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Crypto and NFT Film Financing
This year, Cannes Film Festival attendees had another event to add to 12 days of screenings, photocalls, and deal-making — the NFT release. Like the art, gaming, and music industries, the seventh art is moving to the interconnected Internet, Web 3.0, and democratizing how films are financed and distributed.
An NFT release, also known as an NFT drop, is an event at which movie producers launch their film content but notably as an NFT — a unique digital representation of content registered on the transparent digital ledger called the blockchain to prove ownership and authenticity.
From a film prop to a full-length feature film, all film content can have a digital twin in the ERC-721 standard for a non-fungible token (NFT). Buyers of NFTs in films can buy, sell, and trade them in NFT marketplaces like a company's shares.
Cannes: Is the Film Industry Really Ready to Embrace NFTs?
From Blockchain to Web 3.0 and DAOs, there are a lot of new buzzwords out there - and plenty of skepticism - but supporters say these new technologies can make filmmaking more accessible, transparent and efficient: "We are just scratching the surface."
Although the art and gaming markets are already selling billions of dollars in NFTs a year, NFTs have only made their big debut in the film industry at Cannes this year. Around the periphery of the red carpet, recently launched NFT film platforms and investment funds seeking to help films mint, sell, and distribute NFT film content are doing deals.
Among them are:
- Decentralized Films, a non-profit run by Roman Coppola with partnerships with the big agencies (CAA), managers, and distribution companies, expects some great films to evolve from its relationships with all the film schools in the US.
- First Flights, a Web 3 crowdfunding model behind the first NFT-funded short film, The Dead of Winter.
- NFT Studios, founded by producer Niels Juul Executive (The Irishman), seeks to raise $8 - 10 million to sell 10,000 NFTs. NFT Studios plans to announce its NFT-financed film pipeline at the Cannes Film Festival.
Academy award winner Roman Coppola says token holders in his platform, Decentralized Films, will become part of a community of movie curators, “In the world of movies, there are a lot of barriers — agents, studio heads that basically control things, gatekeepers — and it is coming down to controlling the money. And this is a method to have a very low barrier to entry. You do not have to pay anything. You engage with our platform, and you can bring work out to see it rise up.” (From an interview at the tech conference for the film industry SXSW 2022).
This opportunity to democratize film financing was the main topic at Film3 events at Cannes, including the NFTCannes Summit, The Future of Film Financing at the Marché du Film, and Film3 beach parties.
At Cannes 2022 IRL and virtual events in the metaverse, the world’s largest film festival, Film3 was a hot topic and widely considered the future of film financing and distribution.
Film3 Financing Models
The high cost to produce a film, around $65 million on average for a major movie studio and up to $2 million for an Indie film, has been a barrier for most film producers. Tokenized film investing is a way to finance, market, and distribute films by selling NFTs. This is a welcomed funding alternative following two years of empty movie seats and dried-up film financing during the COVID pandemic.
Famous producers started foraying into NFT sales by selling ‘behind-the-scenes’ video clips from popular movies, led by Academy award-winning film producer Quentin Tarantino’s original script snippets from Pulp Fiction. We are now seeing all types of film content tokenized as NFTs. Following are some emerging Film3 financing models.
Fractionalized Film Ownership
The NFT film financing model is based on fractionalized ownership. NFT holders collect a proportional share of revenues from the film and potentially collectibles. Despite the current challenging environment, Indie producers have been the first movers in NFT film financing, selling a stake in their films as NFTs.
Trevor Hawkins’ romance Lotawana is known as the first film sold as a non-fungible token. The NFTs were sold on the largest NFT marketplace OpenSea.io, aiming to sell 1,000 NFTs. So far, 22 have sold to 36 different owners for a total amount raised of 6.9 ETH. Film enthusiasts became film investors for an average NFT price of 0.1372 ETH.
Julie Pacino has raised 74.9 ETH by selling 100 NFT character shots for her I Live Here Now film, to be released on August 31, 2022. Thanks to the popular royalties feature on OpenSea and some other NFT platforms, Pacino also receives royalties, up to 10 percent, when the NFTs are resold, potentially creating a revenue stream from marketing to distribution. The initial sales earned 20 ETH.
Film legend Anthony Hopkins introduced another NFT financing model in September 2021 when he sold NFTs for viewing the film Zero Contact, raising $90,000. From this endeavor sprung VUELE and a metaverse called VUELEVERSE, where investors can collect and trade NFTs of digital collectibles and feature-length films.
The amounts raised by the first NFT-financed films may seem low, but considering low budget films cost about $10,000 - 25,000 to make and generally under $2 million for an Indie film, Hawkins and Pacino may have covered their costs.
Film Distribution Rights
The distribution and marketing of a major film typically cost $35 million. Alternatively, filmmakers can use Web 3, the decentralized internet, and open distributed technologies.
