1.ICO overview
Cryptoflix is aiming for disruption within the Entertainment Industry. According to PricewaterhouseCoopers the global entertainment industry was worth $2 trillion in 2017. This makes it a very big market to disrupt. Right now there are a few players entering this landscape: Filmchain, Tatatutoken, Bunnytoken. Each is looking at disruption across different areas of the entertainment business: Underwriting, Financing, Production, Packaging, Distribution etc.
Cryptoflix’s proposition aims to operate partially in the Financing sector but mainly in the Distribution sector.
2.ICO proposition
Cryptoflix has a five-pronged proposition for its ICO. They want to:
- Create a platform where consumers can stream Movies, TV & Educational content, enabling paid content using Cryptocurrency;
- Run this service across mobile & tablet, focusing first on underdeveloped, highly populated countries;
- Focus on local content relevant to each market whilst offering big hollywood studio movies as well;
- Enable their token holders to fund entertainment projects within the platform;
- Establish a registered charity to accept donations of free content, collect profits from the platform & use these to fund more free educational content.
Against this scope Cryptoflix want to raise between $1m - $11.6m in Ether by issuing 57m tokens.
They state the soft cap is 5m of their own token (FLIX) and hardcap is 57m of their own token. However, they have not allocated a price per FLIX token in their White Paper so we have no idea what the monetary values of those caps is set at.
The founding team plan to keep 18% of the funds raised for themselves.
3.Feasibility of the Idea/Business Model in the current market
With Cryptoflix we are going to enter what I call ‘mythland’. So we are going to go on a journey of debunking the myths set out in their White Paper.
- Myth 1 : Underdeveloped countries need Crytoflix to access entertainment
OK let’s apply this to a real use case - Africa. Africa has 54 countries, most of which are classed as ‘underdeveloped’.
Nigeria ( in Africa) has the second biggest film industry in the world, called Nollywood. PwC forecast that by 2021 Nollywood will be worth $6.4 billion.
Now, clearly, for an underdeveloped continent, Nollywood doesn’t seem to have any issues charging for or distributing its content. Let’s look at just one example of this for Africa, the iROKO group, which is a prominent media group in Africa.It has
iROKOtv, its own mobile streaming platform with 5,000 local movies and multiple payment methods;
iROKO networks, its own satellite TV network distributing its own local TV channels;
iROKOx, an online marketplace for African musicians, filmmakers, etc., to monetize their content;
iROKO Music, its own African music channel ( like MTV), which they distribute all over the world;
iROKO Global, its licensing business, which distributes its assets.
So does it really seem like underdeveloped continents like Africa are desperate for a streaming platform like Cyrptoflix simply because it accepts Cryptocurrency as payment? Any one of these media groups in Africa would tack crypto onto their payment wallet and then it’s game over for Cryptoflix. So that’s any one of these media companies doing about 3 days work in development to make the Cryptoflix business model totally redundant.
- Myth 2: Underdeveloped countries need the Cryptoflix platform because they don’t have the hardware or internet speeds to stream content
Let’s keep using Africa as a real use case. Africa skipped desktop internet, like many emerging economies, for mobile internet. So when we talk hardware for Africa we are talking mobile.
Now, Africa was heavily targeted by Chinese smartphone manufacturers with cheap Android copies. They’re cheap smartphones (retailing new at $35-$50) with low memory capacity. But given that streaming doesn’t require the storage of large movie files it’s not applicable in this case (contradictory to what Cryptoflix state).
Does the quality of the hardware impact streaming significantly - no. Streaming relies on three things….
- You own a device that supports internet access;
- You have the right Data ( internet) Plan for that device, i.e., 3G;
- You have decent signal strength in your vicinity, i.e., tower signal strength.
Now, without getting technical, one or all of these three things will significantly impact the ability to stream content. Can Cryptoflix building a streaming platform get around you not owning a smartphone or laptop or not being able to afford a 3G data plan or living in a area where signal strength is weak?
No, Cryptoflix has no ability to influence any of these three factors, regardless of how much money they raise at ICO.
Look at the graph below, which shows just two years ago most of the underdeveloped world had very low internet penetration. How is Cryptoflix going to solve streaming when, in the markets it wants to target, 50-76% of the population doesn’t have Internet access?
