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It’s Not a Movie, It’s an NFT! How Hollywood Is Flirting with the Non-Fungible Token

From film financing to collectibles, NFTs show promise even if many people still don't understand them.

“Lotawana” is the first film believed to be sold using NFTs

Trevor Hawkins

When Trevor Hawkins wanted to finance his debut feature, “Lotawana,” he did it the old-fashioned way; He took out a second mortgage. Now that the film is done, he’s taking a distinctly 21st-century approach by creating two types of non-fungible tokens, or NFTs: At $1,000 each, there’s 1,000 tokens that represent ownership shares that give profit participation as well as $100 tokens to access the movie’s online premiere.

“It was risky to make the movie itself,” he said Hawkins, a veteran director of commercials and shorts whose work has been featured by National Geographic. “When this came along, we felt it was a way to differentiate ourselves. This was a huge risk as well, but it feels right. We’re just a little bit ahead of the curve here … my personal opinion is that it’s here to stay.” Hawkins said that after 500 of the $1,000 shares are sold, the film’s original partners will no longer be majority stakeholders.

Last month’s “Saturday Night Live” short “What the Hell’s an NFT?” wasn’t so much a parody as a public service. Interest in the search term started to spike around Valentine’s Day and that hockey stick is still growing — probably because the public is still a ways off from understanding why people are so excited by this acronym.

A dollar bill is fungible — they all look alike and carry the same value. An NFT is unique digital certificate of authenticity for physical or digital objects. These tokens are stored on a blockchain network, the same thing that powers cryptocurrencies like bitcoin, and every transaction is verified and recorded in a public ledger. Since an NFT is practically impossible to fake, it helps create value for the associated object, which can be bought, sold, and traded in perpetuity.

In March, a JPEG created by artist Beeple as an NFT sold for $69.3 million to Metakovan, founder of cryptofund Metapurse, who declared it “the most valuable piece of art for this generation.” That series of events suggests the overheated logline of a future James Bond installment, but Hollywood is already investing real-world millions in NFTs — and independent filmmaking may be one of the earliest applications.

Hawkins said several companies have approached him about collaborating on the sale of other NFTs. He’s in the process of finalizing a deal with one firm to sell NFTs connected to “Lotawana” film stills, scripts, posters, and other collectibles, he said.

Film finance firm The Forest Road Company (“The Kindergarten Teacher”) recently closed a $20 million fund to make pre-production investments in exchange for the right to sell associated collectibles using NFTs. Producers will participate in the NFT royalty stream after Forest Road recoups its investment.

CEO Zachary Tarica views his company’s newfound involvement in the movie memorabilia space as a MacGuffin of sorts — those objects are there to give filmmakers more capital on the front end, and more profit for investors on the back end.

“All we’re really talking about is the use of technology to create more efficient contracts and decentralize the flow of funds,” he said. “It’s a more efficient forensic watermark and smart contract that allows for the person who created the IP to better, more efficiently monetize the thing they created.”

Streaming and distribution company Cinedigm is another early adopter. When CEO Chris McGurk teased his company’s plans in a tweet last month, Cinedigm shares spiked.

In an interview with IndieWire, McGurk and chief strategy officer Erick Opeka said they plan to use NFTs to support Cinedigm’s streaming business, where subscribers will earn digital collectible NFTs as rewards. Those limited-run freebies could appreciate in value due to their scarcity.

The executives, who compared the program to airline mileage plans, plan to utilize NFTs in Cinedigm’s relaunch of streaming platform Fandor later this year. Cinediem is also developing a premium film label that sells limited-availability film NFTs.

With the rise of streaming services, the executives believes the industry is moving away from ownership of individual films. Just as Spotify disrupted the music industry and inspired it to seek new revenue in records and merch, they believe the film industry could do the same via NFTs.

Critics have questioned how “non-fungible” an NFT can be; even Beeple’s $69 million artwork can easily be copied and distributed at will, even if its associated token cannot. However, Opeka said NFTs actually help solve a core problem with digital ownership. While you can buy a digital copy of a VOD movie today, it’s a lot different from owning a DVD copy of the same film.

“The problem today in the market is, what does ownership mean if you can’t sell or swap it?,” he said. “It’s all about making things non-fungible and tradable. That’s a big thing that gets lost with NFTs … there’s marketplaces that are being set up so people can move these things around.”

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