$81,071 is a pretty nice chunk of cash.
It is an annual salary for many. It's the price of a high-end Audi. For me, it was the total price of my first house right out of college, a split level with a stinky basement.
For indie musician JJ Heller, it was also the amount she raised on Kickstarter last summer to make a holiday album, which came out a few weeks ago.
Yet, while the funding amount seems high (it was in the top 25 of all albums funded on Kickstarter last year in Nashville), the reality is that Heller ended up having to pay an extra $16,805 out of her own pocket to make the album.
The reason? While crowdfunding is one of the only avenues available for smaller companies, movie-makers, and indie artists to raise funds to even make a product, there are many hidden fees that most people don't realize are part of the equation.
Here are just a few of the expenses involved.
Heller says she paid an upfront fee for the campaign of $4,023. Then, because Kickstarter doesn't process credit card payments, there was an additional $2,827 fee.
As you may know, when backers decide to support a campaign, they pledge the money and it is transmitted and sent to the artist once the project begins.
But how do you even find backers?
That's another cost. Heller says the only way people find a campaign is with ads on services like Facebook. The total cost for that was $6,300. (By the way, many artists and gadget-makers are unwilling to list all of these expenses, and Heller plans to use Kickstarter again, but she also wanted to explain how crowdfunding is not so glorious.) Some backers did not fulfill their pledge, so there was a deduction of $605.
If you're keeping track, that's a total of $13,756 in fees--before ever striking a note in the studio or writing an original song. Heller says the cost of making the album was $49,400 in the studio (including producers and engineers); design expenses were $6,000; manufacturing ran $8,570; the cost of Kickstarter rewards fulfillment was $8,600. Then, producing more promo material like lyric videos and running more ads was $11,550.
In the end, Heller was left with a bill for $16,805 to make the album, even after the Kickstarter campaign. That means, of the $81,071 in Kickstarter pledges, she only collected $67,315 of that after fees but the album cost $84,120 to make.
It's not all bad news, though.
Heller says she would do the same thing again, even though a holiday album only sells for one month out of the year. Digital sales of the album will likely total around $15-20K and, for the past two months, packaged disc sales have run around $27,500 (which doesn't account for the cost of packaging, shipping, and labor to send the CDs). Streaming, which she says requires 2,000 plays to equal one packaged album, is also helpful.
"Speaking as a musician in an environment where fewer and fewer people are paying for music, my campaign allowed my fans to rally around a product they wanted to see come to fruition. In the end, that is what Kickstarter is all about," she says.
For Heller, the costs to make an album are high--and so are the crowdfunding fees.
But it's worth the effort and expense, because it creates a tighter connection with fans who are aware of the new recording effort.
"Crowdfunding is a win/win for indie artists and fans," she says. "Even though my job title is musician, what I'm really trying to do is build a connection between my listeners and myself. When my fans back a Kickstarter campaign, they have far more anticipation to see it completed and have a higher expectation that it will be great."
Still, do you feel the fees are too high? Is it fair? Post on my Twitter feed. I'm really curious about your opinion of if you've had a similar experience.