Outlook: Blockchain-based Revenue Distribution and Crewfunding
Outlook is a series of case studies and presentations during Berlinale 2018, presented by The FilmTech Office and the German Film Producers Association (VDFP).
Big Couch is launching its new product FilmChain — a decentralised and transparent platform using blockchain technology. The revenue distribution platform supports film and digital content creators, by collecting revenues and automatically distributing them to all stakeholders, while lowering friction, increasing transparency and decreasing settlement times. Big Couch has established a reputation as a fintech startup energising the film industry with a unique finance model, CREWFUNDING, which helped independent film producers fund their films in the UK, Iceland, EU, and New York.
In the fourth part of our Outlook Series, we were happy to welcome our friends Maria Tanjala and Irina Albita, Co-Founders of Big Couch.
They began their presentation with a anecdote about the importance of friendship: they have known each other since the age of 5 in Romania, and emphasized that this connection has helped them get through the ups and downs of founding a company before getting validation and adoption from the market.
With their complementary skills and experience in film and tech, they joined forces to make it easier to get investment and set up their company together in 2014 in London. Now they are at the stage of launching a new product: a blockchain platform that transparently and efficiently collects and then distributes residuals to ensure that all stakeholders who invest in a film, or cast and crew who defer a part of their fees, get paid.
Specifically with regards to deferments, they highlighted the transparency aspect and promises made by producers:
“Some producers have the best intentions, but don’t know how to report revenues to cast and crew once the film entered distribution and was taken out of their hands.”
They have pioneered the concept of crewfunding, an alternative funding model which involves crews reducing their upfront rate through deferments in order to participate in profit sharing down the road. Big Couch has so far crewfunded six films using this model.
What Big Couch does is basically become the financier representing the cast and crew by pooling all deferments into one single position in the recoupment schedule. They don’t directly take and give out money yet, but instruct the collection account agent about these payments. However, one obstacle they face at the moment are the fees that come with the payments of residuals. For example, unless a crew member in the UK reaches a 500 GBP threshold in income, it won’t be released. Each payment also costs up to 40 GBP in transaction fees. Big Couch wants to eliminate thresholds and of course make fees lower.
The first opportunity to dip their toes into the blockchain sphere came as they got in touch with David Lofts from 21 Million, the blockchain television series, when the executive producer reached out via Twitter. This turned out to be a key moment for Big Couch. They realized the cast and crew behind 21 Million had an appetite for cryptocurrencies — together with a reduced cash rate cast and crew would get would also receive 21 Million coins, which allows them to participate in the future revenues of the film. They are currently crewfunding 21 Million.
It’s common to hear the panicked cries of the film industry, particularly independents, who say that they are not making any money. But according to Big Couch, statistics show that the independent film sector is making significant revenues. The question is, if revenues are there, who is splitting them, and how? How transparent is this process?
Enter FilmChain, the new blockchain based product being currently developed by Big Couch. FilmChain automatically collects revenue to distribute them to those involved in a production, essentially cutting out the traditional collection account agents, making this process transparent and efficient.
Irina described the blockchain as a distributed ledger technology. Every time a payment is made, the transaction is listed as a piece of code in this ledger. When another transaction is made, it’s chained to the first one, so on and so forth. What this brings is complete and full transparency on who takes what, and is a huge benefit for automatically splitting royalty payments.
In the collection agreements, the producer sets out what percentage each stakeholder recoups from the revenues (the pool of deferring cast and crew being one of the stakeholders entitled to revenues) and this is then turned into smart contracts. This whole automated process runs over time and in perpetuity, and it simplifies in a modular way the work of the producer.
Interestingly, they note that 75% of films made in the UK are made for less than 1.5 million GBP, and they are completely underserved by collection accounts in the market today. FilmChain will make it easy for the project owners to go on the platform, set the stakeholders and define the rules of the profit sharing. Each entitled stakeholder can later log in and see how much money they have on their accounts.
Outlining the support behind their startup, the ladies cited working with Imperial College London, experts in blockchain who are helping them to understand token dynamics, film industry luminaries, and platform experts. They have been fortunate to recently receive significant funding from Innovate UK which also represents a validation of their work by a governmental body.
Further clarifying confusion over the blockchain, in answer to a question from the audience, they stressed that the blockchain does not equal bitcoin, which is a volatile cryptocurrency. Big Couch’s tokens will be pegged to either the Euro, the US dollar or the GBP.
So what do their prospects look like for the future of Big Couch? They want to create a thriving, innovative ecosystem, helping to fund and promote films they love. They want to make available the data they collect on how independent films make money, including which genres are successful, which channels of distribution, which territories, etc.
Onto the Q&A session, one audience member asked about producers who are normally hesitant to be so transparent about things like contracts and revenues. The ladies answered saying they are aiming to build partnerships with people who are more forward-thinking and progressive when it comes to transparency.
FilmChain will offer a flexibility defining privacy settings for any recoupment schedule and putting that into contracts. They are in the process of building levels of privacy for different stakeholders. Ultimately, the privacy will be up to the producer to decide at the beginning of the process.
See here for the full Outlook Series program.
