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Berlinale 2018: Why the Blockchain Could Fundamentally Change How Business is Done in the Film Industry

Berlinale 2018: Why the Blockchain Could Fundamentally Change How Business is Done in the Film Industry

I recently wrote this piece for the film community at NoFilmSchool.com.

A new company is using the blockchain to help eliminate waste (and shady people) in the film industry.

[Author’s note: Prior to reading this article, it is advisable for readers to peruse the Wikipedia “Blockchain” entry or the briefer definition of Blockchain in Investopedia.]

Technology and the film industry have had a historically rocky relationship. 20 years ago, Blockbuster ruled the at-home video market and famously (or infamously) rejected the opportunity to purchase Netflix for a mere $50 million. Today, Netflix has a $120 billion market cap and is poised to dominate the film industry for years to come.

Yes, market leaders like Netflix and Amazon are surely experimenting with algorithmic programming and Artificial Intelligence (AI) in attempts to take humans out of the screenwriting equation to give viewers what the companies think they want. But there are other forms of technology that can help improve the independent film business and even have the possibility to revolutionize how films are made—and more importantly, how production staff from actors to directors to below the line crew are paid. 

Enter FilmChain, a project started by BigCouch co-founders Irina Albita and Maria Tanjala. The goal of FilmChain is to increase accountability and transparency in the murky independent film financing world by using blockchain, the underlying technology behind Bitcoin. However, during their presentation at the Berlinale’s European Film Market startup pitch event, the pair were quick to debunk the myth that blockchain and Bitcoin are one and the same. Let it be known, they aren’t! As an oversimplified way to distinguish them, Bitcoin is a digital cryptocurrency, and the blockchain was developed as a decentralized way to record and account for Bitcoin transactions which has now expanded to use for a variety of commercial applications.

FilmChain is a revenue collection and allocation platform operating on blockchain technology that aims to service film and digital content creators by collecting revenues and automatically distributing them to stakeholders. If successful, FilmChain will mean that one can say goodbye to loads of middlemen who take a piece of the pie during the filmmaking process. 

The benefits of the blockchain to help film distribution processes are many: global transactions are typically costly, frequently people don’t get paid for the work they do, and the accounting books on numerous independent productions either is non-existent or riddled with errors.

Manuel Badel of Badel Media in Canada discussed other strong points of how blockchain technology can improve the film business:

  • IP protection - proof of ownership
  • Digital rights management - registration, tracking, royalties
  • Contracting - automation and smart contracts between stakeholders
  • Collaboration - scriptwriting and product design
  • Micropayments - tokens, crypto, crowdfunding, royalties, recoupment
  • Content distribution - decentralization, trust, and disrupted distribution. 

Who will gain?

Who stands to benefit from this FilmChain technology? Anyone who works on a production!

What makes “smart contracts” revolutionary is that they are triggered automatically. For example, say you are a screenwriter based in America and your contract says you will get paid $10,000 on the first day of production of a film produced and set in China. Once that first day of production happens, your $10,000 will automatically be triggered and you will get paid. Contracts could be set up such that, for instance, three individuals confirming that production started on a specific day would be all that is necessary to send an instant payment halfway around the world. 

Who will lose?

And who stands to lose from blockchain technology being implemented in the film business? Shady film financiers who don’t make good on the payouts they owe, therefore stealing money from others who rightfully deserve it.

Of course, shady film financiers may never voluntarily utilize a system such as this one, but if FilmChain (or similar platforms) become the norm, then staff members on productions that do use this technology would stand to benefit. Film financiers would benefit too as the myriad bank transfers and other international payments they send would become much less expensive as the systems become automatic and tech-enabled.

FilmChain won’t be implemented overnight. But it and similar projects surely present a hopeful future. Anyone who has ever been screwed over by a shady financier or producer, or even has just waited far too long to get paid for freelance work, stands to gain if blockchain technology is implemented into the film business. 

 

 

Our bold attempt to create an asset class of documentary films

Our bold attempt to create an asset class of documentary films

A year ago, my business partner Maria Springer and I wanted to do something revolutionary: we wanted to turn non-fiction filmmaking into an asset class. Of course, when you are attempting to create an asset class, there should be reasons why one doesn't exist already.

But we remained bullish that the time was right for such an asset class to be born: with Netflix spending $6 billion on content this year and up to $8 billion on content next year, one could argue that there is a gold rush now taking place as Netflix, Amazon, Youtube Red, Apple, Hulu, VICE, HBO, and traditional TV networks all compete for similar wonderful content.

However, Maria and I made assumptions in our initial analysis that were incorrect: 

1. We felt that we could drastically reduce the amount of time it took to make or finish and distribute products from years down to six months.

Yes, we made EUROTRUMP and had it air within 9 months. But for one big reason this didn't happen faster: summer vacations. It seems like the entirety of the television and film industry (especially in Europe!) is on vacation for the summer months. We would frequently call and email people and discovered so many vacation responders. This isn't a critique of the entertainment industry: when I used to work in startups, people would also say things like you have two seasons to raise money, spring and autumn, but I didn't realize howmuch this effects film/TV projects. 

What's the fix for this? Plan in autumn. Shoot in spring. And, if possible, spend your summer months editing. Many people do this as they want to hit the Sundance Film Festival deadline anyway which is in autumn. However, this likely may mean way more competition for your film projects if they fall on a similar timeline to everyone else's. The real reason this isn't a proper fix though is that documentaries frequently take more time than this to shoot. Only very specific, niche projects with clear start and end points can be completed in this strict timeline. 

2. We also assumed that when we invested to finish the projects others had created that they would be used to our grueling pace and also want to get projects out there and into the world quickly.

