Wesley Snipes Is Launching A Tokenized $25 Million Movie Fund (#GotBitcoin?)
Liechtenstein Cryptoassets Exchange (LCX) is tokenizing a $25 million movie fund together with renowned Hollywood actor Dr. Wesley Snipes. The news was reported by Cointelegraph auf Deutsch on Sept. 9. Wesley Snipes Is Launching A Tokenized $25 Million Movie Fund (#GotBitcoin?)
Dr. Snipes is an American actor, film producer, master martial artist and author, known for his roles as the Marvel Comics character Blade in the Blade film trilogy, as well as for films such as New Jack City, Major League, White Men Can’t Jump, Passenger 57 and Demolition Man.
Movie Fans Become Co-Producers Through Tokenization
According to the report, the partners aim to launch a fully compliant security token offering (STO) via LCX’s Liechtenstein-based platform and blockchain infrastructure.
The tokenized $25 million “Daywalker Movie Fund” (DMF) will invest in future movies and TV shows produced by Dr. Snipes and his production studio, Maandi House.
Launching an STO will reportedly lower the entry barriers for both institutional and retail investors, enabling movie fans to invest alongside established Hollywood producers.
The DMF Token will offer investors a share in the profit of the fund’s productions, as well as conferring extra benefits such as invitations to move premieres. All profits will be reinvested in the DMF Token to boost its long-term value.
DMF will be managed by an investment committee of professional fund managers, alongside Dr. Snipes. LCX’s blockchain technology platform will not only host the STO, but handle registration and identity verification for all prospective investors.
Dr. Snipes has described the tokenized fund model as a means to enable move fans to become indirect co-producers of forthcoming features.
Pre-registration is open on the LCX site, with registered users to have priority when the STO is formally launched.
Cryptocurrencies In The Limelight
In October 2018, Cointelegraph reported that the actor and producer Johnny Depp had partnered with crypto-powered social entertainment platform TaTaTu to jointly create and produce film and digital content together.
TaTaTa focused on combating piracy and improving transparency for rights holders, as well as on assisting high-quality brand advertising using distributed ledger technologies (DLT).
In May 2018, actor and tech investor Ashton Kutcher donated $4 million in XRP to Ellen Degeneres’ Wildlife Fund, saying the technology enabled him to do away with the “big giant check thing.”
How Tokenization Is Transforming Film Financing, Wesley Snipes’ Fund
As the world of finance continues adapting to contemporary innovations, it almost cannot help but drag other industries along for the ride — willingly or otherwise. Film is one such sector currently undergoing a quiet revolt, concocting a radical subversion to traditional models of financing. This is partly due to the emergence of distributed technologies such as blockchain, and it has led to a new concept: the tokenization of everything.
In its purest form, tokenization is the act of adding liquidity to real-world assets. A good — if not exact — comparison is depicted in stocks and shares, which represent fractional ownership in a company. Tokenization is relatively analogous to these types of equity investments, taking the conventional model, expanding upon it, and placing it on-chain. In theory, anything can be tokenized — and according to some, everything soon will be tokenized.
Daywalker Movie Fund
Hollywood actor, director, producer and martial artist Wesley Snipes is attempting to capitalize on this shift to tokenization. Earlier this month, it was reported that Snipes, together with the Liechtenstein Cryptoassets Exchange (LCX), plans to tokenize a $25 million movie fund. The venture, known as the “Daywalker Movie Fund” (DMF) will invest solely in the artistry of Snipes and his production studio, Maandi House Studios, allowing investors from all over the world to hold a stake in the fund’s productions. Speaking to Cointelegraph, LCX founder and CEO Monty Metzger detailed the benefits afforded to investors:
“The Daywalker Movie Fund will be structured as a fund, giving token purchasers access to a portfolio of productions including the whole value chain, from the actual movie to games, merchandise and intellectual property rights.”
LCX will launch a wholly compliant security token offering (STO) with the Daywalker Movie Fund — represented by the DMF Security Token — thereby leveling the playing field between retail investors and Hollywood financiers.
STOs — much like their ostensibly defunct cousin, the initial coin offering (ICO) — represent value via a digital token. However, unlike ICOs, security tokens are designed with a strong foundation of regulatory due diligence. Moreover, ICOs offer little more than a token utilizable only through specific infrastructure. By contrast, security tokens symbolize more tangible assets, such as shares in a company or even equity in real estate.
