Our London correspondent Nick Ayton investigates the music, television and film industry where the "fat cats" won’t be quite so happy and content with life in the next few years.

Huge profits

The global entertainment industry is worth over a staggering $500 bln globally, but nobody really knows for sure. Roughly broken down: TV & video $300 bln, music $45 bln, film $38 bln and the amount of television being watched, cinemas being visited and music listened to has done well in recent years.

With the majority of the money being made ending up in the hands of a few at the top of the industry, an industry is reliant on talented creative people that have few options but to work in a loaded system that for many works against them.

In the industry, complexity has been added to create artificial barriers to entry, confuse artists and levels of opaqueness to cover apparently necessary activities that further eat away at the artist’s income potential.

Singers, writers, actors, performers and the people that create the content get a poor deal and they know it, that is unless they are one of the chosen ones the movie studios decide to make into gods.

Back to creators

Some amazing pioneers like Imogen Heap have had enough. She is doing something about it with her Mycelia project. Others are following suit with Jaak, Blokur, Bitunes.org and Aurovine offering direct to consumer content, and dotBlockchain Music looking to simplify digital rights management.

Ujo Music and BC Music project are looking to create new “content platforms” to move the game to a peer-to-peer relationship between artist and consumers (fans) removing all the friction of the middlemen with their hands out waiting to get paid.

Artists, filmmakers and writers who have their content copied and ripped off, are forced to hand over control and then wait for royalty payments that are further diluted by the armies of middlemen, agents, lawyers, distributors and the rights agencies like the PRS and PPS. They have carved up the world into territories where they control income.

Then there are the platforms that in their own right disintermediated the music industry further  - iTunes, Spotify, SoundCloud, Amazon Music and others that set the market for distribution, creating another profit layer that sees the content owner, the artists, get less and less to a point where there is often no point. And then there is Netflix and Amazon.

An increasing number of people, not only professional musicians, actors and filmmakers are fed up with being taken for a ride, as they see their income fall in real terms, retaining less and less, while those that control the industry protect their margins and decide what gets made to suit their agendas.

Enter stage the Blockchain

The Blockchain is a perfect storm that makes sure the owners of content and the artists get what they are entitled to and don’t get squeezed out of the game. Smart contracts can enforce and automate the rights and distribution of wealth as payments to key parties. The Blockchain is the equalizing balance that puts the power back in the hands of the artists. Those with the talent can now decide how their content is used, who gets access to it and, more importantly, that nothing is tampered with, copied or hijacked, delivering an income stream to someone else.

Blockchain creates the direct relationship between artist, content owner and the customer and can enforce the rights of the artist whilst serving the fan - the user - by simplifying the commercial relationship, removing friction time cost and generating more value for both.

Better returns for artists and better value to those consuming the content, immediate payment and distribution of content. No fuss, no fat cat, no problem.

The best-kept secret in Hollywood

As you dig deeper into the entertainment sector you uncover things and make astounding discoveries. What many don’t realize is that most of the profits that studios make come from TV licensing, or licensing in general as the artists content is sold under license by the power brokers.

TV still has the furthest reach of any entertainment platform given that many countries don’t have high cinemas penetration or fast Internet for streaming downloads.

The industry numbers never seem to change despite the improvements in efficiency and technology, as transparency is difficult to achieve to shed light on who really gets what part of the pie.

Production is approx 20-30 percent, packaging and distribution a massive 40-50 percent and net profits somewhere around 20 percent, and it is the reason why so many famous A-listers prefer to get paid a percentage of overall profits and use their production and distribution entities to grab a slice of the action from the major studios.

Kicking creators out

Of the 160,000 movies on catalog available on various platforms, less than 20 percent ever get played. In music this statistic is similar.

Is this because the platforms, the studios along with the distribution layer, only put up content that works for them?

Unfortunately, the artists often hand over control their rights and power over the content they have created as a means to make a living and get the initial works released.

But when it suits the “fat controller,” the agreement the artist thinks they have can be shut away and, without them knowing, their content deleted from the availability list because there is no transparency, no trust and no alternative until now.

Everyone has their head in the artist’s trough

The structure of the entertainment industry emerged as the originating entrepreneurs created the studios and distribution structure fed by an army of supporting “actors” that are required to keep the merry-go-round going.

At the center are, of course, lawyers that specialize in digital rights and intellectual property management, creating agreements with everyone and everything that moves, comes onto a set, touches an artist or flick a switch.

There is publishing, mechanical rights, various distribution deals and then there is licensing from one studio or TV network to another. Lots of one way, two ways and multi-ways deals that keep the money flowing between studios, distribution, actors and actresses, film extras, equipment providers, set builders, make-up artists and wardrobe.

All a kept secret, serving the various vested interests.

I have many friends in the music and film business and the expression I have heard many times is “why do a job with 10 people when 50 will do.” This seems to fit the industry well.

Research shows the entertainment industry is fat, slow, inefficient and only a small elite gets to decide which films and programs get made, who earns the big bucks, receive the awards and kudos and dictate the industry.

Next generation funding for content creation

As Blockchain entrepreneurs pile into the entertainment industry, the model for raising capital is starting to change, with new entrants SingularDTV, a sister brand to Ujo Music, Joe Lubin’s ConsenSys, who have raised $12 mln through a successful ICO in 2016 and the boys at 21Million, who have created a new capital markets platform for raising capital to produce great content and bringing fans as investors into the tent. A platform that takes all forms of cryptocurrencies and fiat creating new liquidity linked to crypto-exchanges and the 21M trading wallet.

It is a unique model that threatens to unlock new sources of capital that will help anyone that has a story to tell, the means to get it to market and offer real fans the opportunity to earn profits from the success of the movie, TV series or documentary.

As David Lofts, the CMO for 21Million explains:

“The entertainment industry is wide open for disruption and Blockchain technologies tips the balance in favor of the artist. Specifically delivering a one-to-one relationship between the artist (song) and the buyer (fan) that creates a fair trade relationship.”

“As more and more artists sell their music direct from their websites, and others such as Mel B accepting Bitcoin, the content makers as artists and writers are searching for new ways to reach the people that become loyal fans. Why should the artist get £0.13 only from a song sold for £0.99 on iTunes, what are Apple doing to justify the £0.87.”

David adds:

“Music is moving fast and now others like SingularDTV and 21Million are about to do the same to the movie industry where creative talent gets overlooked because of vested interests and favoritism which means the best content is yet to come.”

Storm coming

We are going to see a shift in how content is funded, how artists get paid for their content, their IP and how people as investors, fans and libertarians interact with the content creators and how money moves around the system.

Fans can interact with the artist’s content using smart contracts that define the terms of the deal and encourages others to consume the content.

With SingularDTV and 21Million, they provide a platform and a secure financial rail where content is purchased and the creator gets paid in minutes, rather than the many months if not years which happens today, as the studios and labels have to collect funds, unpick the complexity and decide who gets what, reconciling too much data, and then there is the banks to deal with, currency exchange and disbursements. Artists have to wait and then if there is a dispute about how much is received, the opportunity for recourse, complaint or change is met with a set of obstacles invented to deter people from trying.