So far I’ve covered the inspiration behind dMovies and the importance of a Loss Leader to act as a case study for tokenized media sharing in both the decentralized and filmmaking communities.
Today we're gonna talk about money!
You might be asking, “hey my dude, have you checked out bounties?”
Yes. I love them. “Bounties” are a great tool for an individual to pay another individual to consume content and I am obsessed with evolving tools like VibraVid and DTube. It is truly the next step in Patron/Subscriber culture. As an artist, I can set a bounty to incentivize viewers to consume my content, or I can be paid by users who enjoy my work. Even Steemit has a fantastic protocol to reward (multiple) creators for their content (thank you for your upvotes by the way).
But this doesn’t accurately reflect the compensation structures of traditional Hollywood media.
.
Before we shrug and say, “okay boomer,” I want to acknowledge our shared, long-term goal: mass adoption. How can we tokenize media to be most easily adopted by the most number of people and industries? We don’t need to re-invent the wheel. We need to develop a wheel that looks and feels similar to the one Hollywood is already using.
For comparison, if “bounties” are a bake sale… “tokenized media” is a bakery. You can get cupcakes from both (and they are equally delicious), but a bakery has a whole extra layer of overhead - payroll... insurance... labor unions... health inspections... corporate supply chain - that are completely separate from the cupcakes. The bakery can’t just empty the tip jar at the end of the day and send everyone home.
Similarly, large creative projects (like a movie or video game) require thousands of labor hours from hundreds of different categories of workers, who all have different, long-standing contractual conditions and payment protocols. And none of them have been treated very well by “backend compensation” or “streaming” platforms.
I want to be very clear that the number one hurdle in mass adoption is the insane volume of revenue and jobs currently lost to online piracy. Every single person who knows I’m talking to BitTorrent about releasing my next movie thinks I’m an idiot.
So why am I doing it? Because the current model is broken, but any new payment model we introduce needs to clearly show how each group will still receive the payments they expect to receive... So let’s unpack the current model(s). (Please note to keep this condensed, I will oversimplify some industry concepts)
In traditional media distribution, we often refer to a “Waterfall” for international and domestic sales, designating who gets paid and in what order. To avoid misrepresenting the business, below are some actual deal structures I’ve worked under:
- Revenue Sharing - nobody gets paid anything upfront or guaranteed any compensation. Any money generated by the content is split according to the distribution agreement. We see this most commonly on sites like YouTube where creators are paid out based on volume of ad-views in CPM (cost per “mille” or thousand).
- Electronic Sell Thru - a transactional website or platform acts as the broker to list and collect on your Title. They take a healthy fee (as high as 30%) and pay out monthly or quarterly, usually once you meet a minimum threshold, like $100.
- Minimum Guarantee - a Distributor pays an upfront fee (usually to satisfy debts with a financier or finishing fees) for exclusive rights to sell the Title and they are not obligated to payout any profits until they recoup their MG after any fees and costs. A producer friend of mine once politely warned me, “You’ll never see a dollar after the MG.” This is consistent with my experience, given the model relies on accurate reporting from the Distributor. And honestly, the offer of any MG is becoming more and more rare for independent storytelling content.
- Sales Agency Agreement - The above minimum guarantee would often come from a company or entity overseeing sales of the Title based on their long-term relationships with global buyers. If I cold-called a French television network, I’d probably never be able to negotiate or collect on a meaningful license for my indie Title. But a Sales Agent with dozens of films, regularly doing business with the French television network, can command a reasonable licensing fee and compel payment through the threat of withholding access to future Titles. See the above Waterfall demonstrating how a Sales Agent takes a Distributor Fee off the top and recoups any costs (including any minimum guarantee paid) before paying out.
Traditionally, any remaining money from the above Waterfall “flows” to whoever holds the rights to the content, often a centralized production company or film studio. This entity is responsible for overseeing and distributing royalties or covering internal costs associated with the project. This might include agreements with other creators, financiers, producers or labor unions. In the last decade, Creators have been empowered to act as the "Rightsholder" entity for their own content, however they are then responsible for overseeing all payment obligations.
Taking a step back, we can see these models create 2 potential gaps in transparency as:
- the Distributor might not disclose all its sales, and/or
- the Rightsholder might not disclose all its payouts.
All these waterfalls share a common variable: the reliance on a centralized entity to oversee and collect all the money and pay everyone else. Decentralized file sharing makes this reliance unnecessarily antiquated. My first priority in experimenting with a “decentralized movie” is empowering all participants to trust the technology more than each other. For A Tale Told By An Idiot, neither BitTorrent nor I should touch other people’s money.
Say a user wants to watch the movie… They deposit tokens… a smart contract immediately distributes those tokens in a fair and impartial, real-time transaction… and prints a ledger of the transaction for all to see. Sounds a lot simpler than any of the above models, right?
How do we decide what’s "fair"?
I’ll get into more detail in my next post, but to start, why not use the pre-established models to build my own Decentralized Waterfall based on decades of standards and practices?
Combining what we now know, we are effectively using BitTorrent as an Electronic Sell Thru platform and then Revenue Sharing with everyone, including the Seeds/Hosts who are acting as a Sales Agent to share the media file with their Peers.
We need to compensate "Distribution Fees" to cover Transaction Costs, the Platform, and the Seeds. We also need to build in a layer of Recoupment for future project budgets. And we need to separate and Recapture the royalties for Team Members and executive compensation for Producers and Financiers, who have traditionally acted as the Rightsholders.
So any and all tokens deposited by a potential Downloader would “flow” between the following categories:
| Payee | Payout |
|---|---|
| TRANSACTION COSTS/FEES | 1% |
| DISTRIBUTORS (PLATFORM + SEEDS) | 19% |
| COSTS (OPTIONAL RECOUPMENT) | $0.00 |
| RIGHTSHOLDERS (EXECUTIVE COMPENSATION) | 40% |
| TEAM MEMBERS (LABOR COMPENSATION) | 40% |
These are the essential categories we expect to “participate” in the creation and distribution of original media content. My goal is to design an equitable system that compensates all parties based on their contribution(s).
I can do this because for this singular moment, I am the centralized entity. I own the content. I own the copyright. I paid everyone their quoted rate for their work. Every word, every clip, every audio cue. Based on the contracts my cast and crew signed, I do not technically owe them any additional compensation to distribute the film online. So I’m the only one who stands to “lose” if this fails and everyone “wins” if it succeeds.
Similarly, I could “go it alone” and not include BitTorrent users to participate in my film’s revenue stream. But…in the past I have always lost to centralized distribution. I have nothing to lose by trying something new.
I generously hypothesize that the more participants I incentivize and include in this Waterfall, the larger the potential revenue stream for us all.
Why do a bake sale…when we can open a global, decentralized bakery? I believe we are all stronger together…
Now I just need you all to help me prove it.
-@brendanAbradley