The one factor that truly legitimizes security tokenization is its ties to regulatory governance. Needless to say, the policy construct of tokenization differs jurisdictionally. In Liechtenstein, where LCX is stationed, the government recently passed legislation aptly dubbed the Blockchain Act.
Alongside stringent rules on Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, the act essentially provides a clear legal basis for the ownership, transfer and safe storage of security tokens. Metzger elaborated on the regulatory landscape of Liechtenstein and its bearing on the DMF:
“The Daywalker Movie Fund is part of the LCX ecosystem and therefore supervised by the Liechtenstein Financial Market Authority. A key benefit of Liechtenstein is the market access to the whole European Economic Area (EEA), and Switzerland combined.”
LCX is also taking an active role in the pursuit of global regulatory clarity for the blockchain industry, with hopes to extend the scope of investment to a broader demographic:
“LCX is engaging at the World Economic Forum to shape policymaking and the future of the blockchain industry. Due to our international approach and partnership network LCX is considering to apply for regulatory approval in other jurisdictions as well to open up the security token offering to a wider audience. But this is a work in process.”
In the United States, the regulatory practice surrounding tokenization is just as rigorous. Security tokens are governed by the U.S. Securities Act of 1933 and are categorized under three types of regulation: D, A+ and S.
Regulation D avoids formal registration of the offering with the Security and Exchange Commission (SEC), provided a specialized form is filled in after the STO. It also allows issuance to a broader demographic of investors, assuming they’re accredited — i.e., high-net-worth individuals, banks and hedge funds. Regulation A+ allows non-accredited investors to join the fray. However, this is only available under securities registered with the SEC, which can prove to be a lengthy process. Finally, Regulation S targets STOs offered outside of U.S. jurisdiction and are therefore not subject to SEC registration.
A Growing Appetite For Tokenization
Snipes isn’t the first to venture into movie tokenization. Laying claim to spearheading the concept is tZERO, the blockchain subsidiary of U.S. retail monolith Overstock.com.
Back in July, the firm announced the tokenization of “Atari: Fistful of Quarters,” a biopic of Nolan Bushnell, the founder of game publisher Atari. Together with the producers of the movie, tZERO plans to design a security token named “Bushnell” and relays that the token will incorporate a “pro-rata portion of worldwide adjusted gross receipts from the film,” along with several other benefits.
Speaking On The Compliance Issues Surrounding Security Tokens, tZERO Told Cointelegraph That STOs Are Emerging With Some Initial Stumbling Blocks:
“Anytime an entity issues a security, there are regulatory considerations that must be taken into account. While security tokens are still somewhat novel, the goal of our protocol is to be compliant with all existing securities laws and regulations regardless of the industry of the issuer.”
Clearly, there is burgeoning demand for tokenized funding — and what’s more, by most accounts the film industry is in dire need of new vehicles for liquidity. Traditionally, film funding comes via a hodgepodge of revenue streams, ranging from hedge funds to individual investments from wealthy benefactors. These, of course, come with a price, usually in the form of partial ownership in the finished product.
Mitigating Risk Via Co-Financing
One particularly favored route for funding is known as co-financing, in which multiple parties share the cost of production. At the height of its popularity in 1995, co-financing was utilized in 35% of films produced by major studios and employed by industry giants such as Fox, Miramax and Paramount.
This cooperative approach to funding is often applied in order to mitigate risk — and financial risk within the film industry is particularly prevalent. After all, it’s one of the only sectors in which a valuation cannot be made until demand is assessed, and demand cannot be evaluated nor can the associated costs be realized until the film is released. Due to the hazards affiliated with film-making, investors, for the most part, shy away.
This tightening of the purse strings has been especially pervasive in recent years, made worse by the rise of the internet and the disruption it has sown within the industry’s traditional distribution models.
The need for fresh capital flows is particularly evident within the independent film scene, in which emerging filmmakers struggle to find suitable funds. Speaking to Cointelegraph, director of photography Nicholas Eriksson noted the myriad hurdles for independent filmmakers:
“In many ways, Netflix and streaming services have taken a huge share of the traditional film indie market for less financial risk and far lower distribution costs. Nowadays, generally speaking, funding an indie project comes down to three options. 1. Self-funded 2. Crowdfunded 3. Government subsidies through charitable organizations.”
The Rise Of Crowdfunding
Crowdfunding is an avenue in which more and more filmmakers find themselves traversing. The rise of crowdsourcing has acted as the quasi-death knell for traditional financing, with platforms such as GoFundMe, Kickstarter and other derivatives holding a firm grip in the world of funding.
