Financing / Crowdfunding : Blockchain, open sourcing the business of entertainment. by Brett Russell

Interesting. What's the best venue to share these challenges?

We can communicate by my personal email... steve_vandrilla@ hotmail.com

Hey Max Edward Woertendyke ... thanks for the reply.. Im not looking for sensitive information so this public venue could be utilized or we can take it offline if that's what you prefer. I would like the discussions to benefit others as much as it will our project. We are not doing actual financing but as part (a small part) of our project we will create a cog for filmmakers that will been seen by funders and a cog for funders that will be seen by filmmakers. Knowing the pain-points, helps us design the cog. Over-to-you.

Hi Steven Vandrilla will connect with you next week. Hope thats OK

I would be interested in knowing some details of what you are talking about. Since it is hard to envision what the blockchain can actually address in the industry. Can you share any thoughts here please?

Yes Shadow Dragu-Mihai, Esq., Ipg I will share more here. Thanks for your interest! ... and Im sorry Steven Vandrilla for not connecting last week. I will connect with you privately to discuss. soon.

:)

:0

Im sorry for the delay here folks but wanted to respond to Steven Vandrilla and Alfred D. Griffin Clark . Ill first say that the funding component that we will propose to filmmakers /producers in our business model makes up a small part of the overall project. My question about financing here in STAGE32 was to explore the identifiable pain-points in financing and continually work at finding creative solutions. We will continue that effort so please post or message here.

In response to Shadow Dragu-Mihai, Esq., Ipg question, blockchain allows tokenization which allows the creation of new channels of investment. The tokenized asset here is the ownership in the film production or could it be the member company or it could be an individual scriptwriter. A tokenized asset will make it legally available to a wider pool of investors. In our project, each of the member companies and individuals that make up a production, and they could number in the thousands - funders, producers, actors, crew, lawyers, accountants, distributors, makeup artists, set designers, gaffers, (you get the picture) - all become stakeholders who not only share a predetermined and limited / proportionate amount of the risk, but also become benefactors of any potential blockbusters. In other words, along with the major funding sources, everybody that touches the production owns a piece of it.

This is a oversimplification of one single component to an extensive permissioned blockchain that we are building and I should make it clear we are not selling tokens or doing ICO's - we are disrupting many aspects - legal, intellectual property, accounting, development, etc of the entertainment industry using blockchain.

There is much more to come and will post in this forum as we develop.

I look forward to connecting with community members that may be interested in our blockchain project. Thanks !

Brett Russell Hi, I have been preoccupied with the Premiere of Sin 13 and the launch of Facet.TV, so that's the reason in delay for my launch. First, block chain technology is used to secure a transaction. Transactional security is not an issue in film finance. Never has been, never will be. So the key strength of blockchain is not applicable to film finance. To my mind, the only possible application is, as you allude to, the possibility of raising money through a wide net where people buy cryptocoins instead of stock certificates. That is, essentially a crowd-funding solution with all the inherent challenges of crowd-funding PLUS the challenges of getting people to accept a crypto-coin as a legitimate vehicle and how to exchange money for that, etc. Not to mention the question of whether or not there is any public pool of investors just waiting to invest in film. Seems there never has been. Crypto-technology doesn't solve that fundamental issue and may even make it harder since public perception of crypto is not flattering. Every so often, since the beginning of bitcoin, someone has decided this was a great solution, and tried to use it, and never, to my knowledge, succeeded. As far as a "tokenized asset" being "legal" - as a lawyer I will tell you flat that my opinion is the nature of a tokenized asset is a security. Period. So creating a funding scheme using a crypto token is at best skirting securities laws, and then only if you have gone through extensive legal maneuvers to take those transactions outside the jurisdiction of the SEC. Those maneuvers in themselves should raise red flags for investors. Now the SEC has recently said that ETH tokens specifically are not "securities" in and of themselves, but that really will depend on the nature of the transaction, and certainly does NOT apply to other tokens. In my professional opinion, the SEC is just plain WRONG on their recent pronouncement, and will likely reverse itself when it considers a real situation where people are raising money for a venture like this. Now having said all that, can you lay out any actual advantage to investing through a token rather than traditional stock purchases, etc.?

