NITRATE WHITEPAPER 2018/19 ROSSI ABI-RAFEH

Transcription

1 NITRATE WHITEPAPER A N E X T- G E N F I L M M A R K E T P L AC E 2018/19 BY TAS H O M A V I L I N I, RO B H I TC H E N S A N D ROSSI ABI-RAFEH

2 Nitrate Whitepaper 2018//2019 TABLE OF CONTENTS CEO Statement 04 The Problem 06 Current Models 07 Content Saturation 08 Nitrate is a film marketplace utlizing a spot pricing payper-view mechanism that favours quality; giving viewers an opportunity to generate a passive income by participating in the distribution and promotion process as recommenders. Target Groups 09 The solution 10 DYNAMIC TVOD 12 Our business model 14 The founders 15 Nitrate Alpha prototype 16 Funding strategy 18 indiegogo 19 initial token offering 21 MARKET SIZE 23 PROJECT TIMELINE

3 2019 Business Plan 2018 Don Simmons n i t r a t e A NEXT-GEN FILM MARKETPLACE BUILT FOR THE ORGANIC DISTRIBUTION OF SPECIALIZED CONTENT. After graduating and deciding This reality is what drove me increasingly fast moving and to embark upon a career in the to work in film distrubtion to changing world, it s hard to film industry, I, like many before understand how films make keep your finger on the pulse. me have been astounded to money, and the effect that new I left working in distribution to realise just how colluded the technologies are having on the embark upon this passion project industry already is, and is further landscape. The result I saw using blockchain technology. becoming. Film is an artform that has been elitist since it s inception. The cost of making your average feature film even today with cheap technology was increased centralization and concentration of power towards a homogenous group of hands that are economically forced to put profitability before I believe it has the potential to not just disintermediate major distributors, but also democratize the film industry as a whole. We have a new model W E H A V E A N E W outweighs the cost of buying a house in most countries. Hence, art. Film distribution is a game of identifying films that will that will turn the film industry upside down. It s based on the M O D E L T H E the logic that filmmaking is as much of an enterprise as it is an artform. appeal to potentially profitable markets which you have access to. The problem is that in this premise that no-one understands a films potential audience and how best to reach them better than those that already love it. W I L L T U R N T H E F I L M I N D U S T R Y U P S I D E DOWN 04 05

4 Nitrate Whitepaper 2018/2019 T h e problem c u r r e n t m o d e l s The rapid onset of new technologies such as VOD and its influence on film consumption has led film studios and distributors to become more risk averse than ever in regards to film investment and distribution. Low to mid budget films focussing on niche audiences have suffered as studios and distributors increasingly rely on tent-pole style blockbuster movies to attract wider global audiences. The rise of free streaming platforms and the declining cost of high dynamic range cameras have created a content explosion online from a new breed of independent creators that typically focus on self-funded, short form content in the absence of sufficient investment....netflix F A V O U R S NETFLIX ORIGINALS, NOT INDEPENDENTLY PRODUCED CONTENT. Currently, both filmmakers and content creators are presented with limited options to monetize their work. The existing models are presented below: Advertising Models (AVOD): rely on the meager advertising revenue generated while tolerating invasive interruptions and distractions, ie YouTube. Ad models also tend to favour creators producing click-bait instead of artistic content. This is why the top earners on Youtube are toy demonstration channels and gamer channels. Pay-Per-View Models (PPV or TVOD): audiences pay a set price to watch content. This requires additional marketing expenditure in order to attract sales on behalf of the creator, ie Amazon Prime and itunes. Sponsorship Models: when companies fund content in exchange for in-film brand placement. The downside is they can often be creatively or politically restrictive. For example, the US government has supported over 800 feature films from 1911 to 2017 including Terminator, Transformers and Iron Man. Subscription Models (SVOD): Large platforms like Netflix, purchase exclusive rights to the content normally for a fraction of it s actual value. Whereas before Netflix was a champion of indie film; now Netflix favours Netflix originals, not independently produced content