Often, these platforms reward backers either with equity or a more humble incentive, such as early access to a product. However, crowdfunding isn’t without its drawbacks. From their once humble beginnings, various crowdfunding platforms have now become inundated with requests for funding, and it appears the novelty is wearing off.
According to statistics from Kickstarter, a mere 37% of film and video projects have been successfully funded since the site’s inception, and this success rate is dropping — down 6% since 2015. Now, it seems, even the smallest contributors are in short supply. Eriksson was lucky enough to get his short film funded via this grassroots approach. However, he noted one aspect in which crowdfunding falls short:
“Crowdfunding is definitely a good alternative to traditional funding, especially as it enabled me to get my short film project off the ground. However, it is also a huge amount of work, and to underestimate this would be a big mistake.”
Crowdfunding vs. Tokenization
Crowdfunding has become a novel but inefficient way to raise money, requiring a substantial amount of time and effort to market the fundraising campaign alone. However, just as crowdfunding looked to outmode traditional financing, tokenization is now looking primed to antiquate crowdfunding.
Metzger, an evident propagator of tokenization, remarked that while it bears a resemblance to crowdfunding, it’s blockchain that is taking the concept of tokenization to an entirely new level:
“You can see it this way: Crowdfunding is a front-end where users can buy rights to future products or services, like an eCommerce shop — but the whole back-end has to be managed manually. This can be complex. With blockchain technology, it’s not only the front-end that is automated, but also the whole back-end is digitalized, smart contracts execute on rules, and the actual product can be a digital asset, eg, a security token.”
Indeed, some of the chief qualities of tokenization come from the benefits provided by their underlying technology. Via the use of blockchain, a verifiable framework for funding can exist and be executed with ease. The bureaucracy that often comes along with traditional film financing dissipates as smart contracts offer a one-size-fits-all solution for any investor, automating the work typically undertaken by costly lawyers. Furthermore, tokenization extends investment exposure to almost anyone with access to the internet, mitigating issues associated with finding specific contributors.
It isn’t just the filmmaker that stands to gain, either — the investor also profits from risk management adaptations of traditional film finance by being able to invest in a slate of films rather than just one, as per Snipes’s venture. Perhaps the most significant benefit of all is the instant liquidity that tokenization offers to investors, granting the opportunity to offload the tokens at a moment’s notice.
Speaking to Cointelegraph, Ali Vatansever, an award-winning film director and founder of Indiewonder — a blockchain-based film fund – stressed the benefits of tokenization on audience participation:
“Tokenization opens movie financing to masses. It has the potential to create a more democratic and transparent ecosystem. Along with conventional crowdfunding, it’s a powerful tool to connect with the movie audience early on in the process and turn them into fans or rather users.”
Of course, tokenization isn’t necessarily a veritable gold mine. Like everything, it holds its own specific disadvantages. For example, the traditional risks associated with the film industry still exist: If a movie flops, so too do investor profits.
Additionally, the aforementioned pros linked to the lack of a middleman can sometimes be outweighed by the cons. Smart contracts are offered in lieu of a lawyer, who is typically responsible for drawing up agreements, defining the rights of clients and investors, negotiating the rate of returns from the investment, and ensuring regulatory due diligence is met — all of which, in the case of tokenization, would be transferred to the distributor of the token, which in itself holds its own perils and may even turn some investors off.
Further to this, and somewhat contrary to one of the primary benefits of tokenization, is the jurisdictional restriction provided by regulation, which could prove to exclude investors outside a specific territory.
Above all, Vatansever, stresses that it is inclusivity and accessibility which will judge the success of tokenization:
“If we don’t involve the crowd in the decision making processes, tokenization is just a convenient way of collecting and distributing finances and making more shareholders happy (or sad). But it’s still a small step forward of creating an inclusive entertainment industry. We should not just trust on the money of the fans but their taste. Through creating an alternative channel of interaction with movies; we can turn the audience into local ambassadors for change in the industry.”
“Everything that can be tokenized will be tokenized”
Regardless of its opportunities and obstacles, tokenization is becoming a widely adopted instrument for investment. According to analytics firm Inwara, STOs increased by a monumental 130% in the first quarter of 2019 alone. As this growth seems set to continue, Metzger insisted that the opportunities provided by tokenization aren’t just confined to the movies themselves:
“The film industry is currently only producing movies that the so-called ‘experts’ and the decision-makers behind the production funding think will be profitable. They depend on market research, past success, or just on their gut feeling.
