Jeff Skoll, whose stint as the first employee and president of eBay helped him amass what Forbes estimates as a net worth of $3.2bn, likes to joke that when he started exploring the film business, a common piece of ‘encouragement’ was: “The streets of Hollywood are littered with the carcasses of people like you.” Eight years later the film-based social entrepreneurship venture that the Canadian launched in the face of much cynicism is still alive. It also appears to be still working on its plan to make a sustainable business out of movies that spotlight social issues. And the same can be said for the whole ‘filmanthropy’ movement of which Skoll’s company Participant Media is a leading proponent.

Mixing film and philanthropy isn’t a particularly original idea. Micro-budget documentary-makers such as Brave New Films and Cinema Libre have been doing it for years and lately global brands such as Gucci, which operates a finishing fund for socially relevant documentaries, have jumped on the bandwagon.

The movement has gained a higher profile, however, since attracting the likes of Skoll and Ted Leonsis, a senior AOL executive for 13 years who now chairs Monumental Sports & Entertainment, owner of ice hockey and basketball teams in Washington DC. Leonsis is worth in the hundreds of millions but boosting that figure to $1bn is on the list of 101 personal and professional goals that he keeps posted on his personal blog, Ted’s Take. Both men refer to their film ventures as ‘double bottom line’ businesses designed to make money while effecting social change.

Skoll says that the idea for Beverly Hills-based Participant, with its mission “to produce entertainment that creates and inspires social change,” stemmed from his early ambition to emulate authors James Michener, James Clavell and Ayn Rand by writing stories portraying the world as “a very small and interconnected place”. That ambition was later transformed into a plan to “use film and TV to get out to people in a big way. I thought about the films that inspired me, films like Gandhi and Schindler's List. And I wondered who was doing those kinds of films today. And there really wasn't a specific company that was focused on the public interest.”

For each of the documentary or narrative feature films it considers financing (or co-financing with another independent company or one of the Hollywood studios) Participant identifies an actionable subject and then creates social-action and advocacy programmes that audiences for the film can join through the company's TakePart website.

Leonsis, who is also a venture-capital investor and author of the self-help book The Business of Happiness, has explained that he finds himself “at the time in my life where I won't get involved in a company that can't do well by doing good. I ask for business plans from all of the organisations that ring high on product, on financials and its give-back to the community. And I have found that the more you're giving back, the better the financial performance. Not the better we do financially, then we'll be able to get involved in charitable endeavours.”

Leonsis started in filmanthropy – a term he claims to have coined – by producing the documentaries Nanking (about the 1937 massacre in China) and Kicking It (about the Homeless World Cup). But his current focus is SnagFilms, operator of a website that offers free worldwide streaming – with commercial breaks – of 2,300 documentaries, splitting ad revenue 50/50 with film-makers. Each film is linked on the site with a relevant charity and viewers can ‘snag’ and embed films on their own blogs or social-network pages, thereby putting the film in what the company calls ‘virtual movie theatres'.

Former National Geographic and Discovery Communications executive Rick Allen, who manages SnagFilms as CEO, says the model rests on the fact that “people really do care about what value systems the entities they're supporting have”. At the same time, he adds: ”Filmanthropy tracks well with corporate objectives that our sponsors have had and that others who are interested in corporate social responsibility issues have had.”

In a 2010 interview, Leonsis suggested that SnagFilms, whose investors include AOL co-founder Steve Case, is ”going to be a big business... This will become the YouTube for ‘good work’ movies.”

Maybe. But both of the big filmanthropy players are still evolving and neither has become a consistent profit-maker.

Participant made a strong start with its initial 2005/06 slate of films, which between them earned 11 Oscar nominations and one win and some decent box-office takes ($54.5m for historical drama Good Night, and Good Luck, for example, and $93.9m for oil-industry thriller Syriana). Al Gore’s global-warming alarm call An Inconvenient Truth really got the company noticed, though, winning two Oscars and earning $49.7m at the global box office, a huge total for a documentary.

The Gore film “did amazingly well at the box office and perhaps set unrealistic expectations,” says Mark Jonathan Harris, head of the advanced documentary production course at the University of Southern California's School of Cinematic Arts and a producer of Participant's 2007 documentary Darfur Now.

In 2007, political dramedy Charlie Wilson’s War became Participant's biggest earner to date with a worldwide gross of $119m. But more recent features and documentaries have performed more modestly. This year, Mel Gibson drama The Beaver, linked by Participant to a social action campaign on mental illness, was a major flop, grossing a paltry $970,816.

