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Opaque Streamer Residuals vs Transparent NFT Royalties
It's actually about consolidation. Also: the geopolitics of Megadams, Apple's Reality Filters, and a funky ambient track.
In following the writer’s strike, I’ve been thinking a lot about residuals lately. One of the key asks is to increase residuals that have either been non-existent or very little. For example, Netflix often buys the IP in their deals, which means that there’s no residuals.
I don’t know how they do that. They’d have to request that there was some degree of transparency on streaming and views. There’s not even a metric for how to go about quantifying the residuals on these things that are scraped by ads. If Netflix buys something and they make it, then they own it, and then it plays on Netflix and only Netflix. So there’s nothing. You don’t see another dollar.
In other cases where the streamer itself does not produce the content, residuals are informed by opaque metrics like how many subscribers the streamer has, or how long it’s been on the platform.
If the show is a success, the writer doesn’t actually get more residuals because they are calculated on the subscriber base when it’s written. Your reward for a successful show is that it will stay on the streamer for longer. Not exactly the best kind of upside.
In streaming, the companies have not agreed to pay residuals at the same level as broadcast, or the same reward-for-success as they have traditionally paid in broadcast,” he said. “If you write for a streamer, you get two residuals payments – one for domestic streaming and one for foreign streaming. It’s a set amount of money. If it’s a big hit, you do not get paid more residuals in streaming, whereas in the broadcast model, you do because of its success. That’s the sense that residuals were slashed – they have not agreed to a success factor when a program is made for streaming.
Why can’t it be like broadcast TV?
The conundrum is, is that streamers don’t reveal view numbers and that’s a part of why negotiation has been hard. There’s a lack of transparency. Whereas broadcast TV paid residuals on each re-run or airing, writers and producers do not get ANY information on how many times a show has been viewed on streamers.
The lack of market signals screwed up the industry because markets, as it turns out, have an important function in Hollywood. They represent a feedback loop to the studios, telling executives the preferences of the audience, based on whether the audience (or advertisers) are willing to pay. The tacky way to understand this dynamic is that when a movie did well at the box office, other studios would often copy that kind of movie, in hopes of appealing to the large audience that saw the original. But what happens when you can’t get distribution for mid-market movies because the few theater chain owners don’t want it? What happens when there are no TV ratings because it’s all streamed? What happens when, as happened during the pandemic, there is no box office?
So, a big part of the writer’s strike is a push for transparency. But, is that enough?
One industry where there is no lack of transparency and that had its own struggles with royalties, is the NFT space. A key sales pitch is that each time your art is sold, you get royalty: a supposed boon for the artist who does not see the upside when galleries sell their art for higher and higher prices. With NFTs, you have a public ledger documenting and storing everything over time from prices, trade volume, and royalty rates.
Has this transparency helped creators? Yes and no. Transparency also means the platforms try to court the visible volume. Unfortunately, as the market has lost its momentum, the platforms have shifted strategies away from socially enforced royalties to optional royalties at the platform level. A bitter race to the bottom ensued as platforms chased after the traders, and in some instances completely dropping creator royalties. Platforms even set their royalty rates on the factor that if an NFT blocked another platform, they would honour a higher royalty rate.
During the hype machine of 2021, successful NFT artists collected plenty of resale royalties, even despite deadbeat collectors. But the harshness of the current crypto winter has altered that reality. While OpenSea held the line as long as it could, change was inevitable. In February 2023, Blur announced that it would enforce resale royalties, but only if artists blocked OpenSea from listing their NFTs. OpenSea responded by making all off-chain royalties optional. Make no mistake, these decisions pose an existential threat to royalties in the NFT space.
While innovation has continued and more flexible onchain enforcement of royalties have happened, it’s ultimately up to the creators to step up. If one NFT creator adds minimal royalties to their own NFTs, they might not get as much support. But, as with any union, many artists can force the hand. There’s a certain sense of irony that this hasn’t happened yet. Maybe, in time, it will. You have a technology that can encode that the artwork will only become available to be collected if the trading platform honours a minimum enforced royalty.
Which comes to the actual, key problem in both streaming residuals and NFT royalties: it’s the long-tail that loses when the industry tilts towards concentration.
In streaming: while some of the upfront payments have been higher, the long tail writers that could earn residuals from re-runs on broadcast, just can’t earn a living anymore because 1) less residuals, 2) smaller writer rooms, 3) smaller seasons and time spent on writing.
In NFTs: liquidity favours popular artists that does not necessarily have to enforce royalties to make a living or worry about the cost of transactions. This results in smaller creators losing out or just not participating., I believe, has the answer in his long article on the strike: and it comes from the UK.
Let’s start with the U.K. In the early 2000s, the British government embarked on a strategy to grow its independent production industry. It facilitated something called the “Terms of Trade,” a broadcaster code of conduct to remedy the bargaining asymmetry between dominant broadcasters and independent producers. This pact required four big public channels in the UK - BBC1, ITV, Channel 4 and Channel 5 - to commission 25% of their production from independent producers, and to allow those producers to retain copyrights from their work they could license abroad.
