Good morning! A big hello to readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition. This weekend, Roshni writes about the emergence of web3 buzzwords such as DAOs and DeFi in the movie industry. Also in today’s edition: we have curated the best weekend reads for you.

A small note: There’s a good chance you would have received the last two editions of The Signal (Thursday and Friday) at around 2 am this morning. That was not us. Substack had a “technical incident” that led to “delayed or duplicate email or app notifications for a small number of posts over the last two days.” They claim to have fixed the issue. The inconvenience is regretted.

On to today’s story…

Before there were movie DAOs, there was the Odessa Collective. A brainchild of John Abraham—the Malayali director, not the model-turned-Bollywood actor—Odessa was a cinema collaborative that ran on spare change. Abraham and cofounder C.V. Sathyan, a former Naxalite, travelled from village to village with a 16mm projector and raised funds through movie screenings. From those funds emerged the radical road movie Amma Ariyan (1986), which achieved cult status in Kerala and avant-garde circles.

Crowdfunding wasn’t new even then. Ten years prior, in 1976, Manthan had made history as India’s first commercially-released crowdfunded film. Film cooperatives flourished too: Navya in Karnataka, Chitralekha in Kerala, and Bombay’s Yukt Film Cooperative. There was also the Film Finance Corporation, predecessor to the National Film Development Corporation of India.

But Odessa Collective was for the proletariat, by the proletariat. Everyone who invested had a sociopolitical stake that went beyond crowdfunding.

Today’s movie DAOs (short for Decentralised Autonomous Organisations) also have stakes, common values, and shared goals…

…and that’s where the similarity begins and ends.

DAOs are the latest buzzword in Web3-everything. As FWB DAO cofounder Raihan Anwar puts it, DAOs are “digital flash mobs with money”. These internet-native organisations have no chain of command and are governed by computer programmes (“smart contracts”) that perform executive functions. Funding comes from token sales, which in turn gives you, a member, voting rights. No token, no vote. Not for nothing did billionaire investor and Web3 hypeman Mark Cuban call DAOs “the ultimate combination of capitalism and progressivism.”

There’s a DAO for everything, from building a city to running a newsletter. Then there are decentralised finance (DeFi) initiatives for filmmaking: TheFilmDAO, KinoDAO, HollywoodDAO, Mogul Productions. These groups want to disrupt studio-dominated film financing, distribution, and exhibition much like the Yukts, Navyas, Chitralekhas, Odessas, and crowdfunding platforms. But they also want to tokenise what already was. Think IndieGoGo or Kickstarter with a Web3 layer.

Since everyone’s on the blockchain gravy train, DeFi filmmaking is attracting folks from legacy industry. WarnerMedia’s outgoing CEO Jason Kilar says the future of Hollywood lies on the chain. Francis Ford Coppola’s kids are involved with Decentralized Pictures. Niels Juul, executive producer of The Irishman, is making the first-ever Hollywood feature funded by NFTs. Decentralised movie studio Midnite Movie Club is cofounded by Matthew Lillard; you know him if you’ve watched Scream, SLC Punk!, Scooby-Doo, and Good Girls.

There’s the truly-indie crowd too. Scroll through #film3 and #nftfilm on Twitter, and you’ll spot NFT-funded films with no legacy backing: Calladita, Elena, Hourglass, Red Flags. These are monetised on marketplaces such as Zora and screened on Web3 platforms such as Beem. Having content screened on BlockbusterDAO—which wants to resurrect Blockbuster into the first decentralised streaming platform—would be a nice-to-have; so would metaverse film festivals.

The excitement is palpable. But how much of a difference can film DAOs make?

The solution

To find out, one began by reaching out to the only collective with an Indian cofounder. That collective is Movie Studio DAO, and the cofounder does not want to publicise his identity.

He goes by ‘Couch Rishi’, and he’s a 31-year-old web developer from Chennai. Couch Rishi has created tech stacks for production houses and OTT platforms, and that’s all he’ll reveal because, “My Metamask wallet was once emptied after I got phished, and I can’t risk that again by having my name out there.”

In December 2021, Couch Rishi blogged about an idea that’d catapult him into the world of film DAOs. He wanted to build an Indian Cinema DAO to produce movies “outside the X-ollywood studio machine” (where X = Bollywood, Tollywood, etc). The DAO, he hoped, would disrupt the studio model and prioritise ideas and scripts over casts and budgets. Couch Rishi proposed ₹ICDAO tokens for voting on film proposals. He even suggested that films could be released on decentralised OTTs or OTT DAOs—similar to BlockbusterDAO—whose tokens in turn derive value from movies screened on the platform.

Couch Rishi took his idea to the r/dao subreddit. It didn’t fly, leave alone get responses from Indians. But it caught the attention of an indie film distributor building something similar in the US: Bradley Coburn of Movie Studio DAO (earlier Media Monkeys DAO).

Today Movie Studio DAO, which bills itself as “The Internet’s Movie Studio”, has Coburn and Couch Rishi as founders and 950 Discord members. Per its whitepaper, the DAO has an $MSDAO governance token on the Polygon network. In Q2 2022, it will issue MSDAO NFTs, call for screenplay submissions, and put those to a vote for NFT and token holders. Greenlit projects will start shooting in Q3-Q4 2022.

Couch Rishi wants to imbibe his Indian Cinema DAO concept into Movie Studio DAO. The vision is to platform film industries everywhere–Nigeria’s Nollywood, for example. For now, though, the focus is on the launch and networking with Web3 companies, such as Let Me Out Productions for rights management and Granting Wishes Studio for distribution.

“We want to fractionalise ownership for cast and crew, right from the light man to the director, so that value is passed on to all stakeholders each time the film is distributed,” Couch Rishi says. In other words, creators will hold all rights, and NFTs will be utilities rather than collectibles. This is in contrast to legacy studios buying and owning all rights to films and series.

