New technology has the potential to open up investing in films to a new generation, meaning we can all own a share in Barbie’s dream house, says Matt Ong
Earlier this week, the Oscars reminded us of just how big cinema’s post-pandemic comeback has been. A whopping 19.5m people worldwide watched Christopher Nolan’s Oppenheimer win seven Oscars on Sunday, while Barbie (the highest-grossing film of 2023) made up for its relatively modest haul of just one Oscar with an enthusiastic performance of “I’m Just Ken” by actor Ryan Gosling.
Cinema in the UK looks set to continue its upward climb. In 2023, Box Office’s in the UK and Ireland broke the £1bn barrier for the first time since the pandemic and market research agency Mintel predicts the UK cinema market size is expected to grow 42 per cent to reach £2bn in 2027.
The history of film financing
Films are an expensive art form and, like most other industries, rely heavily on external funding. Typically, financing for large Hollywood films comes from major film studios but it is often supplemented by other sources like tax credits, ultra-high-net-worth individuals, film funds and banks. And while investing in films, like all investments, holds a significant financial risk, it can also (eyes on Barbie’s $1.446bn box office sales) offer significant returns.
But film financing has traditionally not been accessible to the majority of eligible investors. For every Barbie or Oppenheimer, thousands of movies never make it to cinema. It’s a challenging investment space and investors tend to finance film “slates” over stand-alone films.
Film financing in the era of blockchain technology
The greatest gift blockchain has given finance is the tokenisation of real world assets. Whereas historically, investors would have to have sizeable contributions to invest in assets like property, private equity or films, blockchain’s ability to fractionalise assets at a low cost and at scale, means many more eligible investors can participate in any potential upside.
In November, the UK Treasury backed the blueprint for blockchain-based technology supported by some of the biggest names in the investment world. It’s easy to understand why. For the asset owner, tokenisation improves access to financing because they can tap into a broader range of investors. It also adds significant cost efficiency, taking away the endless paperwork typically needed to structure. And for the eligible investor, tokenisation ensures lower barriers to entry and lower costs, enabling the opportunity to diversify across a broad range of assets. This is of particular importance to film investing as typically you’d invest across a number of films to spread risk as opposed to just one. Blockchain has created a world in which (hypothetically speaking), we can all own a share of Barbie’s dream house.
The rise in alternative assets
Interest in film is part of a wider interest in alternative assets. In post-pandemic markets, wealth managers are putting as much energy into maintaining wealth as they do into growing it.
Insights reported by Preqin last month found that surging numbers of Family Offices – tasked with maintaining and growing generational wealth for high-net families – are increasing their allocation of alternative assets. Further, data from KKR suggests the average portfolio is set to allocate 52 per cent to alternative investments in 2024, up from 42 per cent the previous year.
Could alternative assets attract younger investors?
Alternative assets, like green energy and film, could also be a vehicle for investment platforms in the fintech and wealth management space to attract a younger set of investors. A 2022 study by The Bank of America revealed that 75 per cent of investors aged 21 to 42 believe above-average returns cannot be achieved solely through equities and bonds, with 80 per cent of this demographic turning to alternative investments.
Winning the loyalty of younger investors is a key priority for financial services, primarily because a casual $84 trillion in assets is set to change hands over the next 20 years as part of the Great Wealth Transfer. The recipients, primarily members of Generation X (those born between 1965 and 1980), millennials (1981-1996) and Gen Z (1997-2012), are expected to inherit $72 trillion.
The future of film financing
The post-pandemic resurgence of Hollywood will undoubtedly be a cause for celebration among the few who have long dominated the film financing landscape. But their monopoly on film financing may soon be challenged, as blockchain empowers a new generation of investors to participate in and shape the future of cinema. By speeding up the process of financing films, cutting the structuring costs and broadening the investor base, both filmmakers and eligible investors could reap the benefits. Investors get to participate in the potential upside, filmmakers have better access to funding and audiences may see more original content hit the screens as a result.
Matt Ong is founder and CEO of Ctrl Alt, the Alternative Asset infrastructure solutions provider
Credit: Source link