Accountability Issues
Experts such as music industry analyst Bob Lefsetz argue that there is little accountability with the practice of crowdfunding and lots of opportunity for artists to rip off fans by not delivering quality products.
Also, due to lax oversight, an artist who already has enough money to fund a project can launch a campaign for it anyway.
“Cynical people who already have the money [to finance a project] are using crowdfunding as a marketing technique,” Lefsetz says.
Strickler rejected the idea of implementing a “litmus test” that measures the wealth or financial backing of an artist before approving their project, saying, “It doesn’t matter how much money is in their bank account. If the world likes a project and wants to back it, that’s what’s important. We’re all grownups here.”
But to the extent that crowdfunding is still in its kid-on-the-playground stage, with very few rules and restrictions, the school bell could be ringing soon enough.
Many crowdfunding advocates have voiced optimism that President Obama’s Jumpstart Our Business Startups Act, which was passed in April 2012, will break open the dams by allowing entrepreneurs to solicit more money online. However, some analysts believe the rules––which the US Securities and Exchange Commission is still writing––will be too restrictive.
The JOBS Act will prohibit crowdfunding on websites that aren’t specifically registered for that purpose; sites will have to file disclosure documents with the SEC and an individual couldn’t invest more than 10 percent of their net worth into crowdfunding within a given year.
The federal government’s imminent crowdfunding intervention also begs the question: Will music fans still support the practice once it becomes uncool? Is crowdfunding’s maverick appeal in danger of wearing thin, especially as it becomes normalized through entrepreneurial conferences, LinkedIn groups, how-to books and meetup groups? Will it be dominated by well-established––and presumably well-off––celebrities like Zach Braff, who raised millions for a film project in mere days?
“Crowdfunding is a fad,” claims music industry analyst Bob Lefsetz. “People are going to burn out on it, maybe not in three months but perhaps in five years.”
According to Lefsetz, bands have proven that they can get their money from sources other than labels, which undercuts the establishment, “and that’s very exciting,” he continues, “but do I think that Kickstarter is the wave of the future? No.”
