Heads-up to Hollywood—Disintermediator: The Rise of the Creators—will not be playing at a theater near you
The lords of film, TV, and music funding, marketing, and distribution confront a diminished kingdom, clever creators and producers angle for a bigger stake, and loyal fans get in on the action.
The last time that actors and writers went on strike at the same time was in 1960 when Ronald Reagan was president of the Screen Actors Guild. Ronny and Bonzo reviewed their scripts while filming Bedtime for Bonzo in 1951.
Hollywood content creators and the beautiful people join together and say no!
For the first time in over 60 years, the unions representing Hollywood writers and actors—the Writers Guild of America (WGA) and the Screen Actors Guild, American Federation of Television and Radio Artists (SAG-AFTRA)—are staging a strike together. On the other side of the bargaining table is the Alliance of Motion Picture and Television Producers (AMPTP), representing media companies like Netflix, Disney, Paramount, Amazon, HBO, Warner Bros. TV, NBCUniversal, and CBS Studios.et al. The writers started striking on May 2nd, and the actors joined on July 14th, translating into 175,000 union members out of work until the two sides cut a new deal. Until then, several productions remain in Limbo, including Disney's Avatar and Lion King sequels, The Simpsons, Deadpool 3, Stranger Things, Thunderbolts, and The Last of Us.
The Tinseltown beef is a bit more complicated than just writers and actors wanting a bigger cut of the films and TV shows they help create; it extends to issues surrounding the rapid shift toward streaming and the 'existential threat' AI poses. "You cannot change the business model as much as it has changed and not expect the contract to change too," says Fran Drescher, SAG-AFTRA president and the creator of the iconic Fran Fine. Also new is the rippling effects the strike has on largely non-union influencers and digital content creators, who are not always household names, but still a growing part of the attention-seeking game. With Hollywood down, selfie views could see a big bump and move viewers further away from traditional entertainment.
Tom Cruise had AI on his mind when he Zoomed in on a SAG-AFTRA negotiating session last month to share his advanced knowledge of producing dope high-tech movies, such as his amazingly prophetic Minority Report in 2002. But even the star power of the Mission: Impossible actor, who famously does his own stunts, couldn't get the studios to nudge.
Some folks are a bit paranoid about the prospects of an AO chatbot writing the script for the next blockbuster. Sure generative AI can be a tool for writers, but these apps won't and never will replace creative genius. Great artistry requires a breathing, sentient, expressive, clever artist behind the wheel. AI can and will be used to produce background characters in productions and replace jobs for real people, just as computer-generated special effects lessened the need for physical sets and the folks needed to build them. Actors have the right to own their digital likenesses. AI's ability to recreate images and hologram technology must be fully accounted for in any deal, and this is one of the big sticking points.
"The AMPTP's 'groundbreaking' AI proposal that they gave us yesterday, they proposed that our background performers should be able to be scanned, get one day's pay, and their companies should own that scan, their image, their likeness and should be able to use it for the rest of eternity on any project they want, with no consent and no compensation. So if you think that's a groundbreaking proposal, I suggest you think again."
—Duncan Crabtree-Ireland, SAG-AFTRA's National Executive Director and Chief Negotiator
A scene from The Incredible Shrinking Man. an American science fiction film premiered in 1957, based on Richard Matheson's 1956 novel The Shrinking Man.
The Incredible Shrinking Hollywood
The streaming issues seem more a symptom of the fact that TV has peaked, to the point that even the largest streamers that disrupted the big studios during Web2 with much lower marketing and distribution costs are feeling the financial pain spreading across traditional Hollywood. Old Hollywood is firing people and shrinking, with the streamers taking less of a hit but still a hit.
As outsiders, it has been fascinating to watch all the studio heads flipping out over the strike. Disney's reincarnated boss Bob Iger, who just inked his $27 million-a-year contract, started bitching about actors like Meryl Streep and Jennifer Lawrence joining the picket line. They are 'not being realistic' about their economic expectations and are 'disruptive' and their actions threaten to 'bring Hollywood to a halt.' And the strikers are '"adding to the set of the challenges that this business is already facing."
Jennifer Lawrence is ready to play Katniss, the girl on fire again if there is a Hunger Games sequel. "Oh, my God – totally!" the Oscar winner told Variety last month.
