Methodology, Skills and Professional Benefits Participants Participants' Comments MEDICI Head of Training «The 12 Labours of Hercules» Report of the Reports – Workshops 1 to 4

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Eighth Workshop – 26 to 28 September 2018, Royaumont Abbey, France

Module 4a – How to simplify and make life easier for funds and producers in terms of paperwork.

Introduction

Each public fund involved in a project has specific and common requirements, including the chain of titles, contracts, financing plan, budget, list of cast, projection of pre-sale, distribution deals or LOI, etc. Those requirements correspond to a bunch of documents for evaluation and analysis at different stages (from eligibility to payment schedules)

• Would it be possible to simplify those requirements and delegate responsibilities?
• Could the use of a blockchain platform be a solution?
• What would be the impediments?
• How could it work?
• Could the funds share responsibility for the analysis of the documents?
• What about a common financing plan and production budget?

Blockchain as architecture for an integrated approach to audiovisual content funding: The case of “Group Média TFO”, a Canadian public education media enterprise

Impulse speaker: Ulrich Dessouassi (Head of Digital Products, Group Media TFO)

Please also see Ulrich Dessouassi’s presentation (PPTX)

Group Média TFO – who are they?

Groupe Média TFO is a public institution funded by the Canadian government to provide content to the public school system. In Canada, a bilingual country where French is a minority language, the TFO has the mission to sustain the French language presence by creating material for the public school system. The TFO has existed for over 30 years. It used to be a single channel until the emergence of new media and the decline of TV that began 15 years ago. Today, TFO runs two channels: the website for the general public and a channel which is more specific to the school system. In addition, they are strongly committed to ensuring a strong presence on all social media networks. What is most significant in the context of this Module is that the TFO has successfully introduced the blockchain system. Hence, this Module will present in more detail the TFO’s blockchain prototype and how it inspired different public film funds in Europe.

Why did the TFO go for the blockchain?

• The blockchain process can be adapted for public film funding. This is possible because the blockchain technology correlates with the process of digitization by which most of the public film funds are currently digitizing their funding documents, that state the relationship between a producer and the funding body.

• Most of the public film funds produce, co-produce, acquire and distribute content. In relation to that, they have to deal with a wide variety of different types of contracts and stakeholders. It implies a lot of administrative work and burden, which could be reduced by implementing block-chain architecture.

• Blockchain also solves the industry-specific problem of metadata.
• Blockchain is not only used to build crypto-currencies. It is a digital solution for far broader challenges.
• Blockchain technology relies on distributed ledgers. All transactions that take place within a network are recorded. The ledger is a register of data that accumulates over time. The ledger has two major advantages:
  • It is distributed, which means that every party participating in a network has a copy of the ledger.
  • In addition to being decentralized and collaborative, the information recorded in a blockchain is append-only. The use of cryptographic techniques guarantees that once a transaction has been added to the ledger, it cannot be modified.
• With the blockchain you do not need an intermediary to hold or process the information. Instead, a smart contract defines and documents the relationship of a transaction in an automated process. It makes sure that the right people are attributed to the right material (contracts, funds, productions, etc) and then it authorizes the transaction respectively production. This makes the system efficient. Without the smart contract, there would be only a ledger and we would still be in need of a human to go and interact with that ledger.

Two types of blockchain

There are different types of blockchains. The following two types are the most common:

• Permission less blockchain (ex. Bitcoins).
  • In the un-permissioned blockchain anyone can participate in a transaction.
  • It prefers anonymity, immutability and transparency to efficiency.
  • It has high energy consumption by design.
• Permissioned blockchain (private network).
  • You are like a member of the private club. You know who the members are and there are clearly defined rules. It is a network operated by known entities or stakeholders in a value chain, with an agreed set of rules and guidelines to interoperate. Only authenticated users can participate in writing into the blockchain or perform transactions.
  • It prefers efficiency and immutability to anonymity and transparency.
  • The businesses normally choose to work with a permissioned blockchain. It is also used by the TFO. They do it for four reasons:
    1. The existence of the shared ledger that is an append-only distributed system of records shared across business network. On top of that, there is a mechanism to assure that people who are within the network have the right to specific action in that network.
    2. The use of the smart contract that contains business terms embedded in a transaction database and executed with the transactions.
    3. Permissions: ensuring appropriate visibility and transactions that are secure, authenticated and verifiable.
    4. Consensus: all parties agree to the network-verified transactions.

The TFO approach to blockchain

Before introducing the blockchain technology, the TFO extensively consulted all potential stakeholders. The process resulted in a made-in-Canada blockchain solution for the audiovisual sector marked by the following 5 key benefits.