Unfortunately, the traditional path for independent films to get aired relies on them going on tour through festivals. Many filmmakers like getting respect in the film industry by attending these festivals, but this is a process that takes a year or more. (Again, there are few credible festivals between June and September, so this is yet another reason why summer is wiped off the filmmaking map.)

What's the fix for this? My approach has been multi-pronged. While film festivals are a lovely way to reach generally elite, liberal audiences in cities, they don't necessarily equal $$$$$. Yes, a victory at a film festival or two might boost the prospect that your film gets sold, but some films like EUROTRUMP, about a controversial politician, are going to be way too divisive to win film festival awards. Yes, my interest is in making money on film sales after films are made, because I have never been the recipient of a filmmaking grant. (Maybe one day that will change, but at this point, I've had to hustle my way through the filmmaking world!) Thus, a fix for this problem is to be selling your film while it is going to film festivals. The two are not mutually exclusive, so long as your sales agent and/or distributor is amenable to this. 

3. We didn't factor in all of the personal and personnel risks involved in filmmaking.

Any film project is going to have major risks. Even if principal photography has been completed, there are still so many decisions from who to hire as an editor, what time frame the team will complete the project in, and how the film will be prepped for sale. 

What's the fix for this? This question, I really don't have an answer to. I wonder frequently, why do some feature documentary projects get completed while others don't? Yes, I presume films that have received mega-funding from grants or donors will get finished, but there are truly a plethora of risk factors. 

What risk factors can we mitigate against? First, we can make sure a team has a strong track record of working together. Second, we can make sure the film is far along its road to being finished before we invest in it. Or, as we learned by doing, we can just create a film from start to finish ourselves. Ultimately, this latter option was the most effective way for us to fight against the team-related risks.

Conclusions

After a year of trial and error, we determined that creating a proper documentary film fund, that would get investors profitable returns, like investing in real estate, the stock market, startups, or other endeavors does not make sense for the non-fiction film industry.

Though I am happy to report that we are in the black on our film EUROTRUMP, there are, quite simply, too many risks to guarantee profits. And the dozens of potential investors we spoke to about our ideas wanted to believe in our projections, but had trouble doing so. This is fair. (And the last thing I'd ever want to do is lose an investors' money!)

This said, like in venture capital, you don't need every film you make to be a runaway success. If you make 10 films, one can be a huge success, two can pay back their costs and then some, and if you have kept your costs under control, the remaining 7 projects can be utter duds. Yes, the above information took us a year to figure out (as we felt that we had to experiment and conduct our own practical due diligence before asking others for money), but we are extremely glad we didn't raise a proper fund on the wrong terms. 

This led us to our next big idea: impact investing in non-fiction films. More on that soon. 

 

A Year in Review: Adventures in Start to Finish Filmmaking

A Year in Review: Adventures in Start to Finish Filmmaking

I cannot believe how quickly the past year has flown by. Just over a year ago, my business partner Maria Springer and I graduated from the University of Oxford with our MBAs. We felt that the staid, old, complex film industry, especially documentaries, needed further disruption, beyond what Netflix and Amazon were already doing.

Armed with the lean principles we were taught in our technology and operations course at Oxford, we set out to make films at record speeds on record low budgets. And, as we learned in business school, it gets faster to make a film every time you do it. You will learn tricks left and right.

It took over 5.5 years from the time I landed in Perugia, Italy to start doing research for AMANDA KNOX until the film was released on Netflix. For our first OBSERVATORY project, EUROTRUMP, it took 9 months from the time we conceived the project until it aired on television on VICELAND in the Netherlands and Belgium and on the Dutch national broadcaster. This is a substantial improvement but there is more work to be done. If not for minor mess-ups along the way, we could've had this film ready three months earlier. But we will live and we will learn. We will make process improvements, And we will help others along the way.

Here are the key lessons we learned from making EUROTRUMP in 9 months: 

1. Run simultaneous processes: At its simplest level, this means if you are shooting a film you should also be gearing up to sell that film at the same time. This means start making trailers for your film while you are shooting it. It might be a pain, but as they say, "Show don't tell." 

2 . No deal is a deal until it is a deal. The BBC gave us a contract for this project a few months in. We thought we were set. We thought all was good. Then, the executive we dealt with over there went on vacation and all hell seemingly broke loose inside their headquarters. Our project became too controversial for them. And ultimately it was dropped. This was BY FAR the most stressful month for us over the past year. We didn't know this rule at the time, so we started coasting, thinking the BBC was a done deal and all was good. It didn't happen that way. 

3. ALWAYS BE CLOSING. As an independent filmmaker, your job is to sell as much as it is to create. If you don't sell your project, nobody will see it. And then you'll have an audience of 1. 

4. If you make something for $100,000 and sell it for $200,000 you've made a profit. If you make something for $600,000 and sell it for $200,000 you're very deep in the hole. This sounds logical, but too often I see filmmakers who want to raise loads of money, especially for non-fiction projects. If I can make a film for well less than $100,000, then you can too.  

5. Hire slow, fire fast. During the past year, we've had hundreds of personnel working for us on different projects at OBSERVATORY. It's been a major ride. I'm grateful that so many of the people who have helped us out are super competent at their jobs. However, we have also had to get rid of a number of people throughout the year, including interns, producers, and edit staff. It is painful when a bad apple, intentionally or unintentionally, ruins the whole bunch. There were many moments when I blamed myself or other people for someone's incompetence. (For example, if you start fighting with someone you previously worked well with, you have to look around you.) I hate to say this because it lacks scientific proof, but at some point, you have to GO WITH YOUR GUT. If you feel that a person is hurting your team or your efforts to move your project forward, you've got to get rid of them. This is the most difficult but also the most necessary part of being a manager. Once you are rid of your burden, you will immediately feel free. Having nobody working for you is better than having someone work for you who is incompetent and will waste all of your time. 

More observations coming soon...