Hi Shadow Dragu-Mihai, Esq., Ipg getting you a response to this next week. Very pleased to engage you. Have a good weekend.

Hi Shadow Dragu-Mihai, Esq., Ipg ,

I appreciate you taking time to respond, thanks very much. I respect your view.

This kind of feedback is valuable in that it provides a snapshot of how some established entertainment industry participants may view this emerging and disruptive technology.

Let me be clear, any funding or crypto payment mechanisms we propose, develop or implement will not violate any law, securities or otherwise. Nor will we put any participant at risk and will be transparent. Compliance is a priority for all legitimate projects in this space and ours will be no exception. Anyone contemplating anything related to investments or the use of alternate currencies definitely needs competent legal support.

Funding pain-points are proving to be good conversation starters on Stage32 and Im pleased you have joined that conversation.

We enter the WEB3 era - decentralized applications, users control their identity and programmable money is native and flows across borders effortlessly and inexpensively.

Shadow Dragu-Mihai, Esq., Ipg wrote,

"First, block chain technology is used to secure a transaction. Transactional security is not an issue in film finance. Never has been, never will be. So the key strength of blockchain is not applicable to film finance."

Response:

Yes, blockchain does secure transactions. If Im understanding your point here you are saying transactional security is not an issue. But we see it differently. The types of transactions we refer to are many and range from blockchain based automated payments / residuals to smart-contracts that are written to commit screenplays or assign intellectual property to filmmakers/producers. These transactions, and the many more that arise during the development, financing, production and distribution of any film project, are executed, recorded and secured by blockchain. The entertainment industry is built on transactions. Contracts, agreements, assignments, licensing, releases, trademarks, copyrights, are a few of the "transactions" that will be recorded and managed on a private blockchain made available to a select few. Specific to film finance, and aside from our plan to introduce tokenization as a form of funding and payments, a blockchain based chain-of-title is one example of how blockchain can establish the veracity of proprietary rights which is crucial to film finance.

With respect to our ideas around tokenization.

Shadow Dragu-Mihai wrote,

"That is, essentially a crowd-funding solution with all the inherent challenges of crowd-funding PLUS the challenges of getting people to accept a crypto-coin as a legitimate vehicle and how to exchange money for that, etc. Not to mention the question of whether or not there is any public pool of investors just waiting to invest in film. Seems there never has been. Crypto-technology doesn't solve that fundamental issue and may even make it harder since public perception of crypto is not flattering."

Response:

You are correct that there are elements of crowdfunding in tokenization. But, among the many benefits of tokenization, we see it as a way to attract a new pool of investors. One example is token divisibility means unaccredited investors can purchase smaller percentages of the asset. I will expand on this topic in a future post and it will be clear in visuals we are preparing for our website. It seems to me your view of crypto is not positive and that may spill over to the players in the industry and I can understand why if you have not been keeping pace with industry developments. We are well past the ICO scams of 2017 and many of the popular cryptocurrencies (there are now almost 6,000 different listed coins and more unlisted) operate in clear view of regulators and some are underpinning financial instruments on Wall St. and other financial centres. One recent development (July 2020) is that The Office of the Comptroller of the Currency (OCC), which is an independent bureau within the United States Department of the Treasury, now allows USA banks to be crypto custodians. Meaning they can hold bitcoin and other crypto for clients. Public perception of crypto has vastly improved and regular media coverage by financial reporters continues to contribute to positivity in the space. It's not my role to convert you or others who feel the space is a scam or who anticipate bitcoin or ethereum will fail. They wont, and the SEC would be remiss to change their view of ethereum.

Shadow Dragu-Mihai wrote,

" Every so often, since the beginning of bitcoin, someone has decided this was a great solution, and tried to use it, and never, to my knowledge, succeeded."

Response:

Somebody said this.... “Failure should be our teacher, not our undertaker. Failure is delay, not defeat..."

First, again to be clear, our project is not based on bitcoin - a public crypto and public blockchain - which happens to be a very different technology than the permissioned/private blockchain we are building alongside an public ethereum ERC20 based token.

