Music and cable television have seen major disruptions in the past 15 years, but movies have thus far proven immune. That’s about to change. Equity crowdfunding and blockchain distribution will soon turn Tinseltown upside down.
Currently the movie business operates in an opaque netherworld, full of middlemen, secret contracts, and protection rackets. Studio heads and a few A-list actors gain fortune and fame whilst the rest ekes out livings.
Hollywood makes movies in secret for a reason
Hollywood’s financial structure is murkier than a spy-thriller. According to industry accounting, even runaway hits like The Hobbit trilogy lose money.
How are movie dollars made? According to reports, major studios get revenue from licensing deals with broadcasters. Studios themselves are part of these corporate structures. So outsiders lacking massive archives can’t break through without constant hits.
Rewards crowdfunding like Kickstarter and Indiegogo tried to breach the Hollywood fortress but the gatekeepers repelled them. Enticing the crowd with DVDs and other goodies preproduction distracts talent, robs films of commercial value, and degrades marketing and licensing opportunities.
Equity Crowdfunding will change how movies are financed
Enter equity crowdfunding. Reg CF—now a year old—allows moviegoers to become equity partners in films and share in profits. Instead of a DVD, Reg CF investors get ownership. Investors still get perquisites. And producers can offer large investors roles as extras, access to exclusive parties, or behind-the-scenes looks at production.
Producers not only get their projects partially funded but also get a ready-made marketing operation. The potential for financial payout incentivizes Reg CF investors to become marketers.. This cast of potentially hundreds or thousands of acolytes gleefully spreads the word on social media, building grassroots excitement for a movie premier. Traditional advertising can’t buy this organic hype.
Mircoventures/Indiegogo portals crowdfunded two movie early adopters. Animated film ‘Bunny Bravo’ has raised almost $150K towards its goal of 200K to cover distribution and marketing. ‘Field Guide to Evil’ successfully completed a $500K offering earlier this year.
Entertainment is one of the leading sectors of the nascent equity crowdfunding movement. According to Crowdfund Capital Advisors, these ventures have received almost $3.5M in funding thus far.
Blockchain will further disrupt moviemaking
Further, blockchain technology may give Hollywood another shock. This new concept aims to excise everyone but the ‘creatives’ from filmmaking. Through decentralized online distribution, cryptocurrency, ‘smart’ contracts, and IP ownership, blockchain may signal the movie future.
Nick Ayton of The 21 Million Project is producing a film/tv series using this concept. He claims to cut film budgets by a factor of 5 or 6 through blockchain, thus making a $30 million film for a $5 million. The 21 Million Project has committed 80% of profits to holders of 21MCoin, the token financing the film. These crowd investors will receive film royalties in perpetuity.
It remains to be seen if blockchain becomes the new standard and if so how long it will take. But what is certain is crowdfunding is here to stay and everyone that doesn’t adapt, even Hollywood fat cats, will be left behind.