5 2019 Business Plan 2018 Don Simmons c o n t e n t saturation target groups BY 2019, 80% OF THE INTERNET WILL BE VIDEO CONTENT - CISCO INDIE FILM YOUTUBERS GLOBAL FILM So much video content is being created at such a rapid rate that the window for attaining a target audience s attention is getting ever-shorter- there is simply too much choice for the viewer to filter through it all effectively. This has had a notably adverse effect on the movie industry s attitude towards risk mitigation when dealing with independent film. With an increased number of alternatives available to film audiences in the past decade such as VOD, video games, and satellite TV - box office revenues have significantly decreased and pushed many of the smaller distributors that would normally champion independent film out of the market. Today, audiences are becoming accustomed to only going to the cinema to watch spectacle, cast-driven blockbuster films pushed solely by the Hollywood studios that can afford to make and promote them; whereas smaller, independent films with not so middle of the road storylines are increasingly going straight to major VOD platforms for viewers to watch in the comfort of their own home. Due to a lack of competitive alternatives, the filmmakers on these platforms end up selling the rights to their content at a fraction of the films actual revenue potential. Companies like Netflix and Amazon have monopolised on the widening gap in the market for niche content. By using their algorithms they re able to indentify and cater to specific audience groups. Still, the majority of independent films released globally do not make it onto these platforms; and the producers of most the ones that do, find themselves living from deal to deal and unable to earn a sufficient residual income from their body of work using these platforms. In 2016, the Toronto International Film Festival received 6933 film submissions from independent filmmakers- only a fraction of them were nominated and received distribution deals in order to reach a wider audience. In recent years the number of film festivals have also exploded in order to cater to the increased demand from filmmakers looking to spread awareness of their films to specific niche audiences. As a result, there are currently 5638 film festivals listed on filmfreeway.com. Filmmakers are expected to pay submissions fees and cover their travel expenses to be present at these festivalsshould they be noiminatied. The majority of films festival submissions fail to gain wider viewership because they do not receive distribution deals, and the filmmakers simply do not have the marketing budget or expertise to capitalise on the wider appeal their film Beyond the film industry, we now have a burgeoning short form content industry which exists predominantly on the web, on websites like Youtube and Vimeo. Initially, these content creators (who are mainly millennials and Generation Z) post their content online for free with the intention of earning ad revenue or attracting sponsors once they amass a significant number of views and subscribers. More recently a growing number of them are moving towards donation based platforms such a Vidme or Patreon which enable them to more directly monetize their audiences. Despite this, these models favour content creators that have already amassed large followings across social media and creatively limit content creators by trapping them to the one particular niche that their following is based on. Lastly, there is a growing demand for international film products due to the large number of diaspora residing in developed countries such as the UK, USA and Canada.. The problem is that the filmmakers situated outside of these countries often face obstacles in capitalising on this international demand due to the lack of an established film ecosystem with the legal and financial institutions and practices required to construct such international distribution effectively. Nigeria is a prime example. Nollywood is the second largest producer of movies in the world; with over 50% of its population employed by its film industry. Despite this, Nollywood has failed to evolve into a sutstainable industry for its filmmakers. Instead, the majority of films are being pirated in order to reach demanding international audiences. may have beyond the festival circuit

6 t h e solution STUDIES SHOW THAT DIGITAL DISTRIBUTION THROUGH A P2P NETWORK IS MORE BLOCKCHAIN PROVIDES THE MEANS TO ACCOMPLISH SUCH THINGS IN A WAY THAT WAS NOT POSSIBLE WITH PREVIOUS SOFTWARE ARCHITECTURE APPROACHES PROFITABLE AND MORE EFFICIENT THAN IN THE CORRESPONDING CLIENT-SERVER SETTING, IF THE PRICING MECHANISM USED PROVIDES STRONG INCENTIVES TO USERS TO SHARE CONTENT. -KR LANG On Nitrate each viewer gets to influence the price of a film they ve purchased and viewed. To stabilize the price of films, viewers can only increase or decrease the price of a film they viewed by a small increment. No single viewer can change drastically the price of a film, as no single viewer is smarter than the wisdom of the crowd. After setting a price for the film, users can earn 30% by successfully referring it to a friend that shares their taste in film. Making successsful recommendations to friends that rate content similarly to you results in a higher taste level on the marketplacefavouring you in the search algorithm to earn bounties. Instead of Youtube s Like/ Dislike ratings, Nitrate s pricing mechanism is a more elaborate rating system. Youtube asks you to rate a film whether a clip is good or bad relative to an arbitrary and elusive benchmark. This dichotomous mechanism does not help in uncovering the intrinsic quality of an experiential good. a film on the Nitrate marketplace is priced dynamically to reflect its value through the separate components of demand size and demand intensity. The price of a film is the sum of all increments or decrements that are made throughout its lifetime. Nitrate encourages content-creators to initially upload their content at zero price. The range of increments our algorithm uses to influence the range of a price a user can chooose for a movie depends on : 1. How deep is the price of a good? How many viewers changed the price previously? After n number of viewers rating the price of a film, the maximum possible increments decrease. Nitrate s pricing mechanism serves as an implementation of the wisdom of the crowd. 2. The reputation of the viewer. A persons individual influence over a films price matches their expertise in making tailored recommendations. Film viewers with a good track record get more sway. No ex-ante decision on who s an expert, an expert becomes one only through demonstrating a high level influence and empathy towards the preferences of their peers How long in time has the movie not been purchased and viewed? If a film has not been purchased for a period of time, a reasonable assumption is that its price is too high for people to watch it anymore. To solve this, the price of a content on Nitrate decays with the time passed after its last purchase. The majority of content online today is free for consumption, or available at the cost of a small subscription fee. These models are damaging to the industry as a whole as they do not distinguish between artistic films that provide meaningful value to their audience and those that don t. On Nitrate, filmmakers release their film on the marketplace for free and allow the people that purchase the film to set the price for their friends, based on how much they enjoyed it. This unique price is locked for 48hrs, enabling the viewer to share it with friends on their network. Once the 48 hours is complete the price resets to the films real-time price according to the latest viewers rating. If the film is good the price of the film will go up with the number of likeminded viewers it attracts. This is what incentivises people to share and buy recommendations from their friends.

