What NFT means to the content model could be profound?

IBC365

NFT on the blockchain is being touted as a new format of content consumption and purchasing with profound implications for the current distribution model. No wonder Hollywood is taking note. IBC365 talks to two ambitious new NFT platforms including one aiming to be the ‘Netflix of NFT’.

https://www.ibc.org/trends/what-nft-means-to-the-content-model-could-be-profound/7953.article

Hollywood will be watching when Zero Contact, a new film starring two-time Oscar winner Sir Anthony Hopkins, becomes the most high profile feature yet distributed as an NFT (non-fungible token).

If its auction today, on 24 September, attains anything like the $69 million paid for the NFT of a digital artwork by US artist Mike Winkelmann (aka Beeple - pictured above) in March, then indie filmmakers as well as studios will sit bolt upright.

But it’s not the huge single sum paydays that interests Hollywood. It is the thousands, hundreds of thousands to millions of micro-payments in NFTs that represent a new pay model which gives studios – or any content producer – a direct line to an audience cutting out aggregators like Netflix in the process.

To some, NFTs are the latest crypto craze, hyper inflated as a status symbol for the crypto rich, a bubble that’s bound to burst.

Even Winkelmann can’t believe his luck: “he makes a variety of art crap across a variety of media. some of it is ok, but a lot of it kind of blows ass” he writes self-deprecatingly on his website.

Others believe the technology is already changing the economics of content creation and distribution for good.

“Entertainment media is dominated by subscription streaming services that configured the whole economics around their platform,” says Michelle Munson, founder and CEO of blockchain network Eluvio. “This blows that up.”

An NFT is a digital certificate of ownership of an object: text, image, video or audio clip, game item, even a tweet. While all these forms can be copied, the token can’t. The scarcity of the asset and the ability to track and authenticate ownership via blockchain makes it valuable.

“It is game changing,” insists Cameron Chell, co-founder of online platform Vuele (pro: View-ly) which is behind Zero Contact. “NFT is an entirely new revenue stream that is additive to [studio controlled] streaming and theatrical distribution in a way that protects everyone’s intellectual property. That is why Hollywood is standing up and taking notice.”

Experiments in crypto

We’ll get to grips with the particular business model for Zero Contact shortly, but it hasn’t come out of the ether.

The marketplace for NFTs first exploded in the artworld with Beeple’s Picasso-rivalling auction of a single work at Christie’s the tipping point.

Since then, there’s been a flurry of activity by media and entertainment companies exploring the space.

Most are piloting NFTs as a digital extension of the decades’ old collector’s market for film memorabilia. The format attracts fan collectors but many NFT traders flip their tokens shortly after purchase in the hope of raking a dividend as the NFT value rises.

Fox Entertainment, for example, invested $100 million in a “creator fund” for NFT to commercialise characters, background art, and GIFs related to the studio’s film and TV content.

Similarly, Legendary Entertainment launched two NFT collections to tie in with blockbuster Godzilla vs. Kong.

Ditto, Marvel Entertainment which opened a digital collectibles app operated by Orbis Blockchain Technologies. 

Fox also plans to mint and market NFTs for new animated series Krapopolis, claimed as the first studio content conceived with blockchain in mind.

Talent agencies are getting involved too. CAA is working with Google, Samsung and Sony, as well as major private equity and cryptocurrency firms to help facilitate blockchain in Hollywood. United Talent Agency just signed NFT art projects CryptoPunks, Autoglyphs and Meebits to its books.

Real money is being made. In a souped-up form of crowd-source Kickstarter, actor Mila Kunis raised over $8 million selling tokens to fund new animated series Stoner Cats  being produced by Kunis’ production company Orchard Farm Productions. Some 10,000 NFTs sold for 0.35 Ethereum (equating to $800 each) in less than 35 minutes.

The series will only be available to view by NFT holders, a tactic that increases its scarcity and fear of missing out and therefore value.

“The most interesting and experimental use cases for NFTs is crowd sourcing,” says Munson. “NFTs are sold and used to fund the rest of the production and where buyers also have influence on what goes into the production.”

 Eluvio, she says, is involved in two such projects and also has several major media customers “testing the waters aggressively as new way to reach audiences and monetise premium content.”

