Finding Satoshi… And A New Way To Finance Film
Jamie King is the founder of Totemic, a recently launched platform that lets creators issue digital collectibles around their work — and fans to support them. Jamie is an experienced crowdfunder, having created one of the first free-to-share, crowdfunded films, STEAL THIS FILM (2006–2009) and VODO, a pioneering platform in crowdfunded, P2P-distributed film. This article explains how Totemic could become a significant force in the crowdfunding space via the perspectives of experienced filmmaker, crowdfunder, and one of Totemic’s first creators, Emily James.
Finding Satoshi isa hybrid documentary/fiction film set in the world of Bitcoin and cryptocurrency. It follows a detective hired to hunt down Satoshi Nakamoto, Bitcoin’s pseudonymous inventor. As the detective’s quest takes him on a tour of crypto’s key protagonists, the pursuit of Satoshi’s identity leads him deep into the roots and identity of cryptocurrency itself. The search for Satoshi becomes a way to examine crypto and how it is changing the world around us.
The film’s detective, Jimmy, stalks London for leads.
The film, which is currently in development, has a lot going for it. Not only is its topic incredibly current and urgent, but its director, Emily James, is an experienced documentarian with award-winning films and large TV commissions under her belt. Yet even for an established filmmaker like Emily, raising money can be daunting in the fast-moving, highly uncertain film industry.
The Funding Maze
“Funders often want to see nearly a full rough cut before they’ll jump in. The creators of the film have to carry a great deal of the financial risk themselves…”
“In documentary,” Emily explains, “the majority of funding comes from TV commissions — and now platforms like Netflix. And often commissioners want to see quite a lot before they’ll commit any financing — in fiction a script is key; in documentary they will often want to see nearly a full rough cut. Often the creators of the film have to carry a great deal of the financial risk themselves in order to get the project far enough along for others to finally jump in.”
Enter crowdfunding. The crowd (that’s you and me) have proved to be way less risk-adverse than traditional funders, and provide a kind of moral and financial support commercial financers can’t. Platforms like Kickstarter, Indiegogo and the film-specific Seed & Spark have made it possible for less established film makers to go direct to potential audiences with their ideas, raising funding for films that otherwise wouldn’t get made.
“Industry money is dragging its feet even more, as it’s now almost expected that a film will ‘prove its audience’ by raising some funds from the crowd.”
But many filmmakers are starting to feel the crowdfunding pinch: it’s getting harder and harder to raise money as the novelty wares off, and a new problem has been created— industry money now tends to drag its feet even more, with expectations that a film will ‘prove its audience’ by raising funds from fans and audience.
Is that… Satoshi I see?
Crowdfunding: The Current Model
To date the main model for crowfunding has been incentivised donations, which are paid by the audience at a variety of levels in return for a designated perk or reward. For example, a fan could fund $20, $50, or $200 and in return receive posters, a place in the credits or a special edition of the film — though the latter can, in practice, be problematic for distributors. Emily’s Film Just Do It, for which over half of the budget raised came from donations in three rounds of funding appeals, is a good example of this approach.
Trouble In Paradise
The perk system, it could be argued, is a flimsy way of rewarding early backers who are really motivate by something more substantial: a sense of protagonism, of an incorporation in the filmmaking process, conferred by being an early believer and investor. This does beg the question of the possibility of incentives that are equal to the risk of investing so early in a film’s life.
There’s a reason micro-financing never took off. The legalities of accepting investments can be sketchy at best — and the only safe route is to limit fundraising to so-called ‘sophisticated’ (read: wealthy) investors who understand, and can bear, the risks involved.
Some approaches have tried to align rewards with risk, especially early on in the history of crowdfunding. Franny Armstrong’s The Age of Stupid, which Emily produced and was an early pioneer in crowdfunding, pioneered a micro-financing system in which each investor owned a little piece of the ‘back end’ profits of the film, rather than donating and merely getting perks. Clearly, if The Age Of Stupid could deliver profits as well as perks, that might galvanise investors who weren’t ‘superfans’ and for whom perks alone wouldn’t swing it.
There’s a reason that model never took off. In many countries the legalities of accepting investments remain sketchy — and in practice, the only safe route would be to limit fundraising to so-called ‘sophisticated’ (read: wealthy) investors who understand, and can bear, the risks involved.
This somewhat defeats the point of the ‘crowd’ part of the crowdfunding. It’s true that the passage of the JOBS Act has, at least in the US, opened private investments into indie film to investors with a lower net worth — but there’s another (and perhaps bigger) problem for films raising funding. It’s kind of an open secret amongst indie filmmakers: the vast majority of the films out there, even some of the ones you may have seen or heard of, don’t wind up turning a profit. Indie films run on a shoestring, often with the majority of the team deferring much or all of their payment until when (or if — and that’s a big if) a film is sold. Any profits may come only after everyone gets paid, and marketing and other expenses can eat into returns investors were expecting. “It’s true indie films often don’t make much money,” Emily admits, “and when they do hit the ball out of the park, the people who made it (or the crowd who invested) don’t necessarily see as much of that money as you might think. Sales agents and distributors can often take over half of gross revenue off the top, before it even starts to trickle back down. People who invest in films have to understand it’s a very risky investment indeed, and be motivated by something other than hope for large returns on their investment.”