“By tokenizing the film industry, the audience will be empowered and will ultimately decide on what movies will be produced. The whole entertainment industry, Hollywood studios, and fan culture will change. I often say: Everything that can be tokenized will be tokenized.”
Eventually, it seems, the ivory towers inhabited by venture capitalists and angel investors are set to come crumbling down as more emphasis is put on on this new form of fundraising — and it seems the film industry could just be one of many sectors that is set to be disrupted.
Crypto Gets A Taste Of Movie Business, But Is A Long Way From The Red Carpet
With an undercurrent of crypto funding in indie film projects, is there enough potential to disrupt the entire industry?
From its obscure beginnings over a decade ago to its current status as the leading cryptocurrency in the world, Bitcoin’s (BTC) tale on its own can make up for a pretty entertaining movie. With the prevalence of Bitcoin and blockchain-related topics in mainstream media nowadays, it is perhaps not a surprise that more films mention or highlight cryptocurrencies and blockchain technology.
For instance, Anthony Mackie, the actor who plays “Hawkman” in the Avengers movies, promoted Litecoin (LTC) last year in a video published by Vanity Fair. Meanwhile, in February, another well-known actor, Jim Parsons, narrated a cartoon version of himself on The Simpsons, detailing how Bitcoin is the “cash of the future.”
Other crypto references in pop culture and films include Crypto, a crime drama thriller about cryptocurrencies and money laundering, and Startup, a drama series following the lives of tech entrepreneurs using blockchain and crypto, among others.
References to crypto in films aside, there has been an undercurrent of crypto funding that has been taking place in the film industry. Just recently, the Litecoin Foundation acted as an executive producer for a film produced by a Los Angeles-based film company. According to reports, the Litecoin Foundation has been working behind the scenes during the past year, cultivating its presence in the film industry.
Given that the current film distribution and funding model heavily depends on intricate negotiations, financial deals and licensing requirements that take time, more and more filmmakers have been partnering up with crypto enthusiasts to fund film projects.
As an alternative to the existing analog industry, various companies and individuals in both film and crypto have been using blockchain technology and cryptocurrencies to provide the much-needed digital makeover much to the relief of many film and crypto enthusiasts.
A New Wave Of Crypto-Funded Films
HardFork, a television series about a dystopian future, in which cryptocurrency and augmented reality rule, was among the first large-scale film projects to be fully funded by cryptocurrency. The team behind the project saw an opportunity in taking a non-traditional, decentralized fundraising path, especially after building up a community of supporters on Steemit, a crypto-backed social media platform.
No Postage Necessary is also another sci-fi anthology feature film that is crypto funded. Released in 2017, the movie is a romantic comedy written and directed by Jeremy Culver. The indie film project tells the story of a brilliant but convicted computer hacker who struggles to become a better man after meeting a beautiful war widow.
While sharing his opinion about the movie and how it was funded, Culver talked about how the production of No Postage Necessary is set to be a signal of a shift of content consumption and sharing in a different direction, adding:
“There are many advantages to blockchain distribution, including immutable proof of Intellectual Property rights, transparent royalty payments, and, since all data on the blockchain is resistant to duplication, we can now envision a world where films are no longer pirated.”
MovieCoin, a crypto platform built specifically for crypto funding, is also looking to change how film financing is done. The platform is the brainchild of Christopher Woodrow, who created and directed the Oscar-winning movie Birdman.
Also in the mix of people trying to introduce crypto funding to the film industry is celebrated actor and martial artist Wesley Snipes. In 2019, Cointelegraph reported that Snipes partnered with the Liechtenstein Cryptoassets Exchange to create the “Daywalker Movie Fund.” The $25-million tokenized fund will only invest in Snipes’s studio while allowing investors across the globe to hold a stake in the production.
What Film Making And Crypto Have In Common?
Democratization through decentralization is the common link among crypto and blockchain enthusiasts and indie filmmakers. As a result of their underlying theme of freedom and independence, both industries have a capacity for attracting large crowds of dedicated young followers.
Furthermore, what makes crypto funding for the indie film industry a perfect fit is that both industries tend to be led by renegades with a desire to democratize traditionally stunted and monopolized industries. Emily James, a film director currently working on a feature film called Finding Satoshi — a fictional tale of a detective looking for the real Satoshi Nakamoto — believes that the future of crypto funding in film is bright. According to James:
“There have already been a few projects that have raised money in crypto, and some in the works who are planning to launch their tokens. But it’s still technically demanding and legally tricky.”