Kevin Smith, the filmmaker best known for featuring Matt Damon and Ben Affleck in his comedies, plans to sell NFTs to finance and distribute his latest movie, a comedy-horror Killroy Was Here. 5,555 NFTs will be sold on the Legendao platform (Killroy Was Here Preview NFT, Killroy Was Here Movie NFT). Killroy NFT holders will also gain exclusive distribution rights.
Investors in the Jay and Silent Bob's Crypto Studio can have a Crypto Cameo in CLERKS III by buying some Platinum Smokin’ Tokens.
Film Merchandise Sales
The sales of filmobelia as NFTs could rake in more than the movie revenues. In the first quarter of 2022, Collectibles made up 76% of the $16.5 billion global NFT sales, followed by Gaming and Art (with an 8% market share each). Top sellers include Bored Apes from the Bored Ape Yacht Club, CryptoPunks, and Clone X 3D avatars by famous Japanese contemporary artist Takashi Murakami.
The most high-profile NFT film release at this year’s Cannes was Kamal Hassan’s action-thriller Vikram, with an NFT financing model revolving around collectibles and a metaverse to buy, sell and trade them. In addition to having a film screening of Vikram at Cannes, Hassan held an NFT release of film artwork. Recognizing the potential popularity of the film’s collectibles, Hassan has also launched a metaverse, Vistaverse, where land parcels and tokenized film items are for sale. With the many weapons featured in the Vikram film, the producer undoubtedly had collectible NFT sales in mind.
The entertainment industry is already realizing the tremendous value of its intellectual property rights through the NFT market, but beware of imitations. Marvel Comics launched its NFTs in August 2021, starting with themes based on Spider-Man and Captain America. And in an interesting twist, popular NFT characters are hitting the big screen. Coinbase is taking your favorite NFT characters to the big screen with a trilogy of animated short films based on the Bored Ape Yacht Club (BAYC). BAYC movie fans will need a Coinbase account and wallet to watch the films.
Whether you own BAYC NFTs as investments, PFPs, or both, you have the opportunity to audition them for a role in “The Degen Trilogy” in front of a Hollywood casting director.
It could explain Yuga Labs' recent acquisition of CryptoPunks. With their James Dean cool, CryptoPunks could be even more marketable than Bored Apes.
Most NFTs have various utilities, such as BAYC’s exclusive membership to a club or game items with game reward multipliers.
Owners of Vikram NFTs also benefit from access to exclusive events and special screenings, cast and crew meets, and auditions. The top NFT category, Vikram 50 Caliber, includes an audition to feature in a Bollywood movie.
Owners of one of the 10,000~ NFTs, including 40 original props, auctioned for the Oliver Stone movie Snowden had a chance to win a trip to Hollywood for the film screening and dinner with Oliver Stone.
Web 3 film crowdfunding platform First Flights rewards investors with various filmobelia. For investing in the Horror film The Dead of Winter through NFTs, investors receive Film Titles Badges, Scene Stamps, Film Posters, Director Note Scripts, NFT of the film's Score, and exclusive community access. The NFTs trade on OpenSea.
Anyone Can Become a Movie Mogul
Imagine replacing Kevin Feige, Kathleen Kennedy, or David Heyman — the producers of the highest-grossing movies worldwide with a smart contract performing the job functions of the big movie moguls like deciding which films will be funded and who will star in them.
Following a popular trend amongst blockchain platforms, most of these NFT film studios will choose to run as decentralized autonomous organizations (DAOs). A DAO is an automated organization whose members propose and vote on major decisions based on rules encoded in a smart contract. Thus, all token holders have governance rights to propose and vote on issues regarding what movies to finance.
Decentralized films, the community of film buffs, producers, and directors who earn token incentives for voting on film projects, will operate as a DAO. Anyone who buys the FilmC (Film Credits Capital) token can vote on projects alongside Roman Coppola and Steven Soderbergh, financial backer and one of the most successful Indie producers.
damove.io is an NFT film community funding producers and artists with loans financed from NFT sales. The DAO distributes the revenues to NFT holders who share in profits and royalties for more than a decade.
Cannes has opened its doors to NFTs this year, and we have no doubt the Croisette will be rolling out the red carpet for NFT-financed films in future years.
“Film festivals are small universes. From one festival to another, we find the same people. These are the people who shape entertainment and film around the world. To change things, you have to meet them and allow them to realize the possibilities offered by Web 3,” explains Johnathan Partouche, Co-founder and CEO of the Wagas Group behind the NFTCannes Summit, who tells ActuNFT France that this year Cannes is about introducing the film industry to the Web 3 ecosystem to democratize the world of cinema.
Film does not yet have an NFT category like art, games, and music, but that should change by the 76th Cannes Film Festival.