Totemic: The Middle Way?
Could there be a ‘middle way’ for crowdfunding film? A way in which filmmakers can fund their work, and funders receive not only feel-good perks, but incentives tied to the value of that work, without getting tangled up in messy equity and financing thickets? We think so, and our new platform Totemic is setting out to prove it.
Totemic offers a simple, accessible means for creators to issue collectible assets (which can be thematically aligned with their work, or totally separate) and then purchased by audiences and fans in a similar way to the perks of other crowdfunding platforms. You can think of these assets as the digital equivalent of baseball cards, in provably limited edition, and with a provenance guaranteed by the Bitmark blockchain.
From Emily James’ first set, ‘Finding Satoshi’. Each card represents a potential candidate for the real Satoshi Nakamoto.
For a physical world analogue, consider buying a numbered photographic print from a gallerist. While anyone wanting that image could very well scan and reproduce it themselves, what the gallerist is guaranteeing is access to one of a limited number of authorised, numbered copies. In effect, it’s the deed of title to the asset which is being purchased; a deed which confers an indirect relationship with the artist and guarantees provenance, producing a tradeable asset with real value.
Totemic’s collectibles have two key functions: first, they let fans collect work from creators they enjoy, by acquiring the creators’ cards. Being limited edition, if a creator’s reputation increases, the value of the cards could behave similarly. If I acquire Emily’s Finding Satoshi set, for example (which I have, except for those damn Rares… just haven’t got lucky yet!), then if her film does well, I can expect the value of the collectibles to go up. The renown of the film and its creator increases demand for the associated collectibles, which are in limited supply. Perhaps I will collect two sets of Finding Satoshi cards, hoping to sell the other one in the marketplace at such a moment.
Balancing Self Interest & Patronage
Without having an equity stake in a creator’s work, acquiring Totemic collectibles confer similar benefits — and remain outside the difficult film distribution business.
This is a new approach to crowdfunding, balancing self-interest with patronage: as with other platforms, backers benefit from the feel-good factor, (supporting Emily and her film) and also from any perks the creator might offer for holding her cards — invitations to screenings, behind-the-scenes access and so on. But they also enjoy a new, speculative relation to the creator and her work through holding the collectibles — similar, indeed, to that of wealthy art collectors and the artists they collect. When a collected artist gets a significant show, or some other cultural event occurs around them, all the works they’ve sold may well increase in price. Without having an equity stake in that artist, buying their work essentially confers similar benefits.
There are clear advantages to this approach. For film investors in Emily’s film, for example, it means holding assets which stay cleanly outside the thorny film distribution business. Even if the film turns no profit, these collectible assets may well rise in price. And this is achieved without Emily promising any equity stake in her film — leaving her deals with traditional financiers unencumbered. Nor has she promised her crowdfunders advance or special access copies of the final film, which can annoy distributors and make deals difficult to do in practice.
Emily, one of the first creators to try out the Totemic platform, agrees on the potential here. “Digital collectibles could be a great way to crowdfund. It adds real value for the backers. In traditional crowd-funding of films you are always trying to come up with ‘perks’ that will encourage people to give larger sums, but you have to be careful to not promise so much that it ends up costing so much to deliver on that you don’t actually raise enough money for the making of the film! I think that the donors also have become fatigued with giving large sums but getting something in return that’s not really equal in value.
“With Totemic’s collectible model, on the other hand, the backer’s making a bet on you, and by extension on the future value of the cards. As well as helping the film get made, they are also potentially acquiring something of real value for themselves. It’s a win-win! Best of all this money comes with no obligation to pay it back, which is immensely useful for an independent film, where every penny needs to go a long way. Money that doesn’t need to recoup (be it crowdfunding or grants) can be a crucial part of making a film more economically viable: it allows one to deliver a film that punches above its weight production value-wise, and which industry money feels safer getting involved with — because they are getting a film for only a fraction of its real cost.”
This is why we started Totemic: we see a massive potential, in the emerging class of collectible digital assets, to create a new opportunity in the crowdfunding space — both for creators and backers. Of course, crypto-assets are a new and turbulent space: on any given day skeptics are proclaiming their doom, while boosters are determined that whichever token they’re pitching is going ‘to the moon’. But the fact remains: Bitcoin has, for all but the most hardened ‘nocoiners’, shown that trustless, blockchain-based digital assets can gain and retain real value. We believe the same can and will be true of digital collectibles — backed not only by blockchain, but by the reputation and projects of artists both new and emerging.
Thanks to Emily for being one of the first filmmakers to make use of the Totemic platform to raise funds for her film. You can buy her cards right now on the Totemic platform at https://totemic.co.