7 Nitrate Whitepaper 2018/2019 d y n a m i c tvod pricing Using game theory logic, film viewers are incentivised to rate their films honestly as not doing so will lead to a bad reputation on the marketplace; resulting in reduced influence and ultimately lower revenue. If a film is priced too high to attract sales from the market, low incentives It s difficult to argue the benefit of switching to a TVOD service when the target consumer has already purchased a number of titles that are also available through subscription services. then the Nitrate protocol automatically adjusts the price until demand is met again. This mechanism also incentives users to hunt for newly released content in order to secure first mover advantages. The lowest price, the greatest marketing DRAWBACKS OF TRADITIONAL TVOD Low visibility The algorithms on platforms such as itunes favour the films with the highest sales in their first hours. This means that films without the network or marketing resources to pump their initial sales eventually get buried amongst all the other films in these catalogues. opportunities and the best position in the distribution network. The system is similar to spot pricing mechanisms used on trading platforms for stocks and shares. The majority of content online today is free for consumption, or available at the cost of a small user paralysis The ever expanding nature of the film catalogues on platforms such as itunes and Amazon requires users to commit a significant amount of time and effort to discover new content without any real incentive or reward. subscription fee. These models are damaging to the industry as a whole as they do not distinguish between films that provide value to their audience and those that don t. Transactional video on demand (TVOD) is a distribution method by which customers pay for each individual piece of video on demand content. flat pricing The price of a film on current TVOD models do not vary according to a film s quality meaning that the consumer is constantly exposed to the risk of paying a fixed price for a film they may not enjoy. A SUPERIOR MODEL powered by the crowd In short, the drawback of current TVOD models is the use of fixed pricing. The nature of a film as an experiential good means that inherently its value will be determined differently according to different audiences. This ultimately results in an increased risk of negative satisfaction and an increased reliance on user based reviews or recommendation algorithms to be able to determine worthy film options to view. A lot of the time these are considered unreliable as An algorithm can predict whether two people have things in common, but it can t predict their chemistry. It s no different with movies. - Emily Buder, No Film School. This also leaves smaller, more uncertain markets underserved. because of the high uncertainty in demand as in a small niche market, fewer producers and distributors hazard themselves in producing content targeted to these audiences. And fewer audiences are less likely to purchase at the film at a fixed price due to a lack of reviews. Dynamic TVOD solves two sides of this problem through a joint pricing and reward mechanism built into a smart contract attached to a particular film. Users with a high reputation on the marketplace get favoured for their tailored recommendations, and also the random bounties accrued from users that discover films via the browse screen. An algorithm can predict whether two people have things in common, but it can t predict their chemistry. It s no different with movies. -Emily buder Nofilmschool

8 Business Plan 2018 Nitrate Whitepaper 2018/2019 o u r b u s i n e s s m o d e l THE FOUNDERS f we take <10% Token Valuation For every film that is sold on the marketplace, the owners receive 60%, the person recommending it receives 30% and we take a maximum fee of 10%. This is set to decrease overtime as the marketplace grows in popularity and we begin to shift the focus onto other revenue generators. Credit-based subscription Users that sign up to join the BETA version of the marketplace will be charged a monthly fee of $5 in exchange for the equivalent value in TICKETS. With these TICKETS they can purchase content on the marketplace and potentially earn more for making valuable recommendations to their friends. Nitrate intends to release 40% of the total TICKETS supply before launching on major exchanges. The rest will be available for purchase directly from the Nitrate website only via recommendation. The management and distribution of the reserved supply will be managed by members of the Nitrate Commitee to encourage a stable and positive longterm valuation. PAAS Dynamic TVOD is a new revenue model with a pending patent that can be applied to complimentary and growing industries such as VR, Video Games, E-Books, Music, Education and Adult Video. After launching Nitrate, we intend to offer our platform as a service to entrepreneurs operating within these industries. Tashoma Vilini Rossi Abi-Rafeh Rob Hitchens Ceo/filmmaker Studying business and working as a VFX artist and freelance filmmaker has opened my eyes to the economic problems filmmakers face in making a living creatively from their craft. Cfo/economist I live, eat and sleep game theory. Working on Nitrate has allowed me to apply my study of digital markets and crypto-economics to an industry rivetted with incentive dis-alignment. Cto/ smart contract tutor I m especially good at helping teams reach their desired destinations. I can quickly assess the feasibility of an idea, approximate the appropriate architecture and frame options in business terms. marketing strategy data science coding Management phd in economics systems architecture product management Game theory team management filmmaking/vfx machine learning blockchain