• creating and making accessible clear financial information relating to rights holders, revenue and distribution.
• decentralized, distributed public ledger providing trustworthy, accurate and available information for all
• new platform for investors to enhance funding engagement
• creating digital identities to establish a credible and reputable system for producers and consumers
• by removing intermediaries, blockchain reduces delays, legal fees and audit processes.

The TFO blockchain prototype consists of 2 sides:

• On one side, there are stakeholders or right holders of certain content. They could include different funding agencies, crew members, unions, collecting agencies, etc.
• On the other side, there are different means through which the content in question may be distributed – physical distribution such as DVDs, streaming services, broadcasters, and all other ways of delivering the content to the end-user based on the territory.

All these agents within the blockchain prototype are interconnected with legal contracts that bind two entities (for example, the producer is linked to the financing institution, etc.). With the advantage of the blockchain, the terms and conditions of the legal contracts are converted into smart contracts. A smart contract has the ability of being self-updated. Whatever happens with the film, it is entered in the smart contract automatically without the involvement of any intermediary. For example, If the producer hires an actor, and they agree on a lump sum of, let’s say, 10 000 euro and a certain percentage that the actor receives for each additional sale, it is automatically entered into the system through a smart contract. It means that as soon as the permission arrives, the money is transferred to the right personal account.

Lessons learned from the blockchain experience so far

• The processes implemented had to meet the industry requirements.
• The project helped us identify tax credit funding as a critical and complex component of cultural audiovisual production funding.
• It will help the copyright agencies to re-invent themselves and optimize their operations.
• The traceability and immutability of every transaction will support the resolution of legal disputes.

What next?

There are several entities that started using the blockchain prototype created by TFO. However, the TFO does not have a mandate to sell or commercialize blockchain. They are talking to different partners in Canada with the goal to create a sort of consortium. The idea behind this is to create a partnership between the TFO, the tech-people and other stakeholders such as financers, producers, etc. That would refresh the concept of their block-chain prototype and ensure that each point of view in the industry is covered.

Questions by MEDICI participants for Ulrich Dessouassi

Who would initiate a blockchain if you have an audiovisual project with, let’s say four funds involved? Would it be producers, funds or…?

Anybody can initiate it. There is no hierarchy. As long as there is a ledger and you abide by the rules of the processes within the network, you can join the network.

Do you need one blockchain per project?

Ideally, you should not have many of them. The power should be in one central network similarly to social media. Do you need two twitter, Facebook, Instagram or LinkedIn accounts? No, one is normally enough.

So in one blockchain we would have multiple projects that are financed by multiple partners, would it mean that partners participating only in one project would see the data about other projects as well?

No, everybody would see only what they are allowed to see. Blockchain has different windows.

How can one blockchain fit all?

That is one of the challenges. You should make sure that every window abides by the rule of specific funds, countries or continent. Blockchain, on the one hand, consists of the system of files and the file-operation mechanism. But, on the other hand, there are also the stakeholder-specific rules on top of that.

How do you sign or enter the smart-contract?

There is a special interface. You put a file and sign it on the basis of your cryptographic key.

Who is the one who can authorize us to look into the files? Is it a producer?

In a specific production, that would be the producer.

Many funds have already digitized their application processes. How can the blockchain improve further this digitization process?

The beauty of the blockchain lies in the transparency. Today, if someone applies to a fund, he goes on a website and submits files. With the blockchain, you would still do the same thing, but instead of having all the information stored in separate databases, you have a single shared ledger that everyone who has a permission can access.

So if I have the permission to access the blockchain, I can see everyone else as soon as I become part of the financial structure?

Exactly

One of the problems that we have in the audiovisual sector is confidentiality. Competitors do not want the other people to know what they do. How do you guarantee that the information people put into the system will not be disclosed?

It is simple. If two people sign the contract, it is only those two who can see what was signed.

So let’s assume that you and I are a producer and a distributor. You as the producer apply to TELEFILM Canada and I am ready to pay a certain MG at the same time. We have a deal, we put it on the blockchain, the two of us have access to it. But the moment you apply to TELEFILM Canada and need to disclose that information to them, will I be notified of that immediately and block you if I think you should not be doing it.

Yes. Exactly. Also, transparency does not conflict with privacy. Public blockchains are open to everybody and 100% transparent. However, the blockchain used by businesses need to introduce security measures on top of the blockchain in order to limit access to confidential information.

But let’s say that there are 50 members in a blockchain and, due to confidentiality, 49 of them will see only one file they signed and nothing else. So what is use of the blockchain then if people cannot see what the other signed?

The Blockchain assures that whatever happens to your stake in the relationship in a certain business, you will know. And you do not care and should not know the things that do not concern you. For example, as a fund, you often do not know how the money you have granted is performing. And if there is a consensus between all parties that the producer must be able to see how often the film has been shown, then this is something that can be embedded in the blockchain. At the moment, the producer has to go and beg for the data from different intermediaries such as distributors. The blockchain ensures that you do not have to wait until somebody gives you the information. Smart contract is actually your middle-man and it provides the producer with the information thanks to which they can keep control over their product.

