Five years ago, I wrote this article asking whether crowdfunding was the future of independent film finance. Today, I am writing about the next frontier of film finance via crowdfunding, and it revolves around blockchain technology.
What I called crowdfunding five years ago was the concept of using sites such as Kickstarter and Indiegogo to raise money for a film project in exchange for a reward of some kind. Rewards most often took the form of DVD copies of the film or tickets to the premiere screening or movie posters or other goodies. With no equity participation, people who contributed dollars were donors and their contributions were typically modest.
In November 2016, Indiegogo partnered with MicroVentures to launch a new investment platform called Equity Crowdfunding. This created the opportunity for small-scale, individual investors to take an equity stake in the startup companies or the artistic projects they back. So instead of being donors, people who contribute dollars are now equity participants. With increased upside potential and long-term alignment of incentives, individual contribution amounts are typically greater than before and, thus, overall fundraising rises to entirely new levels. As opposed to raising tens of thousands of dollars, companies now aim to raise millions of dollars using these crowdfunding platforms.
Recently blockchain technology has received considerable press attention. The most well-known blockchain technology protocol is called Bitcoin. A lesser known, but potentially more powerful blockchain technology protocol, is called Ethereum. One element of Ethereum that differs from Bitcoin is its use of smart contracts.
A significant amount of the recent press attention showered upon blockchain technology focuses on the massive growth in value of cryptocurrencies such as Bitcoin and Ether. Attention has also been paid to the large amounts of money (ie. millions of dollars) being raised by blockchain tech startups via ICO’s (initial coin offerings) and token sales. TechCrunch recently published an article titled WTF Is An ICO?
Until recently, ICO’s were focused on raising money for blockchain tech startups primarily. However, an exciting occurrence is taking place next week. For the first time ever, a feature film project will raise its production budget via an Ethereum crowdsale.
The film is called Braid and its producers are raising $1.4 million via this new frontier of film finance. This marks a historic milestone for independent film finance. While key players in the world of blockchain technology are aware of this milestone, the traditional players in the indie film finance world will likely not be aware of, nor understand, this method of fundraising for some time. Historically, the traditional media industry has never positioned itself as an early adopter of cutting-edge technology innovation. And this new method of film finance is truly revolutionary and potentially disruptive.
Mitzi Peirone is the writer/director of Braid. She explained to me what prompted her interest in creating a new economy for independent film industry.
“What really got me married to the cause was seeing the status quo of Hollywood production studios just holding on to the same stories, holding on to the same formulas because they know it works. Meanwhile, independent filmmakers are struggling to get funds because all they can really use is Indiegogo and Kickstarter but they're a donation, it's like charity. I wouldn't invest into one of those movies because it could go on to make millions [of dollars] and I wouldn't see a return.”
“I'm a woman. Most directors are men. There's like seven or nine percent of directors out there who are female. We are raising money in this new, obscure way. The story [of our film] is unusual, it's diverse and it's controversial. It's like we are the ultimate underdogs but we're doing it.”
“It's definitely been interesting going this road of essentially breaking ground, and breaking the studio system by putting more power into the audience themselves. Giving them a choice to be able to participate and be involved in the process as a whole. It's like uncharted territory.”
The Ethereum crowdsale for Braid is just the beginning. Blockchain technology is well-positioned to disrupt a wide range of industries and business processes in the future. I predict that we will see many more film and other artistic projects raising funds via blockchain token sales in the future.