurs and investors that’s scooping the 10 percent off the top of what is, in the aggregate, a very large pile of money:
Kickstarter and Amazon made a grand sitting back and watching you do all that work. This is money they made not only on your friends directly paying it, but also on using you to tap into a deep-seated belief in our culture that volunteering is an important social value. Kickstarter gets its rentier-style money, you get a small portion to fund your project, and everyone else gets to bask in the glow of how wonderful it was for them to participate. What could be more exciting to venture capitalists and CEOs than a way to make money that on the surface seems completely non-coercive and non-exploitative of the raw materials, labor, and consumers involved?
MacPhee goes on to argue that Kickstarter isn’t all that different from a Tupperware-style pyramid operation. It grows by infiltrating its members’ personal networks of friends and acquaintances, through which it recruits an ever growing number of project-launchers and project-funders eager to donate their time and their money to the cause. Maybe MacPhee, in formulating his lengthy indictment, is guilty of overreaching, of finding nefarious dealings in every nook and cranny of what is, at least at some level, a worthy, socially productive business. Then again, when you have venture capitalists and entrepreneurs selling charity to the masses, it’s probably a good idea to do a little digging, to see who’s doing the work and who’s getting the money.