James believes that first, someone has to launch and establish “a user-friendly platform for it to have a wider pick-up, much as Kickstarter did for crowdfunding.”
Funding And Distributing Films With Crypto And Blockchain Technology
Apart from looking toward crypto and blockchain technology for funding, filmmakers like James have also been trying to use a non-traditional, decentralized approach in the distribution of their films. James told Cointelegraph:
“I have seen a few plans to use tokens and blockchains not just for fundraising but also for distribution, marketing, and even collection and disbursement of income.”
Even though there have yet to be any real success stories in this area, companies like MovieCoin and Livetree, a social platform that allows users to watch films, as well as licensing and distributing film and TV content, have offered solutions.
For instance, Livetree has brought about a new equity-based crowdfunding model that shares profits with investors. Unlike a typical crowdfunding process where backers of a particular film project are rewarded with some exclusive toy in return for their investment, Livetree uses a DAO-like model that aims to be an autonomous decentralized ecosystem.
But the story of crypto funding is not all sunshine and rainbows. According to Ashley Pugh, a producer of films, documentaries and music videos, despite the interest in crypto funding, more filmmakers are skeptical about crypto funding due to the current low interest among the masses. With diminishing interest in Bitcoin and crypto at the moment, most filmmakers, according to Pugh, prefer traditional crowdfunding:
“At least this way, they get a currency they understood rather than a token they had no knowledge of, in an ecosystem that was underdeveloped and untested.”
On a personal level, Pugh experienced the challenge of the dwindling interest in crypto in mainstream culture when he produced a documentary film, which distributors in the United States and the United Kingdom turned down on the account that “no one cares about crypto anymore.”
How Funding Works In Film Now And A Look At The Future
When it comes to crypto funding, there is still much that needs to be done since most existing projects are either premature or non-existent. However, only indie filmmakers have been experimenting with crypto financing.
While Hollywood movies are made and fully financed by major studios, according to James: “Indie producers pull together a combination of private equity investment, pre-sale investment from distributors, pre-sales for TV rights, etc” in order to fund their films. Basically, James reiterated that it is the independent filmmakers who are currently experimenting with crypto funding for their film projects and hypothetically speaking, James suggested:
“A project could create its own blockchain-based token, which could act both as a fundraising device, raising money through the sale of the token, as well as eventually automating the disbursement of funds back to those investors, and to any other parties that have invested in kind or crew who invested sweat equity, etc.”
James also mentioned some interesting ideas that are currently being floated around the industry that include using tokens to harness the power of individual supporters and fans to help attract attention to films at the release stage, and to provide functionality for grassroots publicity campaigns and the like. Film producer Tomer Kantor shared a similar thought with Cointelegraph, saying that “collectibles/fan bases” is a good way to make use of Bitcoin within the film industry, but adding that, as of now, it is perhaps the only way to utilize it.
Pugh Insists That In Order To Overcome The Obstacles, The Masses Need To Be Educated On The Technology And That They Need To Have Faith In Its Capacity To Work:
“I think equity crowdfunding could work as people would then have a ‘stake’ in the movie, which works for both bragging rights and also investment savvy, but people would still need to understand the tokenomics and have faith in the underlying currency model. We are still a million miles off this in my opinion.”
Giving The Film Industry A Makeover
The film industry is arguably in need of a digital makeover and is one of the many industries that are ready to take a step toward decentralization and the accompanying technologies. Already, companies like Netflix have been changing the narrative by going against the business model that has long since been held by big-budgeted Hollywood studios.
However, as companies like Netflix continue to grow bigger, they also tend to mimic their predecessors, bringing back the old pain points to the industry. Perhaps that is why independent filmmakers like James are excited about the opportunities that blockchain technology will bring to film funding and distribution. James said:
“I would love to see a blockchain-based distribution platform with micro-payments to content producers. Platforms such as Netflix do not give producers more if their show is a hit. In fact, they don’t even divulge viewing figures to the producers!”
Through the use of blockchain and smart contracts, however, James suggested the system can become fully transparent with “fully automated micropayments by viewers, with an agreed percentage going directly to producers.” If taken on board, blockchain technology and crypto may transform movies and how they are consumed, but according to Pugh, it’s possible that change might happen behind the scenes:
“Blockchain/crypto may not change how we consume films directly, but a layer of ‘blockchain in the background’ that people are not even aware of could potentially be working towards how the films they are viewing have been funded, distributed and maybe even delivered in the future.”
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