Patronized Self-Distribution: A Complete Guide to Releasing Your Film as an NFT
A never-before-seen movie business model for the 21st century.
Independent feature films have a huge problem: it’s a monumental task for quality films to land a deal from a traditional distributor. Deals that do take place are often less-than-fair for filmmakers, or reserved for established creators. You're lucky to get an advance check, and at that, you may never see a dollar past that amount, since distributors may never recoup their costs—which the unscrupulous ones may even lie about!
This means the indie producer is left with self-distribution: a long and arduous task where you’re shit-out-of-luck unless you have a large marketing budget and/or serious name talent. Making your budget back will be a tall order.
How is new talent supposed to bring their work to their audience in this climate? How do we solve for original indies being drowned out by tentpole franchises, nepotistic festival programming, and worst of all, the slew of cinematic crap that permeates Prime Video?
Worthy filmmakers and malnourished audiences are being deprived of a healthy cinema culture, replaced with mediocrities and straight-up garbage peddled by centralized institutions. Seriously, how do we solve this problem?
This is where patronized self-distribution comes in. Patronized self-distribution (PSD) is a completely new distribution model that elevates independent films to the economic and cultural status of fine art for the first time in history. At the same time, it increases a film’s chances of finding its audience exponentially through network effects and demand-side curation. We’ll get into that part shortly.
We’ve invented this never-before-seen, proprietary technique for my debut feature He Who Lives In Hidden Lakes. It is the first-ever narrative feature film to be minted and released exclusively as a single-edition non-fungible token (NFT) on the Ethereum blockchain. We’ll use Hidden Lakes’ PSD use-case as an example throughout the article (because it's the only known one right now!).
Update 7/7/2021: He Who Lives In Hidden Lakes is officially the first 1/1 film NFT to sell using PSD. The final bid of 2.25 Ether (over $5,000 USD at auction close) was with an anonymous private collector, who is now our patron and will benefit from the power of this model! The film is available to watch now on Vimeo On Demand.
What is a Patronized Self-Distribution (PSD) model?
PSD models are exactly what they sound like. You are self-distributing your film with the financial and social support of an art collector, or “patron.” With patronized self-distribution, there is no longer a need for traditional distributors.
To accomplish this, you must now think of your film as a piece of fine art, like a painting. Anyone can look at the Mona Lisa (or a picture of it), just like anyone will be able to watch your film on streaming platforms or at the theater—but only one person or entity can own the one true Mona Lisa painting, just like only one person will be able to own your film-as-artwork.
Patrons are different from investors. Patrons are purchasing a finished product, and you don’t owe them any profit from your film unless you want to (more on that later). If Jay-Z collects a Jeff Koons sculpture for $1 million, they shake hands, exchange goods, and part ways. Jeff Koons keeps that $1 million as legitimate profit. Jay-Z’s incentive for buying the sculpture is for its cultural enrichment, and because he expects its value to appreciate over time—at which point he might be able to re-sell it at a profit.
This same thought process underpins PSD. But since films are not physical objects, the best medium to sell your film through PSD is by minting it as a non-fungible token (NFT) on a blockchain. But... since films are not physical objects that you can hang in your house, why would a collector buy something as useless as an NFT?
Because you’re going to make it useful.
I would like to clarify that NFTs will be incredibly useful for financing films with investors and crowdfunding. However, patronized self-distribution is not a model for fundraising, or for investing in the planned production of a film. PSD is a model for completed films ready for distribution and revenue generation. However, depending on your strategy, you may be able to use NFT’s to finance and release your film using a hybrid crowdfunding-PSD model.
A quick aside on NFTs
Before we get into the economic mechanics of PSD, it’s important to understand why NFTs are the best medium for patronized self-distribution. “Minting” is the process of creating a new, unique, non-editable token on a blockchain, which contains a link to a piece of media. When you mint your film, you’re not “uploading it to the blockchain,” rather you are creating a universally recognized and verifiable token that represents your film in all of its singular value and artistry. It’s like issuing 1-of-1 currency note that anyone anywhere can verify, but no one can edit. And instead of being backed by the value of gold or such, it's backed by the value of your artwork.
