Blockchain Invading the Entertainment Space

If you're like any of the 50 million premium users streaming music on Spotify, or the 94 million users watching video content on Netflix, or Apple Music's 36 million paying listeners, then you probably put a high premium on your ability to consume multimedia content on your digital device

Ramy Caspi
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Spotify streaming services has reportedly over  50 million premium users  while Netflix has 94 million users  and Apple Music has 36 million paying listeners. In 2016 music streaming revenues surpassed physical assets and in 2018, we are begining to live in the age of virtual content, but we still have billions of physical assets in the supply chain. Over to another medium, 674 million physical books were sold in the US in 2016 alone and nearly USD 16 billion worth of gaming discs were shipped around the world in 2017. Consumerism, for entertainment is a significantly large industry and  current market trends are fundamentally changing the industry.

Traditional revenue streams are declining, and are being replaced with new revenue models. Individual business models are being replaced by a complex ecosystem of industry participants from new startups to super-platforms as digital brands are gaining prominence.

Blockchain has the potential to become a powerful disruptive force. A survey of 800 executives, featured in the same book, suggests 58 percent believe that up to 10 percent of global GDP will be stored using blockchain technology.

Blockchain technology may provide several important features that could be leveraged for use in the creative economy:

  • Transactions are verified and approved by consensus among participants in the network, making fraud more difficult.
  • The full chronology of events (for example, transactions) that take place are tracked, allowing anyone to trace or audit prior transactions.
  • The technology operates on a distributed, rather than centralised, platform, with each participant having access to exactly the same ledger records, allowing participants to enter or leave at will and providing resilience against attacks.

Blockchain is:

  • Reliable and available: Because a wide circle of participants share a blockchain, it has no single point of failure and is designed to be resilient in the face of outages or attacks. If any node in a network of participants fails, the others will continue to operate, maintaining the information’s availability and reliability.
  • Transparent: Transactions on the blockchain are visible to its participants, increasing auditability and trust.
  • Immutable: It is nearly impossible to make changes to a blockchain without detection, increasing confidence in the information it carries and reducing the opportunities for fraud.
  • Irrevocable: It is possible to make transactions irrevocable, which can increase the accuracy of records and simplify back-office processes.
  • Digital: Almost any document or asset can be expressed in code and encapsulated or referenced by a ledger entry, meaning that blockchain technology has very broad applications, most as yet unimagined, much less implemented.

While the internet has now democratised content creation and distribution in entertainment and creatives no longer have to get in bed with the likes of Interscope or Disney, a new crop of middlemen have emerged in digital content. Today, users rely on platforms to consume music and video content. Platforms like YouTube (1.5 billion users), SoundCloud (175 million), Spotify (159 million), Netflix (~110 million), and Apple (36 million) control user consumption across the globe and act as the new distributors, responsible for both collecting subscription and ad revenues and divvying up payments to artists.

This amount of control favours the major labels and streaming platforms, and has led to disputes around artist compensation and treatment, most famously Taylor Swift vs. Apple Music and Spotify. As artists grow increasingly disillusioned with these platforms, they are looking for new options. Enter the blockchain.

Blockchain technology, powered by nodes of peer-to-peer computers around the world, is on the rise. So can we expect decentralised entertainment applications built on blockchain to replace streaming services like Netflix or Amazon?

Studios and networks (now including Netflix, Amazon and Apple) fund the development of content, and the content follows an orderly approach to distribution – from the studio to the end user along one of the pre-defined channels: cable or broadcast or mobile device or website.

A number of new crypto projects have cropped up that use either existing blockchains or completely new blockchains as infrastructure for decentralised video streaming. Some of these are optimised for ingesting and compressing content to make it available, such as LivePeer, built on the Steem blockchain, and Viuly, built on Ethereum. Some are application level tokens for streamers and influencers, such as Stream Token and YouNow/PROPS, both on Ethereum. Spectiv VR is focused on the advertising model and making sure content creators get a larger part of it, particularly for VR content. And LBRYTheta Labs, are building new blockchains/protocols to support third-party DApps for entertainment, esports, and more.

Not only could these blockchain projects completely disrupt the distribution world because they no longer require centralized architectures, they can also disrupt the Netflixes of the world and make the idea of channels on cable completely obsolete. What is a channel but an aggregation of curated content over a well-defined distribution network?

Blockchain has the power to fundamentally disrupt the entertainment industry because it brings out a completely new, decentralised model for content distribution. In a blockchain, computers all over the world act together in a peer-to-peer network to work on some task — there is no central server or authority to have a say over what content is to be distributed and how it will reach the “last mile.” With decentralised apps (Dapps) for entertainment, whether it’s for live streaming or on-demand video, thousands of computers around the world would act as broadcasters in a mesh network that is not hierarchical. These “super nodes” would solve the last mile problem by broadcasting the signal to computers that are geographically nearby. This will be particularly effective in countries that don’t have lots of presence from existing CDNs.

