TL;DR:
Hollywood's initial enthusiasm for NFTs has faded since 2020-21.
Variety's podcast on blockchain and Hollywood was criticized for focusing on anti-crypto arguments.
Blockchains are secure, tamper-proof, public ledgers with key features like being permissionless, trustless, and composable.
Blockchain can revolutionize Hollywood's opaque royalty and settlement systems with transparency.
Younger audiences adopting cryptocurrencies will drive blockchain's impact on Hollywood's e-commerce and marketing strategies.
There’s not a lot being written about blockchain technology in the context of Hollywood. Most major studios jumped on the bandwagon to experiment with NFTs when temperatures ran high in 2020-21.
It’s been quiet since…
I recently listened to an episode of the Variety podcast “Strictly Business” that attempted to address the potential and opportunities at the blockchain x Hollywood intersect. I’m a fan of Variety and was happy to see them (finally) start poking around the subject. Unfortunately, this well-intentioned attempt missed the mark.
I won’t go to deep into the details (you can listen to the episode here), but the basic premise was a first half of the episode discussing with a pro crypto guest, the latter half with an anti crypto guest.
It’s great that industry publications make efforts to address and understand this technology. It’s unfortunate that the episode was mostly spent on the anti crypto professor launching inaccurate arguments against crypto and blockchain networks.
I’ll only counter two of the arguments before we move on:
Bad for the environment. It’s fair to say that Bitcoin mining requires a lot of energy. It’s less fair to only in passing mention that there exists other ways to secure blockchain networks. Proof of stake protocols are energy efficient. In fact, Ethereum (maybe the most relevant blockchain network for Hollywood) has a lower annual energy consumption than the Eiffel Tower in Paris.
Crypto currencies are mostly used for scams. A recent research report found that illegal activities represented less than 1% of blockchain transaction activities in 2023. Sure, there’s been an increase in ransomware attacks that can be traced back to the invention of blockchains. The same thing happened with mail fraud increasing tenfold as it morphed into email fraud when the internet became mainstream. Yet, I don’t think anyone would consider the internet a net-negative for society.
Moving on.
It’s rarely productive to evaluate a technology from the binary lens of good or bad. Hollywood would instead benefit from exploring the benefits and opportunities that the technology (like other technologies past, present and future) may unlock.
It starts with understanding the fundamentals.
Blockchain technology is somewhat challenged because the first and most visible use case thus far is hyperfinancialization. To properly consider the technology’s potential we must understand it from multiple angles at the same time; financial, technological, societal.
At it’s core, a blockchain is a secure, tamper-proof, public and distributed ledger. Blockchains that have smart contract capabilities (like Ethereum) can host and run applications in this same environment.
Three key properties of a blockchain that are important to understand:
Permissionless – anyone can access and use
Trustless – they don’t require participants to trust each other, instead the network ensures security, transparency and fairness
Composable – applications can integrate and build on top of each other seamlessly.
Blockchains have all the underpinnings to provide as much opportunity (and threat) to the traditional entertainment industry as the internet itself. But, it’s no more than a technology that provides us with new building blocks.
The innovation depends on how we as an industry comes together to build with them.
Settlements
The original idea of the Variety podcast episode was to explore using blockchains and smart contracts to solve royalties, residual payments and the settlement splits. This is a notoriously opaque system in Hollywood, that would clearly benefit from the transparency that smart contracts on blockchains provide.
There are already projects exploring adjacent ideas, like Story Protocol. They’re building a programmable IP layer to automatically handle IP objects (stories, characters) and licensing terms through smart contracts with automatic settling.
This part is even more relevant when viewed intertwined with another technology innovation that’s got people scratching their heads: generative AI. How can we track the value of training data, the outputs of generative AI and the value these outputs capture, to then distribute back to different participants? It will require transparent, tamper-proof and automatic settlement systems.
Broadly speaking there are two ways to consider adoption and utilization of blockchain technology. The above exemplifies the first: industry-driven adoption. Ways that the industry can adopt this technology to improve its inner workings. This adoption is driven purely by the industry itself.
The other category is considering how wider consumer adoption of this technology will directly and indirectly both impact the industry and create opportunities for it.
Consumers at the Wheel
Both streaming, social media and online immersive worlds are important constituents in the entertainment landscape today. Purely driven by consumer adoption, and later, industry adaption.
Technology adoption traditionally skews young. Early adopters are often the same segment as Hollywood continuously try to find ways to engage. This overlap alone should be a good enough reason to be early to experiment with new technologies.
As a leading indicator, it’s estimated that 560 million people worldwide own crypto currency (currency is the first widely adopted blockchain). 72% are aged under 34 (source).
Blockchain technology will also shape all the facets of e-commerce including payments, personalization and marketing. As this technology is maturing, another is slowly fading into history; third-party cookies. You know, those pesky little data packets that all online targeted ad systems rely on. Most internet browser providers have already started to phase out these cookies, which means we have to rethink how we market online.
For studios that own some of the strongest and most universally known brands, characters and stories, this presents an opportunity more than a threat. Patent filings of the past years indicate that at least Disney is exploring how user-owned assets (yes, NFTs) can be used as a foundation for new types of marketing and loyalty activations that escape the bounds of specific platforms and content formats.
Formation of Culture
A more esoteric opportunity space is the culture that’s forming in and around blockchain and crypto centric communities online. Hollywood is ultimately in the business of telling stories that people care about. Studios already shifted from sourcing IP from comics and books to games. As adoption of blockchain-powered products gradually grow, there will be new, cryptonative cultural objects with the same type of built-in audiences that made both games and comics valuable seeds for entertainment franchises.
The points covered barely scratch the surface, but as an industry it would greatly benefit it to come together to explore the depths of this technology. Not from the perspective of good vs. bad. Instead with an optimistic curiosity that any new technology is worth exploring as it hold capabilities that can strengthen the industry. Or, it may not.
But that’s part of the game.