At first, we thought they were annoyed that the strike happened just as they were jetting off to Allen & Co's annual 'billionaires' summer camp' in Sun Valley, where they hang out with their fellow titans. But at a closer look, their outbursts reflect much deeper issues. Linear TV is not coming back, content distribution and marketing are going peer-to-peer, and content creators will increasingly turn to crowdfunding to finance their productions.
First-time camper at Allen & Co's annual media and tech honcho retreat Sam Altman, CEO of OpenAI, using chatGBT to find his way around the Sun Valley compound.
Mr. Iger at least sees one and a half of three disruptions coming at Disney. "Our TV assets [e.g., ABC, ESPN) may not be core to the future of the company. There's clearly valuable creativity and content at the core of Disney, but the distribution model that has delivered great profits over the years is definitely broken," he admits.
"It is one of those situations where, once one or two of the dominoes finally fall into place, I expect to see a large wave of new consolidations, of acquisitions of smaller outfits such as Lionsgate and AMC Networks, barring a Biden administration antitrust activity that we haven't seen yet," says J.D. Connor, who specializes in contemporary Hollywood and studio economics, told Variety. Wall Street analysts also speculate that Mr. Iger was brought back last year and re-upped on his two-year deal to sell the Mouse House.
Picket line walker Meryl Streep (with Anne Hathaway) quit method acting after The Devil Wears Pradabecause playing Miranda Priestly (a character based on real-life Vogue editor Anna Wintour) made her so depressed. "I was miserable sitting in my trailer," recalls the three-time Oscar winner. 'It's the price you pay for being boss!' she mused.
Newbie content producer Silicon Valley-based Apple remains the wild card of the whole bunch. With the industry moving into Web3, Apple is well-positioned to offer mobile token wallets and extend content into the metaverse with its Video Pro mixed-reality goggles. Apple would also be a premium buyer of Disney’s franchise content to up Apple TV+’s game versus Netflix and Max. If that deal went through, it would probably have Steve Jobs singing from the heavens because it would include Pixar, the first full animation film producer that Mr. Jobs built and sold to Disney.
News Corp is the only one of the four major US broadcast networks not tied to a streaming play and the only company amongst its peers to launch a dedicated Web3 and NFT division.
“Our challenge is to survive Web3. We are moving into a trustless, permissionless, creator economy where content is disintermediated, tokenized, and instantly distributed. All barriers to entry are obliterated. Blockchain, crypto, and the metaverse must be at the top of our agenda.”
When you translate all this into the entertainment world, which is, by definition, filled with intermediaries, this will be a seismic change. Messrs. Iger, Diller, and Murdoch have put their fears on the table, and it's safe to presume every studio head shares their views. These folks have made a lot of money controlling marketing and distribution. Mr. Iger says the model is now 'broken,' but only for him. The model is decentralizing and going direct, creators-to-fans, and there is not a damn thing the entertainment lords can do about it.
Settle the strikes and move on
It is clearly best for all to settle the strikes ASAP and get the 175,000 writers and actors back to work. We understand there is a concern that the studios are disincentivized to end the strike early because the content pipeline is plenty full, and they can save money by not paying writers all summer. Secondly, if the strike goes beyond August 1st, the force majeure clause kicks in, allowing studios to terminate some of their first look and overall deals with writers. With the directors already in their back pockets due to an earlier deal, the studios were not expecting the actors to jump in, which completely blew their plans and froze all productions. The studios have been flippant about responding to the actors’ concerns regarding image exploitation.
These are very complex and nuanced negotiations, and we are Internet industry people, so this is not our lane. That said, we promise our brother and sister creators that the world is moving in our direction. The Web3 technologies are already in place where content creators, including casual online users, will increasingly own, control, and even sell their online social graphs and data and enjoy more privacy and security. This transformation will take time, but it will happen, and strikers would be wise to negotiate with this premise as a given.
Suggested bargaining script
"Dear Studios—The barriers are crumbling, and the balance of power in film, TV, and music is shifting. You have acknowledged this transformation publicly, so it can not be denied. In the new paradigm, we, the content creators and actors, will have more control over our images and content and enjoy royalties on our work in perpetuity for every big and micro sale and trade. This change might be tough for you, but it is inevitable and your new reality. This negotiation is, therefore, not your last-ditch opportunity to own us; it's time to even the playing field and pay up for the talent, creativity, and content that has made you King. It is time to give us what is rightfully ours or risk irrelevancy and abandonment. You don't want to end up in the trash can of Web2, with no role in the future."
