The global film industry is about to face a wave of disruption from cryptocurrency start-ups that harness the power of blockchain.
The tremors of change were felt when the Netflix (NFLX) share price plummeted by over 20% after a sharp downturn in its subscriber uptake. Veteran production companies such as Disney+ (DIS) and Warner Media’s HBO Max are making significant inroads and retaking lost ground in an ongoing streaming war with Web 2.0 disruptors such as Amazon Prime Video (AMZN), Apple TV (AAPL) and Netflix.
However, the battleground for industry market share may have already shifted to a new front — the “wild-west” of cryptocurrencies and decentralised film, or DeFilm.
The advent of non-fungible tokens (NFTs), blockchain solutions and cryptocurrency transactions threaten to dismantle the traditional structures of the art world, global finance and the music industry. Now the winds of change have turned towards the bastions of the film industry and many analysts forecast that blockchain will shape the future of how films are produced, distributed and exhibited.
Crypto start-ups, such as Moviecoin.com, have ambitions to disrupt Hollywood by offering the chance for anyone to invest in film production and take a share of the profits via the blockchain.
The start-up was created as a response to the concentration of film industry power into fewer and fewer hands. Moviecoin’s long term goal is to break the power of the monopolies through decentralising and democratising the world of movie finance.
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The big tech monopolies that emerged at the beginning of the Web 2.0 internet development stage have moved from streaming content to content production, with the advent of Amazon Prime Video and Netflix originals. This narrows the variety of films that get produced and emphasises the pursuit of profit at the expense of quality and creativity, according to Moviecoin.
Moviecoin said it offers the opportunity for anyone to be a film financier and invest as little as they like through smart contracts deployed on the blockchain.
These transactions using the Moviecoin cryptocurrency (MOVIE) will remain transparent on the Ethereum (ETH-USD) blockchain, a public ledger where transactions are automatically executed without the need for human intermediaries.
A share of a film’s profit that is financed in this revolutionary new way can also be accessed by purchasing presale NFTs associated with the films. The Moviecoin.com platform already boasts productions starring Russell Crowe, Ray Winstone and Mel Gibson.
Moviecoin’s team leaders James Mackie and James Hickey told Yahoo Finance the new mode of film financing “will be a wake-up call for those few with the power to control the narrative of movies via production funding”.
Upcoming biographical movie Prizefighter starring Russell Crowe and Ray Winstone is one of the films being part-financed through the Moviecoin cryptocurrency and NFT pre-sales on the start-up’s platform. Moviecoin.com currently have the rights to make NFTs of the props from the film.
Writer and lead actor Matt Hookings told Yahoo Finance UK that it is “getting harder and harder for indie filmmakers to get a film made and seen”.
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He said that a decentralised film-making process “allows a new system that disrupts the status quo and gives more people a chance to make films that need to be seen by audiences”.
“We need to flush out the middlemen who don’t add value to the industry, but are still taking their piece of the profit.”
In the current film industry, “the middle ground does not exist”, Hookings said — with either big-budget monoculture productions with the same A-list talent or low budget indie features that no one ever sees because sales agents are so risk-averse.
Mark O’Connor, director of the award-winning Irish crime drama Cardboard Gangsters is also using the Moviecoin platform for crypto production financing.
O’Connor told Yahoo Finance UK that “crypto-communities have a power that is unprecedented, and if you get that passion supporting a film project, especially when they are incentivised because they have invested with the Moviecoin cryptocurrency, a lot of finance can be raised, and a ready-made audience is there for the film”.
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Getting an independent film seen by audiences is difficult, especially when big streaming sites are now mostly focused on original programming.
The process involves persuading a sales agent to sell a film’s licensing rights to distributors. These distributors then decide where and when the film gets exhibited in cinemas and on DVDs and television.
These days, the most lucrative deals are with the streaming giants, such as Netflix, Amazon Prime Video, Apple TV and Disney+. The trade is often relationship-based and both agents and buyers are risk-averse and it is extremely difficult to get them to select a film that isn’t led by an A-list star.
Brian Rose, founder of London Real YouTube Channel told Yahoo Finance UK about the struggle of indie filmmakers attempting to attract the attention of streaming giants. He said he pitched the feature-length documentaries he has produced, which include interviews with Jordan Petersen, David Goggins and Dennis McKenna, to Netflix gatekeepers “but unless it was produced by them or consistent with their branded material, they were not interested”.
He described the difficulties of negotiation with “third party agents, and if Netflix does pay you, you get paid over 36 months, but you are never shown any metrics of how many views your film has received, the Netflix audience metrics have never been transparent to the public.”
Netflix does not reveal how much they pay to host films on their platform, they also do not reveal the percentage producers receive from the films that they stream.
However, in a Web 3.0 blockchain-based distribution system data that was once private will be available to film financiers, so they can get an accurate picture of which films are doing well, and those that are unprofitable.
