4th November 2021

Long Read by Sarah Cundall

The initialism has been doing the rounds for a while now, but what actually are NFTs and what opportunities do they bring to the Film & Television industry?

What are NFTs?

NFT stands for non-fungible token which is a digital asset representing ownership of virtual or physical assets such as art, music, collectibles, real estate and even films. A common misconception is that NFTs are a type of cryptocurrency – both NFTs and cryptocurrency have a stored digital record on a blockchain but where NFTs differ is that NFTs are one-of-a-kind.  If you swapped a bitcoin for another bitcoin, you’d have the same thing you’d started with – like regular currency – but NFTs are unique.  They are incredibly hard to fake and are therefore useful to help prove authenticity of digital content, certifying and tracking the ownership of a digital asset – every transaction of an NFT is recorded in a public register.

What opportunities do NFTs bring to Film & Television?

Distribution/Exploitation

From VHS to DVDs and now SVOD platforms, NFTs provide a new avenue for content creators to distribute and communicate their work to viewers.  Earlier this year, a 2016 Oscar-nominated documentary “Claude Lanzmann: Spectres of the Shoah“ was released for the first time as an NFT. The doc aired on HBO but was never made available for public purchase physically or digitally – each of the 10 first edition copies made available were sold for a type of cryptocurrency equal to around US$375,000. Similarly, the creators of animated series called Stoner Cats (starring Mila Kunis, Jane Fonda and Chris Rock) made US$8.4m through the sale of NFTs which granted the owner of the NFTs the rights to watch the episodes. The Stoner Cat NFTs sold out in 35 minutes.

NFTs are also being used to boost popularity of the more traditional types of exploitation – a series of exclusive NFTs was released for Marvel’s Deadpool 2 for people who had purchased a ticket to watch the movie in order to encourage footfall in the cinemas.

Finance 

Some of the industry’s biggest names are cashing in on NFTs: CNN recently announced the launch of Vault by CNN: Moments That Changed Us, an NFT blockchain technology offering for CNN users housing digital collectibles from its television archives; Fox has announced the launch of a dedicated NFT and blockchain subsidiary (Blockchain Creative Labs) along with its “first-ever animated series curated entirely on the blockchain” fronted by the creator of Rick and Morty, “Krapopolis“; and  production company Enderby Entertainment recently partnered with financial technology blockchain pioneer, CurrencyWorks, Inc to form VUELE, the first viewing and distribution platform for feature film NFTs. Users of VUELE can own, watch, collect and sell limited edition films via the platform.

But the NFT space also brings new ways for producers to raise finance for their projects – US film financier Forest Road Company recently closed a US$20m fund with the aim of helping independent producers monetise content, turning new and existing intellectual property into NFTs and allowing them to source meaningful capital through a new revenue stream. The $20m fund makes pre-production investments in exchange for the right to sell associated collectibles using NFTs – the producers will be able to participate in the NFT royalty stream once Forest Road recoups its pre-production investment.

Alongside attracting investors willing to provide pre-production finance, selling digital collectibles (artwork, clips of a film’s score) could allow the producers themselves to raise money for new productions from fans, in a similar way to crowdfunding. Trevor Hawkins is selling NFTs in order to finance his latest film, 1000 tokens sold at US$1000 each can be bought to represent ownership shares in the film that give profit participation to the recipient and US$100 tokens are being sold, giving the recipient access to the movie’s online premiere.

Merchandising/Extras

NFTs also bring merchandising opportunities – streaming and the drastic drop in DVD sales foreshadowed the end of “special edition” DVDs where more money could be charged for DVDs because they included featurettes, collectible posters, cover art and merchandise. With NFTs, there’s an opportunity to reintroduce collectible extras – company OpenSea offers a selection of digital movie poster NFTs and the 10 first edition copies of the Claude Lanzmann documentary were sold alongside copies of the unreleased extended director’s cut as well as signed digital film posters.

Legal Considerations

The copyright ownership in the original work remains unchanged when a linked NFT is sold as what is being bought is not the digital work itself, but metadata containing information about who owns the particular version of the work. Copyright ownership isn’t what changes hands. Instead, people are buying the right to say that they own a certain edition of a work, such as a the first edition of a movie.  This means the only rights the purchaser has is to own, sell, lend or transfer the NFT itself.

It is possible for someone to create an NFT of an existing work in which they have no rights of ownership.  Purchasers of NFTs should therefore be advised to carry out due diligence and seek to ascertain whether the person selling the NFT really is the creator of the work (or has obtained the relevant permissions to sell it). Similarly, the ‘minting’ of an NFT in an existing work also raises questions in terms of a creator’s moral rights – specifically the right to have work attributed to the author and the right to object to derogatory treatment.

Given this is such a new era which hasn’t yet been explored in a court room, those opining on outcomes of any disputes regarding NFTs would be speculating and caution should always be exercised when dealing with NFTs.

Find out more about our experience in advising clients operating in the film and television sectors.