To stretch its resources, Participant in 2008 signed a five-year $250m film financing deal with sovereign fund-backed film venture Imagenation Abu Dhabi, though a recent report (on which neither party would comment) suggested that Imagenation does not intend to renew the deal. To reduce its reliance on outside film distributors, Participant in 2009 signed a non-exclusive worldwide distribution agreement with Summit Entertainment, the independent producer and distributor behind the massively successful vampire film franchise Twilight.

Skoll recently told The New York Times that he has invested “hundreds of millions to date, with much more to follow” in his film venture. He conceded, though, that because of expansion and the performances of its films, Participant has not made a profit so far. The company's chief executive James Berk explained to the paper that the company considers a money-losing film to be a success if it has more impact than a charitable donation of the same amount by Skoll – whose 12 year-old Skoll Foundation is said to be the world’s largest funder of social entrepreneurship.

Industry sources (the company itself didn't make executives available for interview) suggest Participant may be looking to develop a broader business model by moving into TV and publishing and by developing more mainstream narrative features. Last year, it got mixed results trying its hand at a family comedy, the $36.2m-grossing wildlife conservation- themed romp Furry Vengeance, and a horror movie, $54.8m-grossing chemical waste-related zombie outing The Crazies. And later this year it will be looking to make up for the disappointment of The Beaver with the release of Matt Damon/ Kate Winslet action thriller Contagion.

SnagFilms, which soon after its 2008 launch acquired independent film news service IndieWire, recently got a reported $10m injection from an arm of broadcasting and cable giant Comcast (owner of CNBC’s parent, NBC Universal) and venture-capital company New Enterprise Associates.

Investors, says Allen, “believed our central premise that you do well by doing good and that we are constructing a strong commercial enterprise but also trying to find ways for viewers, advertisers and others to work together to try to make communities stronger”.

The infusion is being used to redesign the SnagFilms website, add a library of narrative features to the films on offer and make some films available via cable TV companies’ video-on-demand services, iTunes and other mechanisms.

While it has been criticised by some independent film players for its ad content, SnagFilms did make a profit in the fourth quarter of 2010, and Leonsis said late last year that the company had tripled in value over two years. Because of the redesign and expansion onto new devices and platforms, the company isn't expected to be profitable this year, says CEO Allen.

But in the process of the redesign, Allen adds: “We've spent a lot of time and effort thinking through how we're going to make filmanthropy more robust.

“We're absolutely convinced we can do a much better job of it,” he goes on, “though we're delighted with what we've been able to accomplish so far.”

The future of the filmanthropy movement could well be shaped by the level of success or failure that Participant and SnagFilms achieve in the next phases of their development.

Experienced filmanthropy practitioners say that the movement will always occupy a niche position in the business, turning out low-budget, mostly documentary films, keeping costs to a minimum and steering clear of the mainstream industry by remaining self-reliant.

“That's the answer – everything being done in-house,” says Philippe Diaz, the French producer who heads Los Angeles- based Cinema Libre, producer of such documentaries as The End of Poverty? “We produce, we distribute, we do everything in-house from the poster to the DVD."

Yet the filmanthropy concept might find a place in the mainstream if it could be adapted to relatively broad appeal narrative feature films as well as documentaries, whose popularity, in cinemas at least, has waned since the days when Michael Moore's Fahrenheit 9/11 grossed more than $119m at the US box office alone.

Applying the concept to dramas and comedies can be a tricky process. Michael London, producer of Participant's acclaimed 2007 immigration-themed drama The Visitor and executive producer of the company's 2009 comedic thriller about a corporate whistleblower, The Informant!, confirms that a filmanthropist's need to highlight an actionable issue can sometimes clash with the desire of a filmmaker to focus on character and story.

“The key,” says London, “is to acknowledge that tension – which we often did, openly – and then figure out how you can dilute the sense of something actionable into something that works in a character sense. I personally, and the filmmakers I work with, don't want to make propaganda. And I don't think Jeff Skoll wants to either.

“What the more sophisticated companies like Participant have realised is that you can't go into it looking to only make movies to do good. You have to make movies that will do good and be good movies. Movies that people want to see and that will cover their costs."

As for Skoll and Leonsis themselves, even if they succeed in broadening the film filmanthropy concept, they’re unlikely to make second fortunes in the field. But neither, their supporters insist, will they end up as Hollywood's latest carcasses.

Both filmanthropists, says producer and activist Lawrence Bender, whose films have included Pulp Fiction and documentaries such as An Inconvenient Truth, “are pretty smart guys”. Bender describes Skoll as “a very good friend” who is “incredibly intelligent. Definitely no one's taken him for a ride. If he does do something that's losing money, he's doing it because he believes in the subject. He’s taken a risk, but the risk is based on something he believes in.”