9 Nitrate Whitepaper 2018/2019 N i t r a t e a l p h a GAMIFIED FILM REFERRALS INTUITIVE UI NO TECHNICAL JARGON RESPONSIVE DESIGN AI & BLOCKCHAIN- READY Much research and testing was done to ensure the design of this very first prototype We ve refrained from using any technical jargon at all as film audiences do not The ALPHA version is a web-based client designed using REACT JS; and will be was as friendly and easy to care much about blockchain available to use from any use as possible. We ve taken or cryptocurrency. It made browser on any device. inspiration from leading sense to call our tokens film platforms so that users TICKETS because thats s POWERED BY INDIEGOGO are given a benchmark user experience. how they behave in the film marketplace

10 Nitrate Whitepaper 2018/2019 f u n d i n g s t r a t e g y i n d i e g o g o p e r k s 60% of THE FUNDs Raised in our crowdfund goes back PROPORTIONATELY to the owners of the films THAT CONTRIUTORS spend THEIr TICKETS on. all tickets intitally purchased at this stage will be migrated later to our beta version. LAUNCH DATE:: 2018 Q4 NOT YOUR TYPICAL BLOCKCHAIN PROJECT. AUDIENCE: UP TO $99 FUNDING STages Tokens offered Equiiy offered Voting rights offered The goal of our funding strategy is not comfortable using it than they are with only to raise the capital needed to build cryptocurrency. We want to ensure that the marketplace, but also to build a our earliest investors are people that passionate community of filmmakers truly love and care about film, and not and film lovvers whilst doing so. Our just crypto-traders. This way we hope decision to launch our inital crowdfund to build a strong userbase of people that using Indiegogo was based on the want to watch and rate films; instead understanding that this audience is of speculate on the future value of our already aware of Indiegogo, and more tokens on exchanges. indiegogo SEED-round ITO Contribute and receive TICKETS which you can use to purchase content in our marketplace. TICKETS purchased during our crowdfund will be migrated to our BETA: a blockchain enabled marketplace which we plan to launch in Q CURATOR: FROM $100 UPWARDS Contribute $100+ and receive: -Audience perks -Receive one free film submission for our BETA -A vote to decide which content will make it onto our BETA version -Exclusive invites to screening parties taking place around the world. COMMITTEE: FROM $1500 UPWARDS Contribute $1500+ and receive: -Curator Perks -Membership of the Nitrate Commitee. influence the development of the marketplace and distribution of reserved TICKETs after the ITO.. -Receive invites to key launch events

11 Nitrate Whitepaper 2018/2019 LAUNCH DATE:: 2019 Q3 i n i t i a l token o f f e r i n g LAUNCHING IN Q3 2019»» After our private seed-round we will be launching an ITO to raise the capital required to build the marketplace out fully with machine learning and decentralised hosting. ERC-20 TOKENS We plan to build our marketplace on top of the Ethereum blockchain with an ERC-20 token called TICKETS created in limited supply. Doing so will allow users benefit from its deflationay properties as the marketplace grows in popularity. 50m tickets only why Cryptocurrency?»» Using cryptocurrency as our means of value transfer allows us to become a truly global marketplace and offer filmmakers all over the world access; independent of their territory or government. For ACCREDITED INVESTORS Our ITO will be made available only to accredited investors in compliance with expected SEC/FCA rulings for

12 Nitrate Whitepaper 2018/2019 keys to success m a r k e t s i z e +$4.04B TVOD Sales in 2017 (US MARKET) FOCUS ON NICHE, QUALITY CONTENT.. $15 ARPU The average revenue per user. 4 % ANNUAL GROWTH Expected to reach $4.7BN by OPTIMIZE USER PRICING AND REFERRALS 5% USER PENETRATION Expected to hit 6% by RE-INVEST IN THE COMMUNITY UNTAPPED POTENTIAL in festival dropouts The majority of films, webseries and animations that get submitted to film festivals end up with unseen, or with low visibility on platforms like Amazon or Vimeo. Having these films premiere on Nitrate right after their run at film festivals gives those that paid to attend these festivals the opportunity to earn something back

13 P r o j e c t & Timeline WHITEPAPER 2018/2019 Period Research Incorporation BuildTeam & Patents ALPHA release Crowdfund Seed Round Inital Token Offering Beta Release Nitrate v1 Release 024