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Lord of the NFTs: Get your Collectors Edition here.
Film studio Warner Bros. is betting movie NFTs become the next "collectors edition" DVDs that provide cinephiles a more intimate sense of ownership. Last Fall, with Web3/blockchain partner Eluvio, WB offered fans Ethereum-compatible 'Lord of the Rings: The Fellowship of the Ring' NFTs. The NFTS can be bought and sold in the "WB Movieverse," a marketplace that now includes ‘Flash’ and ‘Superman’ and other titles from the studio. Purchasers of the NFTs can hold them in their MetaMask or Eluvio crypto wallet.
WB and Eluvio minted 999 copies of the Epic Edition, priced at $100 each, and 10,000 of the Mystery Edition for $30. The NFTs effectively function as an all-in-one digital experience. Both allow buyers to watch the extended version of the film (which clocks in at 3 hours and 48 minutes) in 4K UHD, with access to more than eight hours of special features, hundreds of images, and hidden AR collectibles. The Epic Edition includes extra image galleries and navigation menus for three film locations—The Shire, Rivendell, and Mines of Moria—along with location-specific key art.
With the "Lord of the Rings" release, the core digital assets of the experience, along with derivative NFTs, are all on the blockchain, not just the token (NFT) itself. This setup allows smart contracts to dynamically update content and new experiences on an owner's NFT over time.
Several other studios have jumped into the NFT game. Lionsgate has released NFTs for its horror franchise "Saw," Paramount released "Star Trek" NFTs, AMC launched "Walking Dead" NFTs earlier this year, and Netflix has gotten some backlash for its "Stranger Things" NFTs. On the TV front, The creators of "Rick and Morty" have partnered with FOX Network to launch an NFT collection for a new animated series called "Krapopolis" with many unique content and privileges.
DVD and CD collectibles comeback on steroids!
The music, film, and TV streaming companies born out of Web2 started the decentralization movement by serving this content to listeners and viewers on-demand, making it easier for viewers and reducing the need for cable services other than sports and breaking news. Unfortunately for Hollywood, online services beginning with iTunes and later with Spotify and Netflix and all their imitators came online, also signaled the end of selling discs of all forms. As a result, music sales plummeted, and the film industry could only produce horror films, comedies, and big-budget special effects films that could make money at the box office; gone were the less popular genres that depended on DVD sales and rentals.
Savvy entertainment insiders have foreseen the possibilities of using the multimedia, and auto-updatable blockchain-based NFT format to bring back product lines lost when all content went online—the CD and DVD collectibles. The rebirth of these old yet proven revenue streams under the robust and fully digital NFT format could help fund a Renaissance in new, more niche audience-focused entertainment and provide advertisers a whole new way to impress committed fans.
The most significant economic change from Web3 will come from the inevitable tokenization of all entertainment assets onto NFTs. "This is the last mile of direct-to-consumer," observes Chris Jacquemin, head of digital strategy at powerhouse talent agency WME. "The data and relationships artists and sellers have with the consumer are very different in a blockchain environment." To date, Hollywood has been doing some cool stuff with NFTs to bolster marketing and create new sources of revenue. The Lord of the Rings NFT experiment is an excellent gamble. But creators still need to take full advantage of the new blockchain model.
Stoner Cats is an animated television series featuring a star-studded cast of voice actors, including Mila Kunis, Ashton Kutcher, and Chris Rock. Each episode is released as an NFT, which collectors can buy, sell, and trade. At its peak, the show’s NFTs were worth $8 million! Today you can buy one for $35.00.
Poor kitties, grandma wakes and bakes.
Hollywood, therefore, has a long way to go in adapting new Web3 technologies and realizing their full potential. The paradigm shift is just an inkling in our eyes and does not provide strikers much leverage today, but this discussion does have everything to do with Hollywood's future and survival. The following summarizes the primary long-term possibilities and benefits of adopting blockchain-based NFT strategies for entertainment content creators who aspire to gain more and even the economic playing field.