Project pledgers or supporters are eligible for benefits depending on how many $MSDAO tokens they own. These benefits include producer credits, set visits, being an extra in the film, and so on.

Over a Discord call, Bradley Coburn says project funding will happen in stages. A creator or director will get 50% upfront, 25% on request, and the final quarter at least a week after the second installment. The installments are subject to three-day holding periods, put into place for the DAO to see proof of deliverables. In worst-case scenarios of project abandonment or fraud, 50% will be refunded to pledgers.

Rug pulls and Web3 are joined at the hip. But older crowdfunded projects haven’t been immune to foul-ups and foul plays either (hello Zano, iBackpack, Skarp Laser Razor, Triton Gills, and Elio Motors). The question, then, isn’t so much about worst case scenarios as much as it is about use cases. Crowdfunded films offer identical benefits to their backers; what can film DAOs do that they cannot?

“If I fund a Kickstarter project and get a set visit privilege, I can’t transfer it to someone else if I’m unable to make it. But you can do that in Web3 with an NFT,” Coburn explains. “Creators can also give benefits to their backers at any time. Like distributing collectibles years into a film’s popularity.”

The problem

Before gauging how indispensable or not film DAOs may be, we need to understand how movies and series are greenlit in India. The following is an outline and varies from creator to producer to studio.

It begins with a scriptwriter, who pitches a 40-50 page draft to a producer. If the producer is interested, s/he gives development money to hone the screenplay. The worldbuilding of director, cast, budgets, and locations begins soon after. Packaging this project into a mini Bible to pitch to studios can take 8-10 months or longer.

Then come discussions over marketing and distribution: theatre screenings, music, satellite rights, and ancillaries (licensing to airlines, etc.). The return on investment (ROI) plan hinges on profit-sharing deals and exhibitions, i.e. whether a project will be released in cinema halls or go straight to OTT.

Sometimes, production houses and studios buy ‘options’—scripts or rights to titles—in bulk. Few of these become films. If a script is stuck in development hell, options expire and can be resold. This lineage of rights or chain of title can be byzantine; but suffice to say that studios rule the roost here. Rarely do film or series creators own the rights to their work. This is what most film DAOs claim to fix.

Since these budding disruptors believe studio gatekeeping ruins good cinema, The Intersection reached out to two producers known for championing independent or mid-budget films. They requested anonymity since they aren’t knowledgeable about Web3 (but know the ins and outs of the industry). Here’s what they make of ‘film3’.

Producer 1: “[Indian Cinema DAO] Seems to be written by someone with no experience of how things work here.”

Producer 2 is kinder. “Decentralised funding for passion projects seems fantastic. But there’s no point making something if no one watches it. Making a film or series is just 50% of the job; how will they distribute it?”

And therein lies the rub. We can’t watch content on platforms like Beem unless we have wallets. As for decentralised OTTs–the idea makes little sense. Couch Rishi envisions micropayment-friendly platforms, where you pay only for the total time watched. Imagine the chaos; how many people would be game for multiple pay-as-you-use fees? If anything, OTTs benefit from more platform and subscription consolidation (aka centralisation).

Bradley Coburn admits that distribution is a work in progress. He explains that creators can choose whether they want their films or series to be exhibited. We aren’t thinking of metaverse premieres right now, he stresses.

Then there’s this.

Movie Studio DAO (🎬,💰) @aMovieStudioDAO

#film3 filmmakers, drop your projects in the comments. I don’t think people realize that film3 is the next gold rush for #NFTs. Imagine owning an NFT from Tarantino before he was Tarantino. Hodling an original one of one from The Shining.

April 6th 2022

14 Retweets71 Likes

How NFT holders would get returns on their ‘investment’ was a nagging question, since project creators, not pledgers, would accrue maximum value from owning rights. Then there are other queries for the long term. Would platforms or exhibitors need to buy native DAO tokens to bag distribution rights? Would deal monies be split in accordance with how many tokens a member holds? If so, doesn’t that mean core team members would benefit more than the project creators themselves?

There’s only so much ROI you can get with a “utility” NFT. Hence the need to consider “gold rush” collectibles. But here too lies a problem. The demand for said collectible will hinge on how many people watch the project and stan it hard enough to want memorabilia from a hitherto-unknown creator. Enter the distribution conundrum (again).

Such reservations aside, there are two fundamental issues with how DAOs are structured. 

One, the US Securities and Exchange Commission applies the same regulatory principles of initial public offerings to DAO tokens. A cloud hangs over how this will manifest across jurisdictions, including in countries that are clamping down on digital assets or heavily taxing them.

Two—and this is important—paying to vote is antithetical to democratic processes. This form of governance empowers ‘whales’, or members who hold more coins. In essence, some members are more equal than others. Ethereum founder Vitalik Buterin wrote that coin-based governance can even encourage vote bribery and by extension, security vulnerability. In which case, what’s the guarantee that a popular script won’t be chosen over a quality one?

Additionally, members aren’t the only ones who will pay. Project creators have to forgo a certain percentage of their funding as transaction fees; Movie DAO Studio, for example, charges 8%. Transaction fees, especially on the Ethereum network—where Movie Studio DAO wants to eventually migrate—are a major hurdle. The result is potentially dwindling participation in DAO proposals.

Couch Rishi and Bradley Coburn acknowledge that DAOs are still rough around the edges. As Coburn says, however, “We’re in the Wild West, and it’s great to be a gunslinger at this point.”

It’s in this context that one remembers the Odessa Collective and film cooperatives of yore, and comes to a realisation:

You can hack crowdfunding. But you cannot hack egalitarianism.

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