The Kickstarter Model
The approach of seeking funds for innovative projects has fostered a strong belief in the potential of crowdfunding. Through the internet, individuals with creative concepts can connect directly with those interested in financially supporting their realization—bypassing intermediaries entirely.
However, in the realm of online transactions, intermediaries do exist, especially regarding financial management. This fact became painfully clear for the crowdfunding platform Unglue.it when it received notice from Amazon that it would no longer process payments for campaigns aimed at releasing e-books from copyright restrictions. This situation underscores an emerging challenge as platforms like Kickstarter and regulations such as the JOBS Act push microinvesting into the limelight: What are the implications when backers are dissatisfied with what they believed they were funding?
Unglue.it collaborates with copyright holders to establish a price that permits their works to be shared for free under a Creative Commons license. The platform organizes campaigns to gather pledges sufficient to cover this cost. In a recent blog entry, Unglue.it shared that an Amazon Payments account manager had instructed the company to cancel all pending transactions, stating that Amazon would not be accepting new crowdfunding accounts at this time.
Eric Hellman, the founder of Unglue.it, noted that the Amazon representative indicated that at least one crowdfunding platform, Kickstarter, would continue to enjoy a relationship with Amazon Payments.
Amazon confirmed the disconnection from its payment services.
"We support a diverse range of businesses, but we have regulatory responsibilities as a licensed money services business," stated Amazon spokesperson Ty Rogers in an email. "Regrettably, Unglue.it’s model does not align with some other crowdfunding platforms and currently prevents us from fulfilling those obligations."
Amazon did not specify the regulatory concerns involved. Nevertheless, it seems plausible that the e-commerce giant may take issue with Unglue.it’s goal of making literature freely accessible. In its blog post, Unglue.it did little to allay concerns that its business model might threaten Amazon’s interests, suggesting that perhaps, "someday, billions of people will read unglued books and reflect on the years when Amazon had a monopoly over e-books."
Hellman expressed that he doubted the provision of free e-books was the core problem, remarking that "when introducing a new business model, established institutions often struggle to categorize you properly."
According to Amazon, its Flexible Payments Service, utilized by both Unglue.it and Kickstarter, is designed to give businesses comprehensive control over their financial processes. However, as crowdfunding becomes increasingly mainstream, conflicts between contributors and creators are likely to emerge. Unlike traditional e-commerce transactions, which are straightforward—customers either receive their purchased item or do not—crowdfunding introduces subjective meanings. For instance, your investment in an independent film could result in disappointment, or a company producing a highly anticipated smartwatch might falter under pressure, delaying delivery.
While removing copyright restrictions from an e-book may appear to be a clear-cut decision, other situations involving dissatisfied backers could entangle Amazon and similar payment services in disputes they prefer to avoid. It is likely that Amazon would ideally encourage potential backers to take a more conventional route to satisfy their desires for unique products: simply purchase them directly from Amazon.