Shadow Dragu-Mihai wrote,

" As far as a "tokenized asset" being "legal" - as a lawyer I will tell you flat that my opinion is the nature of a tokenized asset is a security. Period. So creating a funding scheme using a crypto token is at best skirting securities laws, and then only if you have gone through extensive legal maneuvers to take those transactions outside the jurisdiction of the SEC. Those maneuvers in themselves should raise red flags for investors."

Response:

Im sorry if we were not clear in the original post. There was never any mention of taking any sort of "legal maneuver" to skirt security laws. In fact, in the US there are legal ways to create "funding scheme" that would fit well within the entertainment industry. And, depending on the type of token used and the jurisdiction (we are global), there are a number of avenues available. One example of a completely legal and SEC compliant token is a the security token and STO's (Security Token Offerings). In the USA under a two tiered Regulation A+ (REG A+) up to $20M can be raised from nonaccredited investors in the Tier-1 and reporting requirements are light. The second Tier-2 is $50M but reporting is strict and it's accredited and nonaccredited investors.

Although this funding/seeding component is important, I dont want to lose sight of the overall benefits of our blockchain project.

Here's a very high level overview of our project ecosystem, for this purpose we'll call a blockchain for a film production a "Circle". We are still developing this so dont get tripped up in the conceptualization.

Each "Circle" is a "permissioned blockchain", that would be a the tech layer - ecosystem - on top of a new LLC for each production. This private Circle, would be commissioned by the founders/producers and they would select and invite all the necessary "participants". The participants would include every person and organization that touches the production. They include the producers, actors, extras, writers, directors, assistants, camera operators, hairdressers, makeup, set constructors, electricians, lawyers, law firms, accounting, auditors, investors, bankers, regulators, union reps, and so on.

The Circle blockchain could be redeployed for subsequent film productions by the same producer. In simple terms it could be overlayed onto a new LLC with some of the same participants - ie. lawyers, accountants, writers, or all of the same participants, or all new participants. This results in a streamlined and cost-effective roll-out with certain costs eliminated as each new production is developed.

The founders/producers of each production would use a token within the Circle to pay each participant. Each participant could have their own unique token or accept any token. Tokens can stay inside the ecosystem or offramped to a AML/KYC'd exchange for local FIAT / USD or used to exchange for a USD denominated stablecoin. Other cryptocurrencies could be swapped out on DEX's (decentralized exchanges) for other tokens. Other tokens could also be another participants tokens.

Here are some benefits to using blockchain in the entertainment industry

- Business Continuity

As a production moves through its life-cycle, the responsibility to maintain obligations, record keeping, distribution of revenues and payments and other commitments will remain for years. The transparent and trustless nature of blockchain will provide a solid foundation for any person or organization tasked with overseeing business continuity.

- Payments / Residuals

Blockchain can facilitate auto-payments using smart contracts. Residual payments are costly to administer and cryptocurrency can be used to execute payments as small as pennies. Oracles will be used to trigger payments based on smart contracts.

- Micro Investments and Profit Sharing

Cryptocurrency has democratized finance. It's now possible for any person, anywhere, to invest as little as a dollar. Imagine a camera operator or set builder who opts to reinvest a portion of their income in exchange for a small cut of the profits. Imagine if they did it on every production they worked on.

-Contracts

Agreements, contracts, assignments of IP, etc will all fit nicely into a chain-of-title and will reduce risk and insurance overhead .

- Networking

Each of the participants in a Circle can develop a trusted relationship with other participants. For example, a production accountant has the option of making themselves known (privacy release) to any other participant - say a business manager - who may want to use their accounting services on another production. Because identity verification is part of the Circle implementation, that accounting person or firm can reuse that identity generated to join other Circles.

Thanks again for your interest and please stay tuned as we continue to develop this sizable project.

Let me know if you have any questions Ill help out as best I can.

Brett

Possibly the enormous amount of reading, filing, phone calls and legwork. It kind of goes against my motto of "spend time making films, not trying to get films made"