Fundamentally, a healthy and dynamic industry has to foster new & independent talent: whether by decree, by incentives, or by social enforcement. If not, you inexorably fall down the rabbit hole to consolidation. There’s many ways to get there. In the writer’s world, it’s striking. In the NFT world, we often harp on about the value of incentive alignment. We have access to smart contracts to enforce agreements upon certain conditions. Tap into the public markets onchain and only release new art if the platforms agree to fund new art. If the market is to be reborn, getting more of this to fund new creators will ultimately be a tide that lifts all the boats.
Transparency gets us closer, but negotiation for creator’s livelihoods is ultimately a fight against consolidation. What do you think?
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On AI Tools: Does Great Art Require Work?
This article fromresonated with me, but I think it’s slightly off mark. In arguing against the use of AI, John argues that true art does not come from speed and efficiency.
This following is true:
I like this because it frames art as something that does not just exist, but is experienced, and the first person to experience it is the artist, whose job it is to then transmit this experience to others.
Art does not exist independent of the experiencing of it. And the experience of art is accessible to all. No special training necessary, you just have to be willing to let it in.
But. Here’s where I disagree.
But here’s the point, the promise of this technology is speed and efficiency, a shorter route to an end product, and the removal of barriers between you and your creative self.
For those of us who are not geniuses, it may be tempting to outsource some portion of our creativity to the AI, so we can get past the fact of our non-geniousness, but those barriers and climbing them is the work of creativity. The goal isn’t to become a genius. It’s to do the work.
We shouldn’t be tossing out the value of a technology just because it’s speedier and more efficient. No one reasonably assumes today that a “““true””” writer must only write with a quill and some ink. Or, a “““true””” artist must not use PhotoShop. We shouldn’t get hung up on the actual process. I’m saying this as someone that REALLY enjoys the process of creating: from writing, making art, coding, everything.
What matters in terms of the ‘work’ in a creation, as to why Dhani Harrison smiles at Prince’s solo is in part all the history of Prince that’s channeled into the solo. The “work” isn’t necessarily the actual work of learning to play guitar like a mad genius, but the desire for it. You can’t automate authenticity, and authenticity is built from so much more than just the process. The why and the search for why. That’s the real work.
The all-encompassing language models of our age are advanced technology, and they are also magic. It’s possible to see them as humorless, passionless, unfeeling monsters that threaten to destroy all art and creativity, to replace all plot with a tale told by an idiot imitating a sage, to reduce all meaning to cycles within directed graphs of signifiers, ouroboroi of nothing.
But it’s also possible to see them as a living web woven out of strands of mutating words running down the ages, shimmering, melodic, as if a hundred diamonds had been cast into a lake and lay just beneath the surface, chains of playful signifiers that can serve as a harness, that pull us up out of the narrow confines of our limited experience, that also allows us to lift others up the tower of existence toward the transcendent, that connects readers and writers with passions and humors and feelings, so that we’re at once both source and destination, ego and mirror, princess and robot, possessed of meaning as well as an immense dictionary with which to approximate it, play with it, and finally, release it.
If Ken Liu writes a story using AI tools, it means so much more than the guy writing 97 books in 9 months, because has been a masterful storyteller for years. Being a storyteller means searching for stories not through the process, but where they are. The real work is in the attempt and the becoming, not the tools.
The Geopolitics of the Nile
Great intersection of a mega construction project and the impacts it has on regional geopolitics.
18 Months On Mars: Perseverance Rover’s Adventures
This is the most calming and wonderful video. These updates are amazing. It’s still so wild and bizarre that we have a big car driving around on Mars, learning more about our neighbour in the solar system.
NFTs Going IRL
A trend I’ve been watching is seeing NFT brands/projects branch into the real world. Always though this was an eventual no-brainer.
And check out the Pudgy Penguin Toys. With the latter, I’m still trying to square the two markets. They are clearly trying to sell the toys to a younger market, while the NFTs are mostly older crypto people? Kind of a weird mixture?
Anyway, there’s a large portion of the NFT market that could thoroughly thrive by just seeing NFTs as digital merchandise. Good to see more leaning into broadening offerings.
Have you bought any physical merch from an NFT collection?
Okay, this is really cool. Warping QR codes with AI generated art. Something that regular artists will be hard pressed to do. Feels very native to the medium. THIS IS A WORKING QR CODE. Mind blown.
Apple Vision Pro & Making People Comfortable
Two things graced my feed this week that paints one of Apple’s real skills in product development: making people feel comfortable at initially looking stupid.
Culture was changing around us in real time. The ads were not just about selling iPods; they were about normalising the concept of wearing headphones in public.
But why shift?
If Apple truly thinks the future of computing is virtual reality, they have to convince customers that simulated representations of humans are as good as video—socially and emotionally.
Because you can't wear a headset and also show your face on Zoom.
As Joel says, take it with a pinch of salt, but both of these point to what Apple is undeniably good at: creating strong enough reality filters to pull people into a new future. I don’t doubt their ability to do that.
Rithma - The Great Spacious
A great funky electronic track. Not exactly sure how to genre square it, but when the guitar kicks in. So good.
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Enjoy a sunset (hopefully not through a haze of smoke for those on the US East Coast)!