The film industry is an ever-growing sector since the early days providing viewers globally with entertainment. It generates over 100 billion dollars annually with constant productions of movies and other motion pictures.
Film financing is a broad aspect induced before the pre-production to evaluate the possible value of a proposed film project. The process requires input from banks, investors, taxation, and more, putting into consideration the risks that may arise in making films for a sustainable endgame.
The financing further puts into account payments of everything featuring in a film, including the cast, production teams, materials, locations, effects, promotions, and more. In the end, a successful movie should account for the negative costs to attain a considerable profit after release.
Film Financing Process
Film financing depends much on pre-sales, especially for independent films. The producer of the film puts out a package, which contains a script of the film, the director, and the expected cast. They then introduce a sales agent into the mix to advertise the film globally. This step may vary from a country-to-country approach or in other cases, worldwide integrating a single distributor.
The producer will involve banks and investors for a loan to fund the production secured under contracts. Like in every other investment, banks and investors will demand a guarantee that the film will reach completion and delivery. In turn, the producer has to meet the payments owed.
However, one problem with film financing is funds circulate internally among the investors and the production team. The whole process leaves out fans and other potential funders. Here is where tokenization comes in to ensure fans can invest together with the producers in the financing and production process. LCX is on the frontline actively utilizing its STO Launchpad in projects that will dissolve these barriers to tokenize the Hollywood scene and other digital asset spaces.
LCX STO Launchpad
Security token offering (STO) is gaining popularity as a more legitimate option for fundraising as an alternative to ICOs. Tokenization liquidates real-time assets into decentralized security tokens while offering more liquidity into the said assets. STOs facilitate a gateway for more crypto investments by people worldwide. Moreover, their regulated nature
LCX is vigilant in implementing the same with its STO Launchpad, focusing on tokenizing everything. LCX’s STO Launchpad increases the speed of attaining security tokens and further reduces the costs incurred. So now, it is in collaboration with other companies to present security tokens that meet the requirements of the Blockchain Act, Anti-Money Laundering (AML), and Know Your Customer (KYC).
In 2019, the company went ahead to form a merger with the famous actor Wesley Snipes for tokenization in film financing. The project, Daywalker Movie Assets (DMA), aims to tokenize $25 million in movie funds. It surrounds Wesley’s ventures and his Maandi House Studios. The token will be the DMA security token where holders access all production portfolios.
The essence of the STO Launchpad to DMA
DMA is part of LCX’s vision of “Tokenize Everything”, putting it under the governance and regulations of the Liechtenstein Financial Market Authority. Likewise, the DMA project will have access to the European Economic Area and Switzerland.
This action by LCX shows its dedication to penetrating a more extensive area as far as tokenization of assets is concerned. DMA security tokens will provide a bridge between the production team and outside investors, making it an all-inclusive undertaking, taking into account the need for fans’ involvement in film production and funding.
Here are some of the benefits put forth by the DMA and LCX conjunction.
- Leveraging Blockchain Technology
A significant advantage of DMA joining with LCX is utilizing blockchain technology for a decentralized and verifiable system of performance. Once they release the token, the distribution of DMA tokens will be more comfortable by deploying smart contracts. Additionally, it eliminates third parties reducing the costs of legal advisories in the process. Unlike traditional financial systems, blockchain offers anyone with internet connection access to the funding.
- Co-Financing
Co-financing is a way in which film production industries share the costs of film creation. Since the whole idea surrounds introducing fans into the funding process, film financing will be less strenuous to the production team and internal investors. Traditional film financing comes with a high price with loan whales taking a vast amount of the profits from a complete film. Furthermore, security tokens increase liquidity into the finished product.
- Fan Participation
The primary way in which fans will participate is in the funding process. The popularity of a proposed film on the screens will entertain a massive input through the purchase of tokens. Investors stand to profit from the allowance to participate in a variety of movies instead of one beating the basis of traditional film financing systems. Tokenization offers the fan base a say in how they want the film to be produced, further eliminating the ideology that only film experts have the right decisions in production. It heightens the hype around the film as they hope to see the fruits of their contribution.
Risks to Account for
It would be best to note that some disadvantages that come along with film financing cannot be eliminated by tokenization. The most important one to keep in mind is if the film production does not succeed, every investor faces a loss. Besides, in formulating the smart contracts, a lawyer’s involvement will be necessary to lay out all the conditions required in the investment. All the same, the pros outweigh the cons presenting a viable way to inject positive outcomes in the film industry.
Final Word
The film industry is a lucrative sector offering a seamless stream of profits. Film financing is a crucial stage in film production, involving the possibility or lack thereof of successful funding. Nonetheless, traditional systems exclude the most important parties in the overall prosperity of motion pictures, the fans.
LCX hopes to change the story by tokenizing film financing to embrace film enthusiasts globally in the film production process. Its partnership with Wesley Snipes to develop DMA is the beginning of a revolution in filmmaking. Comprehensively, tokenization is here to transform different assets, both physical and digital.