Cryptoflix talks about getting around slow internet speeds (which is signal strength-related) by streaming heavily compressed films. When you compress a film, you’re reducing the viewing quality of that film. You lower the frames per second, lower pixel quality.
Imagine watching an action scene and instead of the scene showing a fast moving car chase, the cars seem to jump from one point on the road to the next. That’s what happens when you compress a movie.
Now, this might be fine for free content but if someone’s paying for that movie, this trade-off in quality might not be acceptable. In fact, anyone who’s worked in the content industry for years is aware that this type of user experience is known to upset customers to the point they will churn your platform.
- Myth 3: The reason people in underdeveloped countries pirate movies is because they don’t have the ability to pay for them legally
OK, let’s look at payments. Africa is known as leading the world in Alternative Payments. Why? Because in the last 15 years, in the absence of credit and debit cards, Africa got really innovative in coming up with low tech, cheap payment alternatives.
One example is mPesa, which is Kenya’s default payment method, online and offline. It’s a low tech SMS payment method, using your phone, to pay for everything in Kenya. It generates 60% of Kenya’s total GDP as a country.
Off the top of my head I can think of 62 other payment companies in Africa:
- Paga, around since 2009, mobile payments licensed with the central bank of Nigeria.
- 3G Direct Pay group with mobile wallets covering Kenya, Zambia, Tanzania, Uganda, Rwanda, Zanzibar, Malawi, Mozambique, South Africa, Namibia and Ethiopia.
- Awamo biometric banking
- Cubebucks, loading cash into a digital wallet
- Dusapay for in-store mobile payments throughout Africa
- i-Pay & fastpay electronic payment for South Africa
- Remit mobile payment in Uganda, Kenya and Rwanda.
- Snapscan allows payments by taking a photo or scanning QR codes
- Softeller money transfer in Cameroon
Then there are the Crypto & Blockchain players like Bitpesa, Bankymoon, Bitsoko, BitX, Kobocoin, Payfast, VugaPay.
The point I’m making is, if there is illegal downloading or streaming in Africa, I doubt it has anything to do with a lack of payment methods.
- Myth 4: The reason pirating continues is because there aren’t strong enough IP protection solutions out there & blockchain will fix this
Cryptoflix claim in their White Paper ‘We can combat piracy through the transparency of the Blockchain and by using new and groundbreaking technology to watermark the movies individually’.
Since when did having the right technology to protect content stop pirating? Hollywood and the mobile industry spent hundreds of millions of dollars back in 2005/2006 developing DRM ( Digital Rights Management) for mobile. Where’s that technology now? Retired, thrown away, because you cannot force consumers to change either their behavior or their perception of what should be unprotected, and free to share.
Blockchain won’t solve this. So some Cyptoflix users will live with it enforcing IP via Blockchain, others will simply stop using the platform & move to another platform without restrictions. The point is, can it be worth developing if it won’t solve the problem and puts users off?
- Myth 5: You can run a streaming platform ‘free of political, religious and racial influence’
That’s Cryptoflix claim. Is it viable? No, for a number of reasons. Even huge global corporations like Facebook (NASDAQ:FB) & Youtube struggle to police content and their resources are a lot bigger than Cryptoflix.
Then consider this. Pew Research Centre forecast that four in ten countries around the world have official state religions.
Now, by 2020, the religion in these official state regions, which happen to also be underdeveloped countries ( Cryptoflix markets) is predominantlyIslamic:
Is Cryptoflix going to be able to push back on Islamic states with very strict rules on the inclusion of Islamic content? Anyone who’s ever lived in the Middle East can tell you the entire media there has a heavily censored Islamic slant. So given that even markets like Nigeria will become fully Islamic by 2030 ( Pewter Research), Cryptoflix has no chance of policing its content policy.
- Myth 6: You’re going to be able to make educational institutions pay for content you give away for free in the same countries, to consumers.
Cryptoflix is proposing to make educational bodies, educational institutes & private schools pay a subscription to access educational content. But in the same countries, Cryptoflix will give this content away for free, to private individuals.