Simply put, the NFT is a blank slate certificate-of-authenticity. Through the power of blockchain, sociology, and creativity, you can make it represent whatever you want it to represent.
If you’re skeptical, ask yourself: if George Lucas had Ethereum in 1977 and minted an NFT to represent Star Wars, or Scorsese had minted an NFT to represent Goodfellas, how much do you think those NFTs would be worth today? How would they stack up next to Hova’s $1 million Jeff Koons sculpture? Or the most expensive Picassos? Or a verified Leonardo?
If you want to learn more about crypto, I offer NFT consulting at firstname.lastname@example.org. The rest of this article will not focus so much on NFT technology itself, rather on the economic incentives you can assign to your film’s token that will make a market for it.
OK, so how does patronized self-distribution work?
To reiterate once more, the best way (really, the only way) to guarantee the validity of your PSD model is by minting your film as an NFT. But since NFTs don’t intrinsically mean anything, you have to make it mean something to attract your eventual collector.
We’ve already established that your NFT is going to represent the artwork that is the feature film you’ve poured your soul into. You want to attract a patron who will buy it from you. But especially for a new filmmaker, the future value of that film-as-artwork for a collector can be extremely speculative. What if they buy it, but your next few films are stinkers? They may be forced to sell your NFT at a loss. So we need to go further. There is a lot of economic and social potential in harnessing the power of incentives through your token. With that, there are two key principles to follow when designing a PSD model:
Scarcity: You can mint 1000 NFTs representing your film, but the subsequent price and demand for each one may be diminished. If you include a digital or physical copy with each of those 1000 tokens, you may open yourself up to piracy risks, which might diminish the value even further. In order to imbue your token with the aura of your artwork, and to create extreme economic scarcity which will fuel demand and long-term value, films using PSD should only ever mint a single, one-of-one NFT.
Utility: Most art collectors, crypto or traditional, will factor potential price appreciation into their buying decisions, based on the quality of the piece as well as the artist and their career prospects. However, this can be hard to gauge, especially for new auteurs. PSD aims to “sweeten the deal” by offering collectors an extra incentive to collect your film-as-artwork. Put simply: the token must be useful to your patron in some concrete way.
Most films currently in the NFT space only check one box. Either they are scarce in a limited edition, or they offer utility in an open edition. True PSD must check both boxes (and you must also retain at least partial legal control of your film, but more on that later).
The key, then, is finding the right utility that offers true value that both you and your patron can benefit from. You can include “dinner with the director and lead cast,” which is cool, but will probably end up being expensive and tiresome for everyone. Especially if you want to offer that to any subsequent collectors if the original collector re-sells the NFT.
True value, huh? Well… how about including a passive income stream, or a partial rights release arrangement?
Here are the “tokenomics” of the Hidden Lakes NFT:
The film will never be publicly released online until the NFT is sold. This is a great angle from a marketing perspective, and introduces scarcity on general access to the film at large. The patron also has the honor of “presenting” the film publicly for the first time, which is a title they can claim forever.
The patron receives 50% of the film’s streaming revenue during their ownership. The perk transfers to any new owner if the original patron decides to sell it. This utility is particularly strong for reasons we will talk about later.
There is a lot of potential in designing patron utility, and you can get very creative with it. But the best utility you can offer a patron is:
Something with true value (ideally without a lot of extra work for them), and,
Something that incentivizes your patron to partner with you toward the wider success of the movie that you both now have a stake in.
Now, you should never expect your patron to lift so much as a finger for you. They are under no obligation to exercise their utility, and you shouldn’t treat them as such. Be thankful that they purchased your NFT in the first place. You should have a plan to make your film a success whether they participate or not. That said, the goal is to design your NFT is such a way that helping the film become successful is a no-brainer for them. This is the true power of patronized self-distribution.