Increase content revenue potential. Soon, all films, TV shows, and music will be sold as a token in tiers, from free one-time use to Limited Editon tokens and VIP club versions. The better executed and more value an artist embeds in the NFT they create, the more revenue potential exists. The DVD' collectors editions' proved the model before the Internet. NFTs can re-invent the collectibles model in a much more glorious way. NFTs also create unlimited multi-media advertising and sponsor opportunities.
Increase long-term brand loyalty and ownership & recurring revenue. If a fan is holding a Limited Edition NFT out of allegiance to any artist or production, chances are they will be a fan for life. The NFTs effectively function as an all-in-one digital experience of special access and content only the NFT can enjoy, giving fans a sense of ownership. Because NFTs are blockchain connected, they dynamically update with new content and experiences, discount opportunities, and other privileges. Issuers can also analyze the data of NFT holders to determine what features and benefits they are taking advantage of and other essential fan data,
Broader, cheaper distribution: Tokenized content is more portable, tradeable, and customizable in packaging and price. Artists can leverage these advantages by directly marketing to fans over Twitter, Instagram, Tiktok, and specialized global NFT exchanges. Holders will also increasingly re-sell and trade their NFTs across all social marketing and exchanges, adding value to the NFTs. As Rupert's heir and News Corp's Vice Chair, Lachlan Murdoch, stated, "All barriers to the customer are obliterated.'
Royalty ownership authentication and management. Blockchain-based NFTs can be designed to allocate ownership rights and automate royalty management distribution. It can all be built into the token and governed by the smart contract on the blockchain that is immutable and can't be tampered with, guaranteeing transparency and fairness. This structure will also radically lower legal and accounting expenses.
Crowdfunding. Sound of Freedom beat Mission Impossible at the box office on opening night with little or no marketing budget. Angel Studios, which produced the film for $14 million, proved you could crowdfund for production expenses, sell many pre-ordered tickets, and end up with a much higher stake in your production. Angel promised 'donators' to Sound of Freedom a 120% return share of the $5 million raised. Producers can make this crowdfunding process much more manageable for the issuer and easier for the buyer by providing NFTs to investors and ticket holders.
It is time for artists to secure a long-term relationship with their fans by offering Limited Edition NFTs, providing everything from a small share of royalties on the next single to front-row seats at the show.
Sound.xyz empowers musicians to skip the streamers, drop songs on-chain, and sell directly to music collectors for whatever price they want while retaining 100 percent ownership. Over the past 12 months in closed beta, Sound has paid out $5.5 million to 500 artists, who have collectively released 1,600 songs as music NFTs, including Snoop Dogg.
Snoop Dogg just launched the Snoop Dogg Passport, an NFT pass that unlocks exclusive content and opportunities tied to his upcoming concert tour.
In the SoundCloud, YouTube, MySpace, and TikTok tradition—every track uploaded to Sound will be free to listen to, but fans can also “collect” it by purchasing an NFT. Sound lets artists mint NFTs on the Ethereum mainnet and scaling network Optimism to facilitate these transactions. Sound is betting that fans will buy in to support their favorite artists for speculation (i.e., betting that the NFT value will rise and can be traded later for a profit) and also for social status within the community and amongst their peers.
David Greenstein, co-founder of Sound.xyz, started his career in music and tech with an internship at Atlantic Records and says the goal is “to help artists reach as many people as possible and help them make money from their music.” The rest of the team comes from Apple, Opendoor, OpenSea, Pandora, and Slack.
The New Hollywood, where talent will rise, shine and prosper like never before. Starlet Rita Hayworth and director Orson Wells swap seats on the set of The Lady from Shanghai circa 1947.
Lights, camera, Web3!
During Web1, it took the music labels five years to give in to selling singles online. In the meantime, they created a whole generation of kids who used Kazaa and Napster to steal their music with no other legit choice. It took the charismatic Steve Jobs, God rest his soul, and the iTunes platform to show Hollywood how to stop getting robbed and get into the online game. What will it take to get Hollywood to wake up to the reality of the Web3 opportunity and not be late to this game?
