Pioneering film rights project based on blockchain technology
When broadcasters buy films or sell their own programmes, they still do it the old traditional way. It involves major deals, complex contracts and time-consuming negotiations. A well-known TV producer and presenter now wants to revolutionise this system with Swisscom – using blockchain technology.
Roger Baur, 24 November 2017
Hendrik Hey is known as the man who makes science understandable for us all in his “Welt der Wunder” [World of Wonders] series. Yet even he is stumped by some problems. Like recently when he wanted to supply a fellow broadcaster with a minute’s worth of picture material. Valued at CHF 1,500 on paper, he was faced with negotiations worthy of a business deal involving millions. “The contracts went back and forth, they were amended, and revised again. In the end I was tempted to say: ‘You know what, just take it for free.’”
The fact is that buying and selling TV rights for films and series as well as shows and production contracts is still almost entirely based on analogue processes: negotiated on the phone, sent by fax, signed and sent by post. Transparency often goes by the board, with the odd passage overlooked. Broadcasters and producers therefore employ armies of licensing experts and lawyers to assist with the deals, and then supervise the contract terms. And this is where the next problem arises: with every contract separately negotiated, monitoring is equally difficult.
“Something interesting at last!” That's the slogan Hendrik Hey uses to promote his “Welt der Wunder TV” programme. His new take on marketing rights with Swisscom blockchain technology is also interesting.
Picture: API Michael Tinnefeld
For instance a broadcaster can show Film A three times in three years with a repeat within seven days of each airing – at the earliest however on the midnight following the showing. By contrast, Film B is available until the end of the year after next and may be shown five times during this period – and every airing counts, even those in the middle of the night. The situation is not any easier for in-house productions where production companies, directors, presenters, actors, scriptwriters can all have separate contracts.
This has meanwhile led to absurd situations like the one facing the private RTL channel. It has long wanted to repeat the legendary “RTL Samstag Nacht” series; so far, it has only managed to show some clips from it. The simple reason: the rights to the gags they purchased have since expired. It is literally no joke; a single punch line can block a whole programme. As Hendrik Hey explains:
“No-one is really happy with the current situation. Broadcasters, producers, studios – they're all waiting for a solution that covers everyone and everything. And that’s exactly what we’re about.”
The idea is to create a platform that brings everything together. A business platform for film, TV and video; a “YouTube for pros”, as Hendrik Hey likes to call it. It is even designed to let the various suppliers of a programme team up to form a joint production. “Blockchain not only generates the contracts, it also monitors them and distributes the takings,” explains Hey. It covers contract issue and material transfer through to notification of licence expiry. Payment is made directly in the platform’s own cryptocurrency, the micro licensing coin (MILC). Even minor purchases of video material are worthwhile because transaction and exchange rate costs are eliminated.
This innovative blockchain technology is being used for the first time to simplify the global media licensing business. This industry generates more than EUR 500 billion annually and is still growing. Picture: Keystone
Similar stories can be found in the music industry, where artistes like Imogen Heap have sidestepped leading record companies; thanks to blockchain, all the people involved – from the composer to the studio engineer – are paid directly now. The remuneration is also higher, since the commission for distributing the takings is eliminated.
To start with however, the focus is on selling ready-made programmes and image material. And not least, because the number of potential buyers and sellers has increased significantly: streaming services, news sites, entertainment portals and traditional broadcasters are among the target market. On the selling side, it could also open the door to a new group of small providers. Hendrik Hey: “If I produce a good video I can publish it today on YouTube and get around EUR 15,000 for a million clicks. In the future I will be able to offer the exact same video on the new platform to the entire professional world of video and TV, unlocking whole new opportunities.”
The planned Welt der Wunder TV film-rights platform will be based in Switzerland. However Welt der Wunder TV is not getting its initial funding from a bank or the stock exchange; it is in the form of an initial coin offering (ICO). This kind of funding is a cross between crowdfunding and issuing shares. Investors receive tokens in return for their investment, rather than shares. Investors buy tokens with currencies like the Swiss franc or euro, or with cryptocurrencies like bitcoins and ether. For the film rights platform the token is called a micro licensing coin (MILC) and it is the platform’s only means of payment (see above). It entitles purchasers to buy services offered on the platform. In other words: if a broadcaster wishes to buy film rights on the platform, they will pay the holder of the rights in MILC. They, in turn, can buy rights on their own account with the token – or sell or exchange it for fiat currency, if they no longer need it. MILC pre-sales start at the beginning of December 2017; the official sales start is in January 2018.
Swisscom Blockchain Ltd is supporting both the ICO and the development of the blockchain-based platform itself. Founded in September 2017, the Swisscom subsidiary is advising and accompanying Welt der Wunder throughout the entire ICO process – from verifying the business idea to the technical side of selling the coin.
Although a new phenomenon, ICOs are already highly successful. In the past 12 months alone investments in the region of 3.3 billion dollars have been made in over 200 ICOs worldwide. Filecoin is deemed the largest ICO so far: the US start-up Protocol Labs raised more than a quarter of a billion dollars for this distributed cloud service.
Swisscom regards ICOs as an alternative form of funding that enables the swift global development of a stakeholder base and digital ecosystems. It offers a toehold in the market that opens up opportunities especially for start-ups and SMEs, provided the existing legal system and regulations are observed and the project and initiators are trustworthy. Swisscom therefore has prospective ICO clients checked out by an auditing firm. In the later phases of the ICO, specialised law firms are appointed by Swisscom Blockchain Ltd and the client to ensure the ICO’s legal compliance.