Ah yes, that brings us to…
The “self-distribution” part
OK, so Hidden Lakes is offering a revenue share utility from streaming platforms. How can we guarantee that if we said we’re forgetting traditional distributors!?
Thankfully, the film industry is catching up to self-distribution. To start with, we’re using FilmHub to deliver our film to a marketplace of 50+ streaming networks. I’m not affiliated with FilmHub, so you can research more about their business on your own. Suffice to say, once the token has its first sale, He Who Lives In Hidden Lakes will shortly thereafter be available on streaming platforms. Remember, this is a result of the “tokenomics” we’ve designed that say the film will be unreleased until a patron buys the film’s NFT.
FilmHub’s partners include services like Prime Video, Tubi, and Vimeo. They collect payouts from these platforms, take a 20% cut of the gross, then send the remaining 80% to us. That amount is split evenly with our patron, since the other “tokenomic” is an even split of streaming revenue.
In the future, blockchain streaming platforms like the Theta Network may be able to present streaming video content to audiences for free while paying creators an even better per-view rate than platforms like Amazon and Tubi currently do. Future crypto tech may also be able to automate the revenue share component of the Hidden Lakes token, which frees up Eleusinian Productions from manual accounting tasks.
On that note, let’s take a closer look at that utility—the fact that I’m giving away 50% of my film’s streaming revenue forever. That seems crazy, right? Well, it kind of is.
Rights-share utilities: creating true value
My motivation behind releasing such a large percentage of my film’s potential revenue is simple social economics:
The more people see the film online, the more money it makes for both myself and my patron.
The more people see the film, the more people end up loving it and joining our fanbase.
The more people love the film, the more likely it is that the film’s NFT will appreciate in price value, benefitting my patron and making me a little passive income if they sell it.
Given these conditions, there is a scenario in the Hidden Lakes use-case that goes something like this (keep in mind, this is all hypothetical, but the potential is strong):
My patron, a modest, anonymous cryptoart collector, first purchases the NFT for $5,000. Over the next year, some thousands of people watch Hidden Lakes through out marketing efforts, and a burgeoning fanbase begins to form. The patron may now sell the NFT of a rising cult classic for $20,000 (from which I collect $2,000, due to the NFT automatically paying a 10% creator royalty from secondary sales), and also may have made back a portion of their initial purchase price.
A buyer on the secondary market—let’s say a popular YouTube streamer with 1 million subscribers—then buys the Hidden Lakes NFT from the first patron. Knowing that they have a dedicated fanbase, and they make 50% of the movie’s streaming revenue, this second patron has a lot to gain from sharing their new NFT acquisition in a 10-minute YouTube video. They direct their fans to the film’s Prime Video link, and in a matter of days, Hidden Lakes gains hundreds of thousands of streams and hundreds of new fans. The YouTuber patron makes a sizable portion of their initial investment back inside of a month, and with the film’s fanbase growing, they can now sell the NFT to a media company for $50,000 (of which I collect 10%... so on and so on… you get the idea).
This is why utility is so important: in order to maximize your token’s value, you’ll want to offer collectors extra incentive, such as a revenue share. The drawback is this: the most powerful incentives will often include releasing a portion of your rights or revenue. However, this should be a fair trade since you are the one setting the terms. Be careful though, and try to think about all possible outcomes before committing to a rights release. I’ve written an article about why you should never include a complete rights transferral to your work, ever.
It’s also beneficial for you to minimize the work your collector has to do to exercise their utility. After all, they’re already betting on the future success of your film and career with an upfront price for your utility NFT. If you give collectors too many rights, they might not even want it any more, or be left with a lot of extra work. This shrinks the market for your NFT rapidly.
For instance, Kevin Smith’s Kilroy Was Here NFT, which he will be minting on the Phantasma chain, seems to check all of the boxes of a PSD model: it is a single-edition token, and offers utility by releasing full distribution rights to the collector. Sounds great, right? Except now, the collector will have to manually distribute the film themselves. If his target patron is a traditional distributor, it may work fantastically (albeit not that different from a usual Hollywood deal, which doesn’t require NFT tech). But if his patron is an individual art collector, they will have a lot of costly and unfamiliar work set out in front of them. And at that, this model is not Patronized Self-Distribution, as Kevin Smith is both giving up an entire rights category to his own work, and not self-distributing. Also note that the patron will face a legal and logistical nightmare if they want to re-sell this NFT after the film is in distribution.