The beauty of Blockchain technology is that it not only decentralises a Digital Market Place but also makes that place tamper-resistant, transparent and incorruptible.

Some of the notable features of Blockchain are:

  • Chronological recording of transactions occur in a distributed ledger that is transparent to its participants
  • Blockchain ledger is also encrypted so nobody can cheat by faking or changing the transactions
  • Blockchain includes agreed business rules, contract terms, and rationale that can also be programmed to automate transactions- ‘Smart Contracts’
  • Blockchain is an example of a distributed computing system that incorporates high Byzantine fault tolerance
  • Blockchain offers a decentralised consensus that makes it best fit for the recording of events, management activities, and transactions

Applications of Blockchain Technology

1. Creation of a Digital Rights Database / Royalties

“We are at an amazing point in history for artists. A revolution is going to happen, and next year it’s going to take over. It’s the ability of artists to have the control and the say of what they do with their music at large. The answer to this is in the blockchain.”

Imogen Heap, British singer and songwriter

It is difficult to pay fairly for creative work in a digital world where it is easy to share and distribute copies, so royalty payment mechanisms are ripe for disruption. For example, music streaming sites and rights holders struggle to agree on compensation for trillions of song streams, leading to legal issues such as $1.6 billion lawsuit against Spotify.

In a June 2017 article for the Harvard Business Review , the artist wrote, "Blockchain has the potential to provide a more quick and seamless experience for anyone involved with creating or interacting with music."

Smart contracts can do more than just enable near-real-time royalty payments. They can actually track content consumption across the network. Tracking boosts the efficacy of rights management and has the potential to simplify the process of licensing content. With smart contracts, media products can be seamlessly licensed using a standardised or customised contract across geographies and markets in a matter of minutes as compared to the weeks or months it currently takes. The emergence of blockchain-based cryptocurrencies like Bitcoin has shown that the blockchain technology is an impenetrable protector of unique information. It’s this same principle that makes blockchain technology such an attractive option for media content. Media companies can use blockchain-based cryptography to secure digital content with a paired ‘public-private’ key encryption. This level of protection is simple to execute and can control authorship and monitor the content across the production cycle. The blockchain then becomes the authority that protects digital content from piracy, without restricting fair use sharing between consumers.

Additionally, blockchain media encryption and distribution solutions promote ethical user behaviour by allowing users to make micropayments with the click of a button.

The Open Music Initiative (OMI), composed of 200 members including the three major labels Sony, Music, and Warner, as well as YouTube, Netflix, Spotify, and Viacom, want to modernise royalty payment mechanisms. OMI revealed on CNBC that it's considering blockchain as a foundational technology.

The vision? A transparent blockchain-based ledger that contains music assets and their rights holders. Smart contracts can then automate royalty payments based on a song's consumption, including streaming.

A startup called the 21 Million Project aims to decentralise film creation, which in particular can enable sourcing of talent, locations, and crew from across the globe. Better transparency means everyone in the production outfit knows where exactly the production money and box office earnings go. In particular, 21 Million aims to improve the way digital rights are managed, to ensure that filmmakers — and any stakeholder who truly has a share — will be properly compensated, all through smart contracts. 

SingularDTV is another startups that aims to decentralise the entertainment industry after raising $7.5 Million in its successful ICO.

StreamSpace is a blockchain startup for on-demand video streaming. There are a lot of ways to break down the numbers, but the overwhelming consensus is that people, especially younger generations, are more interested in streaming video from Netflix or Hulu than they are in paying for a cable subscription. For content creators, StreamSpace represents security from piracy and the opportunity to control distribution and to set prices. Meanwhile, consumers enjoy personalised recommendations and unique content that comes directly from content producers. As cord cutters become more common, blockchain platforms like StreamSpace are helping content producers capitalise on their projects while also giving consumers exactly what they want: instant access to incredible content.

OPUS, a startup powered by the Ethereum blockchain is positioning itself as the world’s first decentralized music platform. The startup intends to address long-standing issues in the entertainment and streaming industry, including the ones I have outlined above. According to its whitepaper, OPUS “tackles the issue of music ownership and sharing at an infrastructure and protocol level.” By leveraging Ethereum and the likewise decentralized interplanetary file system (IPFS), the platform can deliver thousands of tracks per second in a fully-decentralized manner.

2. Blockchain-based Ad Exchange Platform for Digital Advertising

In Digital Advertising, notwithstanding the capacity to target and customise Ads, we spend around 40 to 70% of our Ad investments to the intermediaries and the reason is the current Digital Advertising system does not have the needed transparency. Blockchain-based Ad Exchange platforms for Digital Advertising helps publishers and advertisers exchange efficient and transparent advertising contracts.