A positive spin on the Hollywood strikes is that the cracks in the entertainment power structure are dramatically exposed. The Lords are rattled, and the surfs do not feel much better. There will be no turning back to Old Hollywood, but the future feels uncertain. This tension and uncertainty is, in its own highly ironic way, accelerating the inevitable.
Our advice to the creative community is to study the NFT success stories and bake your royalty structures, customer tracking, and fundraising support into an NFT schematic. This new format is the future; it will happen, so creators, producers, and showrunners need to get on it.
If we were striking writers, we'd fling our signs, create an NFT strategy around our next production, and start getting our fans involved from the beginning, including offering them a piece of the action. If you need inspiration, look at how much the creators made on Sound of Freedom. If done right, the web3 approach will make the greenbacks writers and actors are fighting over today look like chump change compared to what they will earn tomorrow.
🙉 Let us know what you think in the comments section below!
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More brain matter
NFT as a vehicle 'pink slip'
Unlike BTC or ETH coins, every NFT certifies and authenticates the holder's rights to unique specified assets and assorted privileges. NFTs have been created around successful digital content, such as World of Women and Bored Ape and the animated characters in Stoner Cats or CryptoPunks. The NFT boom is now targeting real-world assets.
One of our favorite blockchain application examples is what is being built at the California DMV. In version 1.0, rather than having a paper ownership certificate, you must sign when you sell your car, your new pink slip will be an NFT token held in your DMV NFT wallet. When you sell your vehicle, you will send it to the buyer's DMV, and then re-registering under the new owner process will all happen automatically, with no need to fill out any paperwork or go to the DMV.
In future versions, your car NFT could track and record all owners, odometer readings on different dates, and maintenance records. In addition to making the registration process more manageable, you will see what you are getting when you consider buying a car.
The NFT-as-ownership token model is becoming more popular and applied to a rapidly expanding set of real-world asset categories, such as fine art (notorious for its fraud work), real estate interests (including fractionalization), and silver and gold coins.
The Bitcoin metaphor meets Hollywood
Bitcoin, the most well-known cryptocurrency, gained its fame by becoming the first trusted digital currency with no outside authority, including the Central Banks. Bitcoin will always be the Grandaddy of Crypto because 'Satoshi Nakamoto' created an approach to computing —now broadly known as Web3—that will re-write how we do almost everything over the next 20 years.
The Bitcoin metaphor is an Internet computing paradigm driven by decentralized, peer-to-peer applications that people can trust without a central administrator. Silicon Valley is seizing on this opportunity and funding its infrastructure and a new generation of 'dApp.' Since 2019, VCs have bet over $50 billion on 2,500 blockchain companies. Web3 now has several proven use cases and an established and rapidly growing global community of developers, users, and enthusiasts.
Blockchain ledgers are also immutable. Once a transaction posts on the Bitcoin blockchain, no one can alter or delete it, which ensures a tamper-resistant transaction history. Consumers want more online privacy, security, and transparency, and blockchain entrepreneurs are starting to deliver it.
Practically speaking, the metaphor eliminates intermediaries and their usurious fees. It is also where content creators, including casual online users, will increasingly own, control, and even charge for their online social graphs and data and enjoy more privacy and security. For example, Bitcoin uses robust cryptographic techniques to secure transactions and control the creation of new coins. This design has proven highly secure, with no successful attacks on its underlying protocol.
Buy or Sell BTC?
One can believe in BTC or not, but since its launch in 2009, BTC has outperformed every major asset class over the last decade. More recently, it traded up 73% in Q1 2023 during an inflationary and depressed economy. Long-term, if BTC is trading at $30K today, with only 1 percent of the world's population owning a crypto wallet, what do you think the price of BTC will be when 50 percent of the world has a crypto wallet?
A subset of largely Zoomers started maniacally trading NFTs and drove an insane three-month price run-up beginning in August of 2021, only to see values take a dramatic swan dive three months later.
To remind us all, there was an Internet Bubble in Web1 too, but out of the company wreckage, $20 trillion of wealth was created during Web2 by all the social networks and cloud-based apps we now depend on daily for almost everything we do. We have done enough experimentation that we now have a pretty good idea of what Web3 is all about.
Agreed. The future is in DeCo: Decentralized Content - https://medium.com/@IRAdrian21/the-rise-of-deco-decentralized-content-will-change-the-world-6376d5e52ea4?source=social.tw