s the world becomes more familiar with blockchain, people and companies continue to turn to the rapidly adopted technology to solve problems that were previously seen as just the costs of doing business. Over the past few years, in addition to serving as the backbone for headline-grabbing digital cryptocurrencies, the blockchain ledger has been used to create comprehensive, accurate and decentralized databases of music rights, image rights, and even the protection of voting rights. Over the past few months, players in the film industry have made efforts to implement the blockchain technology into the life cycle of a film, including with regard to the accounting and distribution processes.
As explained in detail in our previous posts, blockchain technology presents a decentralized way to record and account for verified transactions in a variety of commercial applications. Or, to put it another way, blockchain’s innovation has been to create a peer-to-peer platform, which allows for the automated management of certain rights and the verifiable recording of transactions concerning those rights. By removing the necessity of a third party to officiate a transaction (such as a bank), blockchain’s promise is a world where people can conduct business more immediately and directly without a loss in security. As such, any space that has a need to protect, manage, and transact in a set of rights, is fertile ground for blockchain applications.
In film accounting, there are a myriad of issues that make the byzantine system of allocating film revenues an attractive area to apply blockchain technology, such as the cost of global transactions, the difficulty of ensuring the right people are paid the appropriate amounts on time, the numerous middlemen, and the frequent disorganization of the accounting books for productions. Film distribution – particularly international distribution across numerous platforms – can also be extremely complex and disorganized. As a result, companies such as FilmChain and Ara have begun offering blockchain-based solutions.
On the accounting side, FilmChain offers a service built on blockchain technology that is responsible for the collection of all of a film property’s revenue. Upon confirmation of the verified stakeholders (and their respective interests in the property) the service automatically distributes profits accordingly. On the distribution side, Ara allows creators and filmmakers to host their video properties on Ara’s online platform (without Ara claiming ownership) and for the creators and filmmakers to sell directly to their audience using Ara’s digital currency. By building a blockchain service that hosts and streams content, Ara is able to better protect against one of the film business’s greatest sources of profit loss, and perhaps the strongest reason for the introduction of blockchain into the film business—piracy.
This month, an independent comedy titled “No Postage Necessary” will be distributed via peer-to-peer video network app, Vevue, running on a blockchain service known as Qtum, which is touted as “the most advanced blockchain in the world.” Because this is the first movie to be distributed in this manner, and because the blockchain data is resistant to duplication, there has been speculation as to whether its success could portend a “future in which movies are no longer pirated.” In a world where TV and film analysts expect piracy to cause a loss of $52 billion by 2022, the interest in technologies that prevent such losses can certainly be expected to increase.
As blockchain continues to revolutionize many industries, we expect blockchain to become a permanent part of the film business sooner or later, which may cause established industry players such as collection account managers, distributors, and sales agents to reflect on their existing business models. That being said, understanding whether blockchain as a means of distribution or accounting is the right fit for a given property still remains an analysis that will depend on numerous variables, and is one in which entertainment lawyers, investors, producers, and business affairs professionals will continue to participate.
Filed in: Legal Blog
June 18, 2018