Developed in partnership with Nasdaq, NYIAX recently deployed a blockchain-based ad exchange platform that allows publishers and advertisers to efficiently trade advertising contracts. Richard Bush, Chief Product and Technology Officer, states: "With valuable experience in capital markets, NYIAX has a long-term vision to create a more financially rigorous model leveraging fin-tech best practices with advertising and media."

Madhive is also deploying an ad exchange targeting digital video content sites. Its CEO, Adam Helfgott, states: "Our platform enables ad-based monetisation of video in a secure privacy-compliant way so a viewer's private information is shared only with an artificially-intelligent agent that pulls in relevant ads." This could come handy in the EU market, where new strict privacy laws go into effect in May 2018 that require companies to track and protect consumer data.

3. Decrease in Digital Ad Frauds

Approximately, when we spend 3$ on Digital Advertising, our 1$ is lost to Ad frauds. The estimated Ad loss because of Ad frauds by the end of 2017 was around $16.4 billion.

The Digital Advertising space is laden with misrepresentations. Companies are generally unfit to evaluate if the Ads they place and pay are offering the real conversions or not. Likewise, it is misty what number of perspectives and clicks of the online Ads are actually created by bots.

Blockchain technology can resolve all such problems and ensure better transparency and accountability. You can record your Ads on the Blockchain and hence can guarantee that the Ad Metrics are verifiable.

  • The Blockchain technology can record how often the advertisement was seen and what was the nature of the traffic that is coming to your Ad
  • Actualising Blockchain technology is probably going to lessen the rate of Ad frauds and prompt advertisers to get the actual value for the investments

To battle against Digital Ad Frauds, a Los Angeles based tech startup MetaX is among one of the first to bring the Blockchain. The company has built up the first protocol AdChain as Advertising Supply Chain that utilises Blockchain technology to record and store all the ad impressions in real-time. This helps advertisers know that they are only paying for those Ads that are being seen by real people

4. Unique Digital Identity across Digital Channels

Blockchain-based Digital Identities store of a great deal of individual data, and in addition, offer the vital link important for the transfers of Digital Assets.

Three examples where Blockchain based Digital Identity is used are:

  • Blockchain-based Digital Identities that augment Personal Credit Score for property buyers. This would offer Smart Contracts with full property details along with buyer’s Digital Identity for property auction on Blockchain for the financiers.
  • In online shopping, Blockchain based public profile can be used to demonstrate your trustfulness with a Know Your Customer (KYC)/reputation management system. This also helps in classical identification of data with the help of more qualitative and quantitative information.
  • Digital identity in the food chain with a Barcode and Blockchain information linked to it will disclose the complete and verified trajectory of the product.

5. Better Data Privacy, Safety and Control

People nowadays are being increasingly vigilant about their privacy, that is why worries over the information gathered through web search tools, and smart devices are at a record-breaking high. It is not a mystery now that Google and Facebook sorts of companies are making a fortune pitching client information to organisations that require insights of the customers, while clients are not qualified for any of the benefits produced using these deals. Because of the usability and free nature of Search Engines, Social networks, and email services, huge measures of personal information are gathered and shared, and clients have no control over such sharing. Therefore, a substantial number of individuals are not happy with the techniques that are being utilised to gather the personal information and they want to have control over which information, assuming any, can be shared to outsiders.

Blockchain technology is one of the most efficient solutions for all such issues.

To upgrade the privacy information security and to enable Digital Media Users to recover the control of their own personal information, Blockchain is considered best.

  • Blockchain technology can bring a level of transparency into the data and information space that is at present not accessible to Digital Media Users
  • Blockchain is a decentralised record and it is changeless, straightforward and effortlessly auditable that empower clients to have control over their information
  • You can decide what information is being shared and who it is being sold to
  • This also creates a revenue-generating model for Digital Media Users who will be directly compensated for the individual information that they share

6. Smart Contracts for Cross-Promotional Engagements in Influencer Marketing

Influencer marketing is the new trend in Digital Marketing landscape. Influencers enjoy a large Social Media following and brands pay them in an effort to influence some of their followers to those brands. Terms of contracts in Influencer marketing vary a lot and that is why Blockchain-based smart contracts can be used for reducing the potential conflicts, which may arise during cross-promotional engagements in Influencer Marketing.

  • Blockchain-based smart contracts automatically pay the influencers once they publish the agreed-upon promotional content
  • The terms of contract and payment obligations are coded in the Smart Contracts and thus Smart Contracts will remove all kinds of potential issues that may arise in between the advertiser and the influencer

Blockchain also ensures frictionless Monetisation of Digital Content that removes the piracy problems in digital distribution.

