As film and television productions continue their exodus from Los Angeles in favor of states and countries with more meaningful tax incentives, it’s clear change is necessary in order to preserve Hollywood as the entertainment industry’s epicenter.

In an effort to lure film and television productions back to Los Angeles, California Governor Gavin Newsom announced a proposal last week that would increase the tax incentives for California productions from $330 million to $750 million next year. But will it be enough to reverse the flow of receding tides?

As more projects opt to base production outside of Los Angeles, the opportunity opens for blockchain to enter the storyline in a more robust way.

One recent notable blockchain-based project was David Bianchi’s RZR, which streamed on Gala Film’s decentralized service and offers cryptocurrency rewards for node operators. RZR received a 2024 Emmy nomination and showed that reputable creators are also willing to look for alternative forms of distribution outside the traditional Hollywood system.

Entertainment has largely used blockchain technology to increase fan participation, ownership and communal collaboration around intellectual property. One avenue for this has been the use of non-fungible tokens, or NFTs. But it has yet to become a mainstay in the traditional Hollywood system, something that may continue to move at the slow pace with which the overall tech is adopted within the larger society.

“What we saw with the early days of NFTs and blockchain was this idea that creators could go directly to their fans and the fans could participate in that IP  without the creator giving up all of the rights,” Chris Waters, co-founder of NounsFest—the animation festival backed by Nouns DAO said to me recently. “With NounsFest, we’re funding short-form animation through an open-sourced IP, which allows the rights to remain in the public domain. Instead of Nouns owning those rights and acting as a traditional studio—being able to exploit them throughout various channels—we let creators make the decision as to who owns them.”

Chris Waters

Many of the existing Hollywood systems for rights management and IP usage have not caught up to the global connectivity and memetic nature of the Internet, Spencer Marell, co-founder and vice president of operations at Adim, said to me over email.

“Blockchain adoption in Hollywood is beginning to grow in interest and exploration, but is in the early innings in terms of widespread adoption,” Marell said. “Creators and IP brands are beginning to leverage on-chain platforms to unlock distribution where they own their audience and can monetize their top fans directly without intermediary participation. There are many examples of success cases including IP brands like Doodles and Claynosaurz as well as independent creators like Jahmel Reynolds and Nyla Hayes.”

Marell said that over the past year and a half improvements in user experience have made it easier for filmmakers and distributors to transact using blockchain networks. 

Part of the unlock for new revenue streams has come in the form of meme coins and other blockchain-based projects that have large audiences and are trying to convert those dedicated fanbases into intellectual property.

Spencer Marell

“When in Singapore at TOKEN2049 recently, we saw a big buzz around licensing IP of Hollywood films and characters for NFTs or tokenization purposes,” Brian D. Evans, founder and chief executive officer of BDE Ventures said to me over email. “The main interest there is memes. You see a lot of memes are doing well right now and the idea is to evolve them from more than just a meme. A lot of the large meme projects are trying to acquire IP from Hollywood.”

But the barrier to swift transitions of blockchain projects to tangible IP—outside of having an understanding of blockchain technology—might be the fluctuating rules and regulations around cryptocurrency. 

“There are a lot of people in Hollywood trying to figure out how to fractionalize films and decentralize ownership because it provides better avenues for funding, but what’s holding us back currently is the SEC,” Evans said. “Otherwise, there would be a number of players jumping on it.”

This seems to be a large reason why the focus for those working at the intersection of entertainment and blockchain continues to be around fan and community engagement—something that largely exists outside the bounds of regulatory oversight. While communal ownership of IP will definitely bring lawyers to the table, fan and creator participation around the development of projects is seeing a rise because blockchain is making the collaboration easier—with the parameters of ownership defined by host platforms.

Brian Evans

“The conversation has moved to be more sophisticated than in the past about how to create new mixed media content experiences that can engage fans in new ways,” Aaron McDonald, chief executive officer and co-founder of Futureverse, said to me over email. “The conversations are much more thoughtful than they were a few years ago and the industry is taking a more strategic approach. Web3 is becoming more mainstream and so it’s not something that can be ignored. There is also a conversation beginning to bubble up about how to track and protect rights better in the age of generative content and the smart studios and labels are starting to understand the power these networks can offer to solve those emerging problems.”

The idea of traditional studios becoming less relevant in the creative process is helping facilitate the emergence of blockchain within entertainment projects, according to NounsFest’s Waters. 

