Cinema, entertainment and blockchain: An overview of international projects
The film industry and more generally the entertainment industry is discovering the blockchain technology through which it is proposed to find a solution to various market problems such as
- limited or difficult access to finance
- lack of transparency
- brokerage costs and delays in the chain of payments
- difficulties in the correct redistribution of profits
- lack of liquidity (no secondary market)
Indie productions are those that are most affected by the changes taking place in the sector (for example the distribution through Netflix style VoD platforms) and therefore the most interested in experimenting with blockchain, but also the Hollywood industry is attentive to this emerging technology.
To understand what are the guidelines and strategies that the “first mover” are implementing (excluding the music industry) I have analyzed 10 startups and projects: SingularDTV (US), FilmChain Big Couch (UK), Cinezen Blockchained Entertainment (SVE), Slate Entertainment Group — SEG (US Canada), MovieCoin (US), LiveTree ADEPT (UK), Treeti (US), StreamSpace (US), Ethereum Movie Venture (CH), LINO (CHN).
Based on the white papers (when present), on other information available on the reference sites and on interviews released on the web, I was able to get an idea of the — similar — approach that is being developed.
None of these projects is fully operational, and for the most part they are under development and / or fundraising, often with ICO (Initial Coin Offering) aiming to raise millions of dollars. They share the optimistic vision of becoming the “destroyers” of the current international cinema and audiovisual market, innovating the entire sector, from conception to production, from distribution to marketing. The promise of blockchains and cryptocurrencies to allow decentralization, disintermediation and new ways of financing and sharing profits makes them attractive and promising: it is the backbone of the technology infrastructure and business models analyzed.
The teams are mostly international and trained by professionals from the world of cryptocurrencies and blockchain (in particular developers), finance, media and entertainment.
The key point to which all converge is the transformation of the audiovisual product (film, documentary, series) into a digital smart asset through the process of “tokenization”. The mechanism is — in theory — simple: the various platforms create their own tokens, custom cryptocurrencies to be circulated in their own ecosystem. They are like chips that are worth within a theme park or a casino and that can be converted into other currencies, digital or otherwise. In turn, these tokens can generate other types of personalized tokens, linked for example to a single movie project.
In practice, all the platforms analyzed rely on the cryptocurrency Ethereum, the second for capitalization after the bitcoins (about 50 billion dollars of turnover in June 2018). But above all it is the public blockchain (permissionless) that first, in 2014, implemented the smart contracts and the possibility to create personalized tokens through the ERC20 standard. Currently there are almost 800 “sub-coins” based on this standard.
Tokens digitize the value of a project (a film, a documentary, a series) and this allows for various operations.
- Funding, through advanced crowdfunding: token (as we said also created specifically for movie project) are sold to users / financiers; milestones can be set which, if not achieved, lead to the blocking or repayment of funds to lenders.
- You can also distribute tokens to the contributors of the work (cast, crew, musicians, screenwriters, etc.).
- Redistribution of profits. Tokens are used for revenue sharing. They can be thought of as stock options, in which the value created by the work flows through its multi-channel distribution.
- Tokens may be converted into other cryptocurrencies (eg bitcoins) or into fiat currencies such as dollars or euros.
- Tokens can be exchanged in a secondary market, such as shares.
- Content and services within the ecosystem of the platform (which may also be extended outside, for example, partner cinemas) will be paid in tokens.
An important feature is that many of these operations — in particular the revenues sharing — will be automated thanks to tokens and smart contracts. Recall that these are “embedded” code fragments in a blockchain that allow automatic transactions to be carried out on the basis of established conditions: by simplifying, they translate into machine language the legal terms of a self-performing contract. Let’s say that my movie is available in streaming on the platform: for every visualization, a fraction of token will be directly credited in my digital wallet and at the same time, in proportion, other fractions of tokens will be transferred to the other contributors or financiers of the movie.
