In the last decade or so, the schematics of the film industry have dramatically changed. From the production style to the inherent content itself – we have witnessed a major shift. However, the one factor that has been consistently growing is the rise in revenues and thereby an expansion in the overall value of the film industry.
The global film industry is worth billions of dollars today. In 2019, global box office revenues totalled $42 billion – an all-time high – contributing almost one-third of the estimated $136 billion in the value of worldwide movie production and distribution. In 2020 the coronavirus pandemic caused a 66% decline in revenues according to the Global Entertainment & Media Outlook 2020–2024 by PWC.
Moreover, the film industry has considerably evolved since the ‘black and white prints’. In the olden times, films generated maximum profits through the sale of box office tickets. But now, a movie’s profit no longer depends solely on its box office collection. This opportunity has considerably expanded with new sources such as DVD’s, streaming services, subscriptions, downloads, distributions, Video on Demand services, and more.
In fact, this opportunity is so wide that there are many revenues streams and ways a movie generates money. Especially smaller movie productions made high profits in 2019.
The Global Entertainment & Media Outlook 2020–2024 report also highlights that due to the pandemic “the way U.S. studios now reach their customers is changing.” Most have been setting up their own streaming platforms, for example, intensifying the increasingly competitive streaming environment.
As a result the film industry is experiencing the “biggest shift in the history of Hollywood.”
It is fairly certain that movie or TV productions have advanced in every possible way. The broader opportunities have made investments in the industry more lucrative than ever. Furthermore, it has also ensured that a film’s revenue no longer stops or depends upon box office collections.
While making any movie or television, the production house incurs various costs including development, production, marketing, prints, advertising, financing, and overhead costs. Now, the profits may start from cinema but it has gone far beyond it and each stage opens a ‘release window’ i.e. a new type of platform. The release window now ranges from the hospitality industry like airlines that stream TV shows or films to subscription services like Netflix. At each release window, the film or TV show gets a new source of revenue generation.
This research has combined and analyzed 29 Hollywood blockbusters with a budget of over $100 million. According to it, the average revenue generated from these movies came from sources other than theatrical. Moreover, the share of profitability becomes considerably higher with VOD and streaming as the costs of marketing, prints, and advertising are reduced. The analysis of this study clearly suggests that the return of investments in TV line or movie production is no longer restricted to theatrical.
Being a part of the film and TV industry has always been an attractive affair. Along with money, other factors of fame and popularity have also played a part. Moreover, the rise in streams of revenue generation has also driven the interest of investors towards investing in the film industry.
Some of the reasons for individuals to invest in this industry include
Advanced innovations have subsequently given new methods and tools for investing in the film industry. Some of the available methods include
Although investing in the film industry has grown more lucrative, there are limited tools available that are fair and plausible. The current infrastructure lacks an inclusive and seamless process of investing in films and TV productions. Let’s explore the challenges of investing in the Hollywood industry.
Blockchain technology has given rise to a range of applications in various industries- from hospitality to healthcare. The principles of blockchain enable the creation of digital tokens that represent a tangible or intangible asset.
Tokenization is the process of converting an asset into its digital counterpart and managing it on a blockchain platform. For instance- converting a real estate property into equivalent digital tokens. The tokens, known as security tokens, represent the underlying asset and gain their inherent value from it. A concept that only existed on paper has been now conceived through blockchain technology. Today, the concept of tokenization is explored for a number of industries including real estate, art, financial assets, stocks, and now film industry as well.
In a short span, the concept of Security Token Offerings (STO) has grown increasingly popular. The market of STO’s grew from $65 million in 2017 to nearly $435 million in 2018. Moreover, according to this study, the market of tokenized assets is expected to rise to $1.5 trillion in European Union.
The film industry has taken this innovative approach of tokenization to transform the sector by making it more inclusive, lowering access barriers, alternative models of asset ownership, and enabling the flow of liquidity.
The process of tokenizing a film’s equity or shares into security tokens and further manage it on a blockchain network comes with its own set of risks and benefits. While tokenizing movie assets would open up new opportunities, at the same time it faces subsequent challenges to its adoption.
The risks or potential challenges of tokenization in the movie and film industry include
Tokenization in movies subsequently opens up innovative methods and promotes widespread adoption of investments in the industry.
The concept of digital securities and security tokens is still at the early stage of the development, but the opportunities of the blockchain industry are promising. The process of tokenizing movie assets, production studios or licensing rights is complex and will have its share of challenges and obstacles. These may be in the form of high costs, scalability, legal complexity, and more.
However, Tokenizing may bring a revolutionary change to the film and movie industry. For the first time, audiences can have more control over media content. Ownership of film rights can be fractionally divided and traded on secondary platforms. This would not only promote the inclusiveness of investors in the industry but would also minimize financial losses of individual investors. Moreover, the transformation of the movie and TV industry has brought new income sources and tokenization would maximize this potential. Tokenization of Movies is still in its early stages, but it could disrupt and reshape the entire entertainment industry.
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