“As gatekeepers become a little less important and the scale of content can be created for less money, maybe it’s not as important now to have a Netflix or a Peacock right out of the gate,” Waters said. “That’s what’s interesting about this model is that it’s about building fan bases, finding ways to reward early fans, creating value through digital collectibles and a really strong community to empower artists to maintain ownership of their IP and not letting it flow up to large corporations.”

But not everyone is convinced of blockchain’s ability to push the entertainment industry forward, at least in the short term.

“It’s either dead or plateaued,” Shira Lazar, digital culture expert and founder of What's Trending said to me recently over email. “It feels like the only people talking about it in Hollywood are more on the tech side, like those in Silicon Beach. In terms of entertainment, it might be brought up in relation to collectibles and using it around fandom IP and franchises. We’ve definitely seen more movement in other verticals, like music, fashion, and art, when it comes to blockchain.”

Shira Lazar

Part of the hesitancy to go all-in on entertainment blockchain projects has been the volatility of  cryptocurrencies. It’s hard to commit large budgets to crypto projects without a thorough understanding of how the underlying tech is making things better. And then there’s the negative stigma of crypto altogether that many people still hold.

“The problem is, the sentiment in Hollywood is very reactive, so when they see an SEC case against OpenSea, for instance, that scares them,” Evans said. “They think, ‘We were just considering building a fractionalization platform, but now the SEC is going after Uniswap or OpenSea,’ and it scares them off. Market price is similar—when the prices bottom out it scares people off and they don’t want to move forward.”

Despite these reservations, Evans cited the Satoshi HBO documentary as clear evidence that there’s significant interest in crypto.

“The good news is, when the bull market is here, you have lots of people with money who want to fund projects,” Evans said. “We are seeing web3 film studios creating films just as a regular film studio would, but they are funding it from people who have made money in crypto and are interested in getting into another industry.”

The entertainment industry certainly understands the boom and bust cycles experienced within crypto. 

While crypto adoption in Hollywood may be slow at the moment, the shift to digital is well underway, Marell said, and those who resist it may find themselves out of a job. For those who can adapt and endure both the slow crypto winters and the swift bustling summers, a fruitful boon of creativity might be the end result, he said.

Aarom McDonald

Shira Lazar agreed. “It forces content creators of all kinds to be nimble, flexible, and experimental with how they push their ideas forward,” she said. “This often leads to innovation, disruption and solutions that can bring creators into the next phase of their careers. It’s also where new formats and talents are born in periods of uncertainty and constraint, as creators are pushed to think outside the box and take creative risks they might not have considered otherwise.”

Certain recent innovations include Pudgy Penguins’ collaboration with VanEck around the launch of ethereum exchange-traded funds (ETFs) and Cool Cats’ launch of an animated series with traditional animation studio Titmouse. In both of these use cases, a successful blockchain project is entering more of the mainstream by leveraging the reach of its audience in new and different ways.

“Once you start fractionalizing, you get fan engagement and you can have fan tokens, tokens for IP, and you can incorporate the web3 community into the story creation,” Evans said. “It really streamlines everything and creates a direct motivation for the owners of those tokens or NFTs to participate in funding, in promoting, in the whole cycle. That creates this flywheel effect where the more that people are bought in so to speak, the more they want to help the project to succeed.”

Blockchain may also help simplify the maze of royalties and ownership associated with productions, while crypto itself could add transparency to how television and film stars are paid. 

“Any time you are paying out the talent or paying out royalties, it can all be on-chain,” Evans said. “It may not be that exciting for web3 folks, but paying out talent in stablecoins for instance is something a lot of films and projects are starting to do. I’ve even seen some paying out in Bitcoin.”

And with the emergence of artificial intelligence technology, the role of blockchain as a verification tool stands to become even more valuable.

“Being able to track contracts, where something is playing or existing, and ensuring the right people are compensated along the way is key,” Lazar said. “With the rise of deepfakes and AI, I feel blockchain could be a solution to track where an image or video originates from and verify its credibility.”

Echoing Lazar’s thoughts on AI, McDonald said he thinks blockchain can help the entertainment industry authenticate its data and content.

“There is a huge amount of value to be created in leveraging the technology to manage rights across new multi-platform experiences and how data is managed for fairly-trained generative models to take advantage of how AI can help with storytelling and audience engagement,” McDonald said. “The future of money is on chain, the future of digital value is on chain and the future of open gaming is on chain—those things all touch Hollywood in big ways.”