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This is important as the film industry is notorious for its creative accounting that can make a movie appear unprofitable, meaning that sometimes creatives involved in a film’s production allegedly do not receive their agreed profit share.
Hickey said that the transparency of the blockchain will allow audiences to also be investors and see “where investment goes and how the chain of distribution actually works which will lead them to comparisons with major streaming sites and ask why the writer of the film makes very little money”.
He said that in the current streaming model “those that make movies get a terrible deal, it’s borderline robbery of their hard work and years of experience, once the finished product is presented.”
Yahoo Finance UK asked Netflix for their stance on the rise of blockchain distribution and cryptocurrency financing, but the company said they “don’t have a comment to make about this story”.
In a decentralised film industry, digital rights management and royalties could be transparently tracked through the deployment of smart contracts. The smart contract takes the agreement terms of an actual paper contract and allows revenue streams to flow automatically from external sources such as audiences who purchase or rent a film to the intellectual property owners, such as the producers and screenwriters.
Moviecoin’s Mackie and Hickey said: “Smart contracts built into NFTs and MOVIE coin will ensure the rights are forever cemented on-chain, the record will always be there, the contract will ensure the owners of the IP receive the correct amounts.”
Another problem with video sharing and distribution platforms is de-platforming and content removal. When content is centralised on servers controlled by privately owned corporations, they have the power over which content is removed and which is promoted.
Because they are private corporations, there is no independent ombudsman to referee de-platforming disputes.
YouTube and Facebook (FB) are considered “private spaces” under US law, meaning freedom of speech within these spaces is not guaranteed by the state. A new precedent was set in US law in February 2020 that officially recognised YouTube as not being a “public forum”, and so it did not need to ensure users’ rights to free speech.
Media academics Sonia Livingstone and Peter Lunt said that protecting citizens from harmful and offensive material through regulation and moderation comes at the expense of creativity, freedom of expression and the rights of consumers to view whatever they want, whenever they want.
Rose said he thought his production company “would be de-platformed because of a controversial documentary led to a YouTube prohibited content warning and even a Dropbox ban”. For this reason, London Real “is thinking of a blockchain-based peer to peer distribution service”.
Hickey said that Moviecoin’s goal is to also “build our own decentralised distribution platform”.
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Thriller film Zero Contact starring Anthony Hopkins was reportedly the first feature film to be released via Vuele, a non-fungible token film distribution platform, in 2021. The digital artwork associated with Zero Contract is already listed on Opensea in the lucrative NFT resale market.
Some 18 NFTs associated with the Moviecoin backed film Prizefighter, consist of physical props from the movie alongside their digital NFT counterpart, have also made their way to the Opensea, the largest NFT market in the world. Each Prizefighter NFT purchased represents a 0.016% total profit share of the film. So, if the film makes $50m profit, each NFT holder will automatically receive $8,000 in profit paid via smart contract into their digital wallet in the Moviecoin cryptocurrency.
Raising film finance through presales of NFTs is a brand new way of raising funds. Hickey and Mackie said NFT pre-sales will “remove the intermediaries from the chain, there will be far more money in the pot to give to the creatives, the talented people that actually bring the movies to life!”
They said money will be more evenly shared between investors, producers and artists, so an actor from a movie would receive 25% gross royalties forever from any NFT sale using their image.
Web 3.0, also known as the decentralised web, is the latest generation of internet applications and services, powered by distributed ledger technology, the most common being blockchains. It is focused on prioritising user ownership of personal data and allowing seamless interoperability between distinct blockchain applications in an automatic way that undercuts intermediaries.
A metaverse is a network of 3D virtual worlds where users can socialise and purchase digital goods and services using cryptocurrency transactions.
Moviecoin plans to harness the metaverse to exhibit the content that they produce and distribute. The start-up has already purchased land in Sandbox, which is an Ethereum-based decentralised NFT gaming metaverse. There they plan to build a 24-hour virtual cinema where audiences can “take part in VR and AR experiences funded on our platform”.
Moviecoin said: “We are exploring multiple ways for fans to watch movies funded on Moviecoin in the metaverse, we envision galleries and cinemas offering exclusive pay per view content, with almost all revenue going to those that made the movies.”
Sandbox is in contrast to Mark Zuckerberg’s Metaverse where all user experience and personal data will be centralised and stored on an AI supercomputer, dubbed AI Research SuperCluster (RSC).
Hickey and Mackie of Moviecoin have urged the Web 2.0 streaming services and the traditional studios “to think about giving a better deal to the creatives, whether or not we challenge their position”. However, they surmise that these corporations are “big players with deep pockets and have large intelligent teams that won’t sit still, so for now we will focus on building something that helps as many people as possible get a better deal.”
The disruptive potential of blockchain technology has now reached the movie business. But, by its very essence of decentralisation and disintermediation, this new technological development is one that studios may not be able to adapt to.
The “golden age” when studio executives dictated what audiences watched and when they watched it could truly become, once upon a time in Hollywood…