Outlook: Blockchain Platform for License Trading of film rights
Outlook is a series of case studies and presentations during Berlinale 2018, presented by The FilmTech Office and the German Film Producers Association (VDFP).
Welt der Wunder TV, Germany’s leading knowledge TV broadcaster, is currently developing a blockchain-driven licensing, trading and distribution platform for high quality video content for international broadcast, VOD and online video publishing.
In the fifth and final talk of our Outlook Series, we had the opportunity to hear from Hendrik Hey, a German TV presenter and producer since more than 20 years. He created the Welt der Wunder TV network four years ago here in Germany and Switzerland, and has a wealth of experience in the roles of producer, buyer and seller of content.
“Content is the new software.”
Hendrik started off by stating that content is becoming more and more important, and the need for new tech to distribute content is key.
The next step? A blockchain platform for the media industry, a place where sellers and buyers can transact directly, without other intermediaries, making it easier to distribute, buy and sell content.
For this, the broadcaster has partnered with SWISS TXT, the technology arm of Swiss public television, who helped them develop the technology behind their video asset management system. They also work with Swisscom, a major telecommunications provider in Switzerland.
For those who buy or sell a programme internationally, dealing with a variety of contracts and legal cultures can be complicated and tiresome. But these contracts could be much simpler to deal with if there were some norm that was mutually agreed on by everyone.
That’s where the blockchain comes in. What Welt der Wunder TV aims to develop is a contract configurator on the platform where, for example, a producer who wants to sell a programme can input in the platform what programme, where they want to sell it, durations and any other important parameters. In the backend, a contract is configured automatically for the producer to use, which is then married to the content and becomes an offer for the buyer to see the contract and content.
He continues that the contract configurator will reflect 80% of the standards used in the market. There will be a process for new standards and demands as they come up, and they plan to work on these on an ongoing basis.
The issue the platform addresses is sizeable expense that comes with dealing with distributors as intermediaries for getting content to market, as they often charge a lot for their service, from 30–50%. The blockchain platform they are developing brings the buyer and seller together, saving money in the process by cutting out the intermediaires.
Diving into the tech behind the blockchain, Hendrik explains that it boils down to smart contracts, wherein chains of data that hold all the relevant information in a contract are brought together in a decentralized manner, and then shared in the community so it’s transparent, hard to hack or change, making it quite safe.
In other words, it’s a distributed ledger technology, with the ledger distributed all over the world.
He explains that the concept of smart contracts actually describes a function, in that it’s not really a contract, but a piece of code which allows you to define what that smart contract actually does.
For example, in license agreements, you write in certain specifications, such as the payment structure, delivery date, number of broadcasts, licence periods. The smart contracts reflect these specifications and autoexecute upon them, once the underlying conditions are fulfilled.
“A smart contract is a contract that executes itself.”
In terms of data management, Welt der Wunder TV developed the tech, but they are also a content producer. They have input all their content to the platform, over 30,000 hours of programming. There are other networks already asking to become part of the platform with their libraries.
Next he goes into jurisdiction. What is its place? He mentions that what they develop is meant to be something everyone can agree on, as they want to ensure fair play.
What the platform does it prevents conflicts. The contract is in the blockchain, and the producer decides what kind of transparency they want. They can make audiences their witnesses, which is particularly interesting if you’re a small producer filing against a big player.
Going forward, Hendrik explains they are in the planning stages for their Initial Coin Offering (ICO) right now. An ICO is a financing instrument modelled on the Initial Public Offering (IPO). Using this process, they will sell their tokens to a certain community and receive the money from those token sales. This ICO is planned to happen within the next 6 months.
The token they plan to sell is called MILC (micro licensing coin).
With regards to the ICO, they are not targeting standard investors. They have been talking to so-called bitcoin millionaires, stressing the importance of explaining the purpose of the platform and what they will do with the money. He mentions that if you do an ICO and sell tokens, there is the possibility to actually receive more money than you might want.
To ensure they do not go overboard with fundraising, he says that if they get more money than they need, the rest will go into co-financing of content.
From the audience there is uncertainty with regards to the function of the token on the platform. Hendrik stresses that the token has a professional function, for example if you input 100,000 EUR into the platform to pay the producer, that money goes directly to the producer. In the system there is simply an in-out exchange, with the money you put in remaining the same value all the time.
However as entrepreneur, the opportunity exists to make a decision to be a part of the speculation on a rising value of the token. It’s a new instrument in the market for people to decide, because the point right now is this is non-existent.
He illustrates this with an example:
The Director of Photography can decide to receive his fee and then that’s it. But he can also decide to get half of his fees in dollars, and the other half in MILC tokens. After he has shot the project he thinks that it might actually be good, so he maybe wants to be a part of the profit-sharing. He is aware of the possibility that the project creates high demand on the market, so he therefore has the chance to make more money.
Another question asks about privacy on the platform. Hendrik clarifies that it’s private when it comes to contract secrets, however it’s always up to the user. The platform doesn’t decide, and it’s not transparent if you don’t want it to be.
In terms of next steps for the platform, they plan to set up a layer on top of popular content channels like YouTube and Facebook, among others. The idea is to combine user generated video with a smart contract that says if you use the video, these are my conditions. You can, for example, decide it give it away for free, to charge 1 cent per view, or choose to share your marketing income. The decision is up to the content producer.
Hendrik describes how in the current media ecosystem, the media licensing space is a 500 billion EUR market. The advertising business: 10 times bigger. While their use case right now is mostly business-to-business (B2B), they know down the line they will open up new use cases.
On a final note, Hendrik describes the regulation process:
“If you do an ICO, you have to deal a lot with regulation. We did that, and we are under the impression that we will be defined as a utility token, which is not regulated right now. Our announcement will be around [February] 28th when we say how the ICO process will work.”