OK, imagine a teacher in Africa has a tablet. She registers for the Cryptoflix service as a consumer. She then takes her tablet into her classroom every day to share her free educational content with her class.
How is Cryptoflix going to stop this from happening?
- Myth 7: You can undercut current pirating models in underdeveloped countries.
Cryptoflix state they aim to solve the pirating issue by charging consumers for the data required to stream a movie rather than a fixed price to watch the movie itself
In Africa, consumers normally seek out free WIFI hotspots, because they can’t afford data prices, to download content for free, including movies. That’s one scenario.
The other practice in Africa is that not everyone has time to sit in WIFI hotspots for hours, downloading, so young guys, keen to earn money, do the download and then burn it onto cheap play only CD-ROMs or onto USB sticks. They sell the movie for pennies in the markets, on the buses, to anyone who wants to buy it.
Can Cryptoflix undercut either of these current business models, i.e., free or pennies - no, they can’t.
4.ICO Team
The core team is a CEO, COO, Marketing Manager, and Full Stack Developer.
Everyone else is either an advisor or supplier.The person listed as the Blockchain developer is actually an offshore tech dev company, not an employee. This guy is CEO of an offshore dev company with no apparent Blockchain experience.
First red flag - there’s no CTO. If we were building a tech streaming platform, which is also a crypto marketplace, we would be putting a CTO in long before we put in a COO.
So in the core team...
CEO
Currently managing director ( long-term) of 3 other companies:
- A small independent Danish film production company;
- A company set up to sell his production company’s Danish film assets;
- A random unrelated business outsourcing office admin.
This guy claims to be an international operator in the global Entertainment industry but we found no evidence to substantiate this. He has a current portfolio of 6 film assets which seem to be local to his region. We noted the film sales website was of a very low quality.
We could find no evidence this guy knows Blockchain, Crypto or tech/streaming platforms. We could find no evidence this guy has negotiated with the big Hollywood studios, which will be a prerequisite in this role.
COO
He is listed in Linkedin as having been Managing Editor of Lighthouse Projects 2008 to 2013. However the only Lighthouse Project we found during our research wasn’t formed by the Danish government until 2015.
The White Paper claims he is a digital rights expert. We found only 2yrs experience in film marketing & distribution. It wasn’t for high profile projects in Hollywood but local Danish TV /film. Again, this guy knows nothing about Blockchain, Crypto or Mobile Streaming Platform Operations.
Marketing Manager
Spent the first 13 years of her career in TV and film production. She has 4 years experience working on social media, blogs, and email marketing. So she is the right fit for her role.
Full stack developer
We could not find any evidence of full stack development in this person’s background, only managing the delivery of web projects.
5.SWOT Analysis
Strengths : free content, a charity to accept donations of free content, instant revenue payment to content owners
Weaknesses : Commercial Strategy, business model, team expertise, Operational Strategy, lack of competitor benchmarking in their White Paper,
Opportunities : finding new business models for free content
Threats : Obvious Competitors : Junction, Indiegogo,Speed & Spark, Slated, Olffi, Kickstarter, Juntobox, Fundrazr, Rockthehub, Ulule, Amazon (NASDAQ:AMZN), Hulu, Netflix (NASDAQ:NFLX), Crackle, Indie Flicks, Youtube,Google (NASDAQ:GOOGL) play, iTunes, Vudu, Fandango Now, Movies Anywhere, Shudder, Filmstruck, HBO Now, Showtime, Starz, Sundance Now, Vimeo.
Plus the hundreds of regional players who have already captured these markets,
6.Conclusion
This is a White Paper and an ICO based on assumptions made by a very ‘westernised’ view of underdeveloped countries. Thus the business plan doesn’t properly assess the markets it wants to enter. It doesn’t asses its competitors at the local level. This results in Cryptoflix being unable to present potential investors with any growth forecasts.
When you combine this with the fact this team have no proper tech chops, aren’t big time players in the Entertainment business, and that they are fringe players, this ICO looks highly badly thought out and the business models questionable.
This ICO would be a high risk venture for investors.
7.Score 0-5
- Idea/Business Model 0.5
- Scope/Potential 1
- Team/Advisors 1
- Token Economy 1
- Marketing 0
- Community/Communication 0
This article appeared first on Cryptovest