On the other hand, I can do as I see fit with my film, since I am never releasing any rights to anyone whatsoever. All I’m giving up is a revenue share perk. I will always collaborate with the patron and account for their thoughts on market strategy—but ultimately, I am the one who decides what happens with my film. And that’s a great place for everyone to be, since my patron will be able to kick back and collect their passive income with little-to-no logistical overhead.
But of course, the utility each party will be able to exercise depends entirely upon the token mechanics you decide on. You don’t have to follow the terms outlined in the Hidden Lakes token to use PSD. You as the filmmaker (possibly in collaboration with your patron(s)) are free to come up with whatever terms suit your goals.
What are the risks involved?
In case it wasn’t obvious, I’ve put a lot of thought into this! And in my assessment, PSD is a surprisingly low-risk model. Especially given the very limited and inequitable alternatives available to indie filmmakers.
We’ve already covered the one big risk: an appealing PSD model for a collector will often include release some (but not all) of your film’s rights or revenue—but what you release is ultimately up to you, and should be mutually beneficial for everyone. What about the other risks?
Outside the cost of producing a quality film—which, in my opinion, should be your #1 priority before you even think of distribution—it can be expensive to mint an NFT properly, in a way that will be recognized as valuable by collectors decades or even centuries out. Blockchain technology is still very new, and despite the hype surrounding NFTs this year, mass adoption is still a ways away.
Selecting the right blockchain to work with is also a big decision. While Ethereum catches criticism right now for its inefficient energy usage, it is still the gold standard blockchain for smart contracts like NFTs. You can mint tokens on chains like Tezos, Phantasma, and WAX, but these 1) are less established and time-tested, 2) are less likely to compete with Ethereum long-term, and 3) have much fewer active collectors to sell to. And don’t worry, one day soon Ethereum will be much cheaper and greener!
These are places where an NFT consultant like myself can help you save hundreds or thousands of dollars in time and effort that you would have otherwise wasted without proper support and guidance. It might even save you from getting too deep into a project before realizing you’ve minted with the wrong ERC standard, which happened to me! Email me at email@example.com for a free consultation.
For Hidden Lakes, we also elected to sweeten the deal even further by including a physical counterpart for our digital NFT asset. The collector receives a specially designed 1-of-1 home video edition of the film, including a lossless USB copy, a custom-made Blu-ray, a signed poster, and a scannable certificate of authenticity guaranteeing the item’s provenance. Putting something like this together will cost a pretty penny, but it is an incredibly sexy and high-class bonus for your patron. Often, even digital-native cryptoart collectors will enjoy a physical edition of their NFT artworks.
The one thing that I can’t stress enough is that quality is your most powerful selling point. There are too many people out there who are taken with the romantic idea of filmmaking but have no business making films yet. Every big ego with a bad film pollutes the content ecosystem and makes it harder for quality work to get its due. Expand your visual and aesthetic literacy, work with talented people, be honest with yourself, and learn to know if what you’re making is truly the best work that you can possibly muster.
Is PSD right for my film?
There’s a market for (most) everything. But if you already have a large marketing budget and/or strong name talent to help ease the burden of driving eyeballs to your film, a PSD model might not help much—but on the same token, depending on the reach and influence of your patron, it may still be a great strategy.
Cheaply-made exploitation films unfortunately don’t have the “aesthetic mystique” or “fine art aura” that I would expect art collectors to be interested in dropping thousands of dollars on. Arguably, PSD tokens are luxury goods for discerning collectors. This isn’t to rag on genre films! This is just my gut instinct—I would be happily proven wrong.