Thanks to smart contracts the rights management can be simplified and made more efficient with traditional constraints (by territory, by episode, by license period) or by new type.
As in the crowdfunding world, the community is particularly important in these business models. In the token economy, with a “gamification” process, user actions — how to advertise the movie on social media, write reviews or otherwise play an active role — can generate points to be transformed into tokens, allowing for profits.
Finally, the decentralized nature of the platforms will favor the elimination of geoblocking for the audiovisual content.
Not just online
The final goal is to make each distribution channel “hooked” to the automatic mechanism of redistribution of profits allowed by tokens: cinema, television, other VoD platforms, screening to events and shows. It is already expected that views on third-party platforms like YouTube or Vimeo can relatively easily turn into token fractions. Another step is ticket sales through tokens: in this way the revenues of cinemas and any type of event can be distributed and distributed easily and almost in real time. Slate with its SLATIX ™ service (tokenized ticketing application) is an example. Speaking of tickets, having a blockchain an “append only” system for the data associated with them also allows you to build an effective system to combat fraud and “secondary ticketing”.
Blockchain technology is also indicated to create sharing economy style services; SingularDTV has created Rentalist, a peer-to-peer Airbnb-style rental equipment platform, currently in beta in New York.
The distributed content delivery network
Tokens are also useful in another context. Several platforms intend to build their VoD service (in fact, of BVoD, Blockchain Video on Demand) through a peer to peer distributed network which allows to reduce the costs of traditional content delivery services. Users will be able to manage a node in the storage and delivery network, ensuring minimum performance requirements, for example in terms of storage capacity and bandwidth: in return they will earn tokens proportionally to the resources made available. Particular algorithms will calculate these gains according to technical and non-technical parameters, such as CPU usage, the availability to preserve file fragments for a certain period (each content is subdivided into small blocks) or to contribute to the distribution of the most popular contents (and therefore with files most requested by users).
Data available to filmmakers and creators
Another element common to several projects is to provide the creators of audiovisual content, always thanks to the characteristics of blockchain technology, a sophisticated system for analyzing the performance of their audiovisual content (perhaps integrated with machine learning systems) with useful metrics to decide sequels or future projects; usually these systems are only available to the managers of platforms such as Netflix, which is based on these to decide their content to be produced.
Analyzing the projects, what stands out is the desire to create an evolved ecosystem, in which the creation of the works, their production, their distribution and revenues sharing take place through mechanisms that are as automatic and interconnected as much as possible. This makes the system “fully operational” rather complex. The first steps are the most difficult, because the first works must be produced with a simplified mechanism that demonstrates the feasibility of the entire theoretical-technical architecture. Convincing some authors and producers to experiment may not be so difficult. Several jobs have already been produced or are in production. The critical mass of users will be more difficult to reach. Cryptocurrencies are generally increasingly used but they are not yet mainstream and are still surrounded by a halo of skepticism. Furthermore, their use, even within the analyzed platforms, does not have a sufficient level of simplicity for an average user.
Other critical issues concern, in general, cryptocurrencies, blockchains and ICOs: we can mention the uncertainties on national and international regulations, possible token taxation, security and governance problems, specifically in Ethereum environment.
Disintermediation, new accounting, financing and profit-sharing processes are the main reasons for the interest that the cinema and audiovisual industry have for blockchain technologies. Do not underestimate the possibility of micropayments, even of the order of thousandths of dollars, which can make the remunerations obtained through streaming services more advantageous for the creators of content.
It is possible that in countries where there is public funding, the interest lies also in an innovative management of the mechanisms of disbursement and control of these loans.
Even if you immediately aim at complex ecosystems, a winning move could be that of implementing a basic core of functionality (an MVP, Minimum Viable Product) that convinces both the operators of the sector and potential users of the potential of the new technology and the advantages that they can derive from it. In fact, at the current stage of the experiments, these systems seem to be promising to remunerate creators effectively, less than a system used by consumers of audiovisual content.