Mavin is a reward-based, reward based decentralised marketing ecosystem based on blockchain that connects digital marketers and agencies to micro and nano influencers in social media. By aggregating the power of marketing of micro and nano influencers into a single campaign, Mavin surpassed traditional advertising market targets through a high level of ROI and engagement. At the same time, it reduces the cost of handling and advertising spending through blockchain technology, smart contracts and micro transactions.

7. Crowdfunding Of Creative Productions

2017 marked the uprising of blockchain start-ups across industries, often funded with initial coin offerings (ICOs). ICOs use cryptocurrencies like bitcoin to crowdfund new ventures.

Creative productions could also leverage ICOs for crowdfunding. In fact, Indiegogo just launched in mid-December its own ICO platform. So ICOs for films and other creative ventures could ramp up in 2018, contingent on how the Securities and Exchange Commission (SEC) applies and imposes securities laws to ICOs.

A blockchain-based crowdfunding platform can securely record funding transactions that are transparent to all investors, allowing them to know real-time where they stand in the pecking order. Upon sale, licensing, or consumption of a creative asset, smart contracts can then automate payments to both rights holders and investors.

For example, iProdoos is a blockchain platform that launches in 2018 to enable aggregation of talent for premium TV & film production, and crowdfunding with traditional or crypto currency. This allows consumers to generate revenue from the projects they fund.

8. Piracy

As with music, film is also no stranger to piracy, and it is often a costly battle for movie studios, distributors, and even law enforcement agencies to fight against piracy. Essentially, a movie is a collection of copyrights and titles, which span across screenplays, derivative works from books, designs, technical works, licensing from other works, merchandise etc…

Piracy is one of the main headaches that digital distribution brought to media and entertainment. Phil Gomes, blockchain thought leader at Edelman, states: "I personally believe that a lot of piracy comes from friction in the legal distribution mechanisms. Blockchain technology can enable more frictionless monetisation of content to better compete with pirates." The key is to seamlessly match the legal user with the legally-purchased content, so that the payment mechanism is efficient and it is easier to compete with pirates, which by design don't process payments.

A startup called Custos Media aims to keep track of digital assets like movies, eBooks and other media through blockchain technology through its “imperceptible watermarking technology.”

Piracy can be a big expense and headache for movie studios. But in the same light, studios can also exploit content creators who might not have enough clout to enforce their stake in a film’s revenue or production.

A distributed ledger can address this challenge by creating an immutable record of transactions on any asset, idea, creative work, and the like. These can be tracked throughout their lifetime, even when ownership is sold or otherwise transferred or assigned, even when these assets are assigned to players in other industries, such as music, television, etc…

9. Global distribution

You would think that with cloud-based services like Spotify and Netflix, you can easily access multimedia content from anywhere at anytime, right?

Unfortunately, there are restrictions, and these are mostly geographical. Some tracks and video content, for instance, are not globally available due to copyright restrictions and other legal impediments that prevent a song’s publisher from distributing to certain countries. In some cases, censorship might prevent a creative work from being distributed in a certain country or region.

While this is unfortunate from the point of view of content creators and consumers, the platforms’ hands are tied, especially if there are conflicts of interest.

The blockchain can potentially resolve this.

Being a decentralised and distributed ledger, there can be no entity that can unilaterally block valid access to content. It does not only involve music, but potentially any kind of digital content. DECENT, a recently-launched platform, offers the ability for publishers to distribute their content globally through its decentralized, encrypted, secure and auditable platform. It aims to eliminate the middleman, thus bringing content directly from source to consumer.

In essence, DECENT is decentralising the distribution of digital context whilst protecting copyright. DECENT launched their ICO in 2016 and raised over $4 million.

10. Gaming

The past few weeks have made it impossible to avoid talking about this application of blockchains. That inevitability is almost entirely due to CryptoKitties, a digital kitten trading game running on the Ethereum blockchain. TechCrunch described it both as a “digital version of Pokemon cards” and a decentralised Neopets. Since launching on November 28, the situation has escalated quickly: More than $6.3m had been spent on the site as of December 6, 2017; it was choking the Ethereum blockchain; and kitties have gone for more than six figures. Of course, it also handily serves as a Rorschach test for people with thoughts on blockchain. Which is to say, everyone: It’s evidence of blockchain’s scaling issues.

Whatever else it is, it’s the first significant gaming application on a blockchain. Unlike Neopets, CryptoKitties does not use a centralised database. Though its developers, AxiomZen, take a cut of every transaction on the game, the company could disappear tomorrow and the kitties would still be tradable. The breakout success of CryptoKitties will draw more attention and financing to game development on blockchains, and there are other projects poised to benefit. Game Protocol stands out for its scope and ambition: it recently launched an ICO after building a protocol that encompasses an entire videogame economy, including a decentralised game store, a developer community along with tools for creating games, and a crowdfunding platform for consumers to fund projects they like. Everything from esports betting to card games has seen iterations based