The more you’re able to position your film as a high-class asset, a scarce piece of fine art, or the unique vision of a breakout talent, the more success I expect you to have with a PSD model. There have also been plenty of short film NFTs that experiment with rights utilities for collectors. However, being that shorts aren’t as easily monetized as features right now, I expect most collectors to purchase short films for the art alone.
The way I conceive it, PSD is best for high-quality, low-budget, self-financed, director-driven features that offer a unique vision, but are still accessible enough where the collector will be able to maximize the utility you’ve released to them.
This is also a preferable method for indie films that aim to create sequels, a franchise, or a cinematic universe: this indicates to your patron that you have long-term plans for your film and are dedicated to making it a success. Cinematic universes are all the rage in visual media, yet still largely untapped potential in the indie world. We’re continuing the Hidden Lakes universe along these lines by innovating the cryptofilm space even further. Keep an eye on @hiddenonesdao on Twitter!
Given what we’ve learned so far, I’d like to return to a previous example: how much do you think an original Star Wars NFT minted by George Lucas would be worth today?
Who really benefits from PSD models?
Ideally, everyone involved.
Filmmakers: You set the terms of the deal, keep your rights, gain upfront revenue that you don’t have to pay back, a passive income stream from secondary sales, and potentially, a business partner who may benefit a great deal from helping you find your film’s true fans.
Flipper Patrons: What I call “Flipper Patrons” are collectors who might buy your film NFT with the intention of re-selling it at a profit on the short-term secondary market (“flipping”). These patrons probably don’t have a lot to gain from your token mechanics (for instance, I’m presently an unknown filmmaker with no audience yet, and this hypothetical Flipper Patron doesn’t have a large enough audience of their own to capitalize significantly on the revenue share). However, there are definitely willing buyers in the market who can make more use of your token’s mechanics. But wait, you say, isn’t that disingenuous? They’re just using my work for a quick buck! I say, “Who cares!” Especially if you do your crypto homework to make sure your NFT guarantees you a royalty percentage on each and every sale in the secondary market ;)
Holder Patrons: “Holder Patrons” are collectors who will save your film NFT in their crypto wallet for a medium-to-long-term timeline. These are collectors who’s hands you want the token to end up in. Like our hypothetical YouTuber, they may be influencers: people who have access to large, dedicated fanbases they can tap into to utilize the utility you’ve included for them. Any collector can hold the Hidden Lakes token and collect streaming revenue forever, but as unknown filmmakers, we still have to manage the hurdle of getting eyeballs on our “little-film-that-could.” The PSD model attempts to bypass that marketing problem by presenting any influential fan of our movie with a no-brainer financial and cultural move that will also expand the film’s reach.
On that note, there’s also another, third-party group that will benefit from PSD...
Audiences: Audiences are being deprived of quality cinema culture. In the world where PSD is a major avenue for film distribution, influencers may end up becoming “distributors” in and of themselves by curating their collection of NFT film-artworks for their dedicated audiences. They will have to be very selective with which films they acquire, so as to not 1) oversaturate the market, 2) devalue their cryptofilm investments, or 3) hurt their reputation by shilling a “box-office bomb.” They will look for only the highest-quality films, free of the institutional biases of film festivals and studios.
Not only does patronized self-distribution present a new use-case for NFTs, it also proposes the foundational element for a new cinema culture akin to the patron-artist relationships of the High Renaissance.
With feature films no longer the dominant form of motion picture, always competing with phones, shows, and distractions of all kinds, the guidance of informed collectors with large, pre-established audiences outside of the film world will be essential to the medium’s all-too-necessary rebirth. We must free ourselves from the chains of tentpole superheroes, films-as-propaganda, bland indie dramas, the tyranny of the festival circuit, Hollywood, and traditional distribution. The weird and blazing visions of the fiercely independent footsoldiers of cinema must prevail. Artists and patrons alike, let this mark the beginning of a new golden era for cinema!
Zach Lona is a multimedia artist and film director at Eleusinian Productions. He offers consultation on NFT strategy for serious artists and on story development for serious filmmakers. Inquires at firstname.lastname@example.org.