Can smart contacts help in legal disputes between the parties?

Yes. Smart contracts also replace lawyers sometimes. If there are small conflicts between entities, smart contracts contain the facts that can easily resolve those conflicts.

Blockchain requires that producers and distributors always tell one truth, the truth. But, making a film sometimes implies adapting the information that producers are disclosing to different stakeholders. For example, when producers engage in co-production, the same project has to have the same structure when you present it to the national authorities in all co-producing countries. But most of the time, it is not the case, essentially because the project is presented to the national authorities in different phases of the making of the film. It demonstrates the complexity of reality. So how would the blockchain deal with that complexity?

But the blockchain can arrange the system that would allow that the same project has different structures in different co-producing countries. It would be an interactive system designed in such a way that it can adapt to the peculiarities of each country. The same situation is with distribution – you have to adapt the rights-management around a product to specific territories all the time while selling your film.

For example, in France every co-production goes through a regular procedure for the recognition of co-production by the CNC. Then, the same co-production, when presented to the fiscal authorities for the purposes of the tax-incentive (another department of CNC), would have a different financing set-up. So you have at the same moment the same figures presented in different ways. For example, in a co-production with Switzerland, in one financing plan, there is no tax credit, and in the other financing plan, there is a tax credit. The one given to the Swiss public fund is without the tax credit, but once the production is finished, the film generates the tax credit and for the purposes of the fiscal authorities you show it, but in the first financing plan you did not because it has been generated by the film at a later stage. So the same film can have two financing plans depending on who you are talking to. The question is who is going to inform the blockchain about all those changes and double-accounting when it comes to financing plans.

If you represent the fiscal authority of a country, the producer will send the information at your request and it will be entered in the block-chain as well. The same way, when the producer goes to the CNC, they will enter also the information that were submitted to them. The producer will have the whole picture, but all other parties will know what they are allowed to know by the law and other rules. If the CNC allows you to see the information submitted to them, you will see it.

Can you explain again what the smart contract is?

It is a bunch of conditional statements. “If condition….then action”, “if condition….then action”. There is a software code that matches conditions and actions. In legal contracts we usually state the terms and conditions or a relationship. We simply transform the regular contracts into a more automated system.

The blockchain is all about efficiency, about improving workflow and eliminating intermediaries. Will there be a need for collective agents then? Do we still need them?

You do not need them. Smart contracts can follow the cash-flow, revenues and the recoupment waterfalls. You can also attach your bank account to the blockchain. However, you still need a lawyer to create the legal content to be transformed to a smart contract. However, the contracts will need to have more factual information that is easier to understand and interpret.

Do you need a specialized technician to transform the legal contract into the smart contract?

Today majority of technology requires that you have a technician to convert content into a smart contract. We hope that in five years time there will be a tool that will allow everybody to write a smart contract on their own.

Is a self-auditing system possible, which can stop possible frauds and show that the revenues we get are real transactions?

It is part of the consensus-mechanism and the agreement of what kind of auditing tool stakeholders want to introduce to the system.

Conclusion: Opportunities and Challenges

• Blockchain gives you an opportunity to re-negotiate the agreements that have traditionally been unsatisfactory.
• If you have the blockchain system implemented, it automatically provides you with all the data that it is allowed to give you. So if you want to check how a film is performing in a particular region or on a particular platform, the blockchain will allow this. However, first you have to renegotiate the contracts with the distributors and the other parties who shall agree that data is automatically accessible to you through the blockchain.

But

• It is difficult to convince governments and politicians to introduce innovations. They need to understand that the blockchain technology would bring them more accountability and efficiency. Based on the data acquired through the blockchain, they could adjust policies and redistribute the public funding more efficiently.
• It is necessary to bring the legislators in charge of cultural policies into the discussion, because they create major issues in the funding structures. But this is not easy. They give you some initial support, but when it comes to the real thing they slow down. There is too much bureaucracy and too many people involved.

Cooperation between public funds in an increasingly complex and international environment: opportunities, actions, ideas

• Introduction
• Module 1a – Panel: Co-operation between funds means mainly supporting co-production
• Module 1b – Are there possible alternatives?
• Module 2 – How to access smart data to better reach the audience?
• Module 3 – How could funds help each other to make the projects they co-finance visible?
• Module 4a – How to simplify and make life easier for funds and producers in terms of paperwork.
• Module 4b – Digitizing the Funding Process
• Module 5 – How to assess the performance of funding programs dedicated to international co-operation?

• List of Participants (PDF)
• MEDICI Eighth Workshop Full Report (PDF)

Illustrations by KAK

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