In November 2017, Slovak artist Gramatik pulled off the feat of raising US$2.48 million in 24 hours. How did he manage to pull off this crowdfunding feat? By tokenizing his copyrights and selling off a portion of them to his fans. It’s as simple as that. So what would have happened if Xavier Dolan had done the same thing at the time to finance his second feature film titled Heartbeats (Les amours imaginaires in French)?
One of the opportunities provided to us by the blockchain is ‘tokenization.’ In short, tokenization is aimed at assigning a unique digital identity to something that is unique (whether physical or digital, tangible or intangible). In this regard, the arrival of Cryptokitties demonstrated how the blockchain can be used to apply the rarity principle to a digital object.
In a traditional computerized universe, the idea that an object has a unique identity requires a centralized register. Indeed, imagine the consequences if your social insurance number could be assigned to someone else. Luckily, there exists a database to prevent the same number from being assigned to more than one person.
With its decentralized register, a blockchain can—without any intermediary being required—guarantee that a single identity exists for a single object (value, currency, entity, person, citizenship, etc.). This same principle guarantees that a given monetary value can be neither duplicated nor exist in two places at the same time on the web. For example, if I have a Bitcoin in my wallet, the blockchain will keep note of the fact that this Bitcoin is in ‘my wallet’ and will therefore not authorize that its value exist elsewhere at the same time.
Intellectual property marbles
Tokenization thereby makes it possible to create the equivalent of a digital token or ‘marble’ that is unique and serves as a concrete representation of something that is abstract and intangible. Copyrights and intellectual property rights are particularly intangible. Everyone pretty much knows what real estate is because it’s physical, tangible. By contrast, many people do not quite know what copyright or intellectual property resembles—and rightly so…
Tokenization therefore makes it possible to materialize a copyright. Let’s now illustrate the entire copyright protecting a work by 100 small digital marbles or ‘tokens.’ Next, let’s say that I am composing a song with a friend. I am composing the music whereas my friend is composing the lyrics. We could then separate the marbles half and half: 50 marbles for the song composer and 50 marbles for the composer of the lyrics. Keep in mind that the blockchain prevents these distinct marbles from being assigned simultaneously to two different individuals. In this context, and why not, we could also choose to sell off the asset to our friends, relatives, family members and fans—thereby transforming them into investors, or fanvestors. We could also share the profits generated by our song with them on a prorated basis according to the marbles in each person’s possession.
That’s basically what Gramatik did: he transformed his songs into ‘start-ups’ and converted his catalogue into a ‘portfolio.’ Using the Tokit.io platform, the artist tokenized his catalog, thereby opening it up to the market with the goal of having his fans contribute to the advancement of his career. In exchange, Gramatik promised them a share of his profits based on the number of marbles in their possession.
Gramatik is not the first to have converted his copyrights into securities. In 1997, David Bowie surprised many when he issued his ‘Bowie Bonds’, i.e., savings bonds purchasable in increments of $1,000 and promising a 7.9% return over ten years, the whole secured by the value of the performing artist’s master recordings and music copyrights. This unprecedented operation—made possible by the fact that Bowie had arranged throughout his career to keep the rights to his masters and publishing catalogs—enabled him to pocket no less than US$55 million. In short, Bowie had successfully transformed his entire work into savings bonds. However, entering the stock or bond market is no small feat. Nevertheless, what changes things today is the fact that the blockchain allows for, in theory, the issuance of securities on the market in as little as six minutes instead of the six months it used to take.
Blockchain technology also enables the creation of what are called smart contracts. A smart contract is an app that is hosted in a distributed manner, i.e., disseminated throughout the nodes of a blockchain’s network. To explain what a smart contract resembles in simple terms, let’s make an analogy with an administrative RoboCop. Once released into the wild, the smart contract performs the tasks for which it was programmed in an incorruptible and immutable manner. It is designed to survive the company that programmed it. Once it has been released, nothing can stop it other than a democratic vote to the contrary within the network.
Pursuant to a smart contract, it therefore becomes possible to distribute one’s revenue among claimants based on who owns what (in terms of numbers of marbles). Nothing of all that requires the slightest administrative effort, there are no risks of human error, it’s very low cost and it’s eternal. Amen.
Films as start-ups
In the field of independent film, young artists and artisans often accept to be paid ‘on a differed basis’ by their producer or self-producing friends. In other words, they accept to be paid a share of the profits. Quite honestly, it all looks more like pious hopes seeing as, in Quebec’s hyper subsidized independent film sector, the vast majority of all productions never generate the slightest profit. Also, the idea of operating in ‘profit-sharing’ mode comes with the difficult and time-consuming task of managing distributions with all of one’s collaborators.
Great news! Tokenization makes it economically possible to implement a model that is usually costly to implement. It’s a model pursuant to which an artisan receives marbles and, once profits begin to roll in, these profits are automatically distributed among the claimants on a prorated basis according to the number of marbles each one possesses. Better yet, it is possible to issue marbles for sale to fans interested in making the [next] film possible. In other words, certain fans receive marbles in exchange for their investment in time, whereas others are given marbles for their monetary contributions.
So let’s go back to the case in point where Xavier Dolan and his friends made miracles with only $600,000 to produce Les amours imaginaires. Imagine if all of Dolan’s fans since I Killed My Mother (J’ai tué ma mère in French) had decided to contribute financially to this second project in exchange for a share of the profits? Such a model could soon be within everyone’s reach thanks to MovieCoin, a platform that claims that it can shake up the good ol’ Hollywood model.
The tokenized future visibly has a lot in store for the audiovisual production sector.