The Reed Smith Guide to the Metaverse - 2nd Edition

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The film and TV sector is famously nostalgic: Hollywood loves glorifying its own golden age, and in the past has been accused of struggling to embrace change. And yet, the technological framework surrounding the industry is advancing faster than ever before.

How, then, does the industry reconcile this apparent inflexibility with the advent of the metaverse? The short answer is: tentatively. We are still in the early stages of change creeping into the sector, but already some of the potential is clear to see.

NFTs and financing

The three letters are unavoidable when discussing the metaverse, and the legal implications of non-fungible tokens (NFTs) generally are covered in ample detail elsewhere in this guide. There is no less potential in the film and TV space than other media industries – though perhaps some of that potential remains more untapped when compared to music and video games.

Financing is the most obvious area of production where we might see swift incoming changes. A handful of independent films have already been funded with NFTs, each representing a small ownership share in the project.

Film financier, The Forest Road Company, has also recently closed a $20 million fund of pre-production investments, and will issue collectibles based on the IP of each of those productions, using NFTs. It remains to be seen how this will tally up with the big institutional financiers, particularly banks, which are notoriously conservative in their approach to media financing.

NFTs and distribution

NFTs also present a new route for distribution – in other words, releasing content itself as NFTs. Conceptually (and legally), this works in the same way as it would for a piece of digital art, although it is perhaps more difficult to fathom its acceptance by the wider public for now.

Still, Mila Kunis’s production company recently produced a web series, “Stoner Cats” (yes, you read that correctly), then sold NFTs granting buyers the right to watch episodes, and made over $8 million in 35 minutes in the process (yes, you also read that correctly). So the hype is definitely there, and it is valid.

But a far more feasible, widespread application would be to use NFTs as a way to exploit existing IP in novel ways. Creators can leverage the inherent scarcity of NFTs to generate exclusive products to bolt on to traditional productions – think bonus content, digital posters, commentaries, specialist cinema tickets, and so on. And because of this potential value, we have seen a spike in the number of negotiations centered on the grant of NFT rights (and the exploitation thereof) between the rights holder of an underlying property and the acquirer of those rights looking to develop and/or exploit the property through an audiovisual production. Historically, such rights would have been customarily (or at least arguably) included in the broad grant of rights provisions included in the chain of title documentation. And because of the potential financial windfall of exploiting NFTs, we have also seen an increased demand to revisit the old chain of title documentation for a determination of who owns what rights (studios want to confirm that they have control over their exploitation, and rights holders want to confirm that they have been reserved from the relinquished rights). A leading example of why this has become a hot topic is the recent lawsuit between Miramax and Quentin Tarantino regarding the NFT rights to Tarantino’s screenplay for “Pulp Fiction.”

However, the concept is still in its infancy, and the press is eager to spot early adopters’ mishaps. Seth Green was planning to develop and produce a show based on a “Bored Ape Yacht Club” NFT that he had bought, in line with the usage rights he had acquired along with the NFT. Unfortunately, those plans have been shelved for now, as Green fell victim to a phishing scam in which a hacker gained access to the NFT and sold it to a third party.

Key takeaways
  • The film and TV sector has not always embraced change, but technology is advancing now faster than ever.
  • Financing is the most likely area of production to see swift incoming changes.
  • New methods of exploiting existing IP presents an opportunity for additional revenue sources.
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