First among them is Fox Entertainment which has invested in Eluvio to power an NFT subsidiary called Blockchain Creative Labs that will be used to serve the broader entertainment market (not just Fox). Aside from Krappolis, Fox will premier one of its TV shows with tokenised media this fall. According to Munson, the show “will have a native NFT experience which is gamified.”

She explains the concept: “If I’m a fan of a TV show the game of collecting tokens can excite me to be part of the whole experience over the duration of a season. If I collect this token with the first episode toward a goal that is integrated into the storyline I will watch every episode in that season and I might also become a superfan to influence others online. This is a clear-cut example of tokens driving fan engagement through gamification.”

The company recently launched Eluvio LIVE, a streaming and NFT ticketing platform for concerts, controlled by artists. It was used to host a Black Eyed Peas concert and will live stream a Rita Ora concert end of this month.

“It becomes extremely interesting to look at direct distribution from source,” she says, suggesting that sports producers could tokenise (sell) the myriad of additional live feeds currently captured but largely uncommercialised direct to consumers.

“More aggressive than collectibles is the curation and distribution of content on the blockchain so a series is streamed to users who have bought NFTs. This could be by giving exclusive access to the content before it is released. It also enables a re-tradeable marketplace for fans to collect and demonstrate their community support.”

Munson and Eluvio business partner Serban Simu developed file transfer tech Aspera into a multimillion-dollar business acquired by IBM, winning technical Emmys for their achievement. With that track record and the investment by Fox, what she says should be taken seriously.

“NFT’s open up a new type of distribution window,” she says. “As soon as an audience has ability to directly consume the content by actually owning it, it becomes a new form of rights.”

Disintermediation and control

The upside for the content owner is “not giving away revenue to the streaming platform and also not giving away creative control.”

She says, “There are creators who have deeper control over their content who are deciding to distribute natively in – meaning no SVOD streaming. Right now, NFT is being used for content premiers [but] as it grows it will butt up against traditional release windows.”

This has potentially huge implications for the likes of Amazon, Netflix, Roku, Samsung.

“It disintermediates the platforms that have been traditionally needed by content owners to get to their audience,” Munson says.

“What NFT allows is anybody with equity interest in the content – think of it as IP with equity interest – to share in the full life cycle value of the content. This is really profound for the content industry.

“It is the ultimate control point for those who have a stake in content. That stake could be a creator, a producer, the network that aggregates and curates it. The key here is who doesn’t take a piece is the middle platform. In the media world these are the streaming platforms.”

To emphasise this point, she says that the content distribution industry has been built to a point where the platform itself is necessary to reach the audience.

“What this tech does is makes it possible for the creator to reach the audience without that the platform,” she says.

That includes Netflix, Amazon and other streamers that rely on licencing content to bulk their online libraries.

“Is [NFT direct to consumer distribution] an alternative to streaming? Absolutely. It will grow rapidly over the next months and years.”

Vuele models Netflix of NFT

The makers of indie film Lotawana claimed the first NFT sale of a feature film in March. The rights and world premiere were sold on OpenSea.io.

According to Screenrant, which broke the news, 1000 shares for each were made available, with the rights shares going for $1000 and the world premiere shares notched at $100. The film’s writer, director, DP and editor, Trevor Hawkins also self-financed the film. “We feel like cowboys on a new frontier,” he said. “It’s hard to believe we’re pioneering a new way for the film industry.”

Zero Contact’s NFT release is more sophisticated and higher profile, given the presence of an A lister like Hopkins. It’s worth examining in detail.

The pandemic themed feature was financed conventionally and conceived for routine release in theatres or sale to streaming platforms. Made under lockdown during 2020, it was filmed entirely by Zoom with the actor’s rooms as backdrop – a feat that would have remarkable in 2019 but less so with rise of the Screenlife genre. 

What’s different are the plans made by producer Enderby Entertainment to sell and market NFTs of the film in addition to cinema and streaming release.

It is doing so on Vuele, a joint venture between Enderby and CurrencyWorks, a publicly traded company that builds and operates FinTech platforms for digital currencies, digital assets and security tokens.

“I like to think of Vuele as the Netflix of NFT,” explains Chell. “You’ll have your crypto wallet to view and trade NFTs, there will be a digital collectible site and fan community all based on the film industry.”

He explains: “The distribution model that we envision with NFT is as an add-on to the traditional distribution of movies. It’s not disruptive. Vuele is where the initial versions [of a film] and unique associated will premier.”

Vuele plan a series of releases or “drops” containing exclusive NFT-backed content. The first 11 drops on 24 September include an NFT of the film, out takes and cast interviews – the sort of extras you’d expect to find in your standard DVD edition.

Innovatively, the producers are also offering one auction winner the chance to appear on screen in the actual film. The logistics of inserting someone into the final picture are a little less problematic in a film made and told using web video conferencing than having to film them on a set, with say, Hopkins.

Nonetheless Enderby envisages the film gaining a cult following and have already set a prequel in train. Further NFTs dropping this month promise a visit to the set of this production.

Another 2500 drops offer tokens to buy behind-the-scenes footage and access to the next three feature films to be released on the Vuele platform.

“Like any new technology, you’ve got to create a model where NFT is available to the mass market,” Chell says.

“If you look at NBA Top Shots [American basketball’s digital collectibles] those aren’t crypto traders buying NFTs, those are basketball fans. Eighty per cent of all its revenue - whether drop revenue (initial purchases) or trading revenue - is done via credit card not via Ether.

“That to me is a vision for where the broader market will go. While our first 11 NFTs are being dropped on [NFT marketplace] OpenSea and these are high value original versions which not everybody will be able to afford, the next 2500 are being dropped on Vuele and probably sold via credit card.”

Tracking IP

One of the attributes of NFT is the ability to lock in (via unique serial numbers encrypted on blockchain) the Intellectual Property of any and all creators.

A digital graphic or musical score may be the work of a sole artist or composer but what about a feature film which is the sum of artistic collaboration. NFT scores here too since the technology contains within it the keys to reward artists directly and in perpetuity. NFTs can be even minted to give the artist a certain percentage of royalties each time it is sold and resold.

Later this month, LA-based composer Gregg Leonard will sell his original score for the 2021 feature release Triumph as an NFT - the first time that this has happened. The opportunity is open to Leonard since he maintained the rights to the score which some reports suggest has an opening minimum bid of $1.2m. Essentially, it represents the opportunity for an artist to control the rights, distribution and even the monetisation of their unique contribution to a movie.

So, does Sir Anthony have any IP in the Zero Contact NFT?

“Certainly [he] has upside in this movie and in this NFT doing well,” Chell says. “His brand awareness on top of his economic interests are served here.”

He reveals that an entire first version of Zero Contact was produced without the Oscar winning actor. After seeing it and – presumably understanding the cache of lending his talent and name to the project – the film was reshot with him as the lead “because he fell in love with the idea,” says Chell.

Both full feature versions of the film will be auctioned as NFTs.

“The complexity of being able to track IP and pay everyone for their IP is entirely doable now and administratively manageable at a cost that is not prohibitive using blockchain.

“That is one of the big value propositions and why Hollywood is keen to adopt and embrace this. Firstly, they don’t see it as threat to theatrical or streaming. Second, it’s a way to enhance the value and increase the revenue around their IP and on the blockchain it’s also more secure than any previous digital method.”

Chell says Vuele has a lined up more titles “with surprisingly big budget, surprisingly big studios and big talent names” for the platform. “Unless we completely botch it, we’ll see a number of movies coming out over the next year in this fashion,” he says.

“If I think about the value of NFTs it is really in scarcity and speculation. But the difference between the content that is being sold for big dollars on NFT [like much digital art] and this content is that you know this will have a value. It’s got Anthony Hopkins in it.”

The speculative nature of an NFT purchase for a film/TV/animation project – especially one with talent attached - can reduce the investment risk, he argues, even before critics have reviewed it.

“If I owned the original Pulp Fiction or Saturday Night Fever, what would that be worth today as a collector? If I had a limited-edition director’s cut Blu ray from 15 years ago that’s worth something but there’s not an active market to sell it into. But with NFTs, people would now know who owns it – which is important to the collector psyche – and there is also now a marketplace to drive value among fans.

“Regardless of the monetary results [on the 24th] I can say with all confidence that NFT is about to become a permanent fixture in Hollywood. Whether NFTs sell for 100,000 dollars or a million dollars, this is found revenue for movies, it’s a fan engagement platform and it’s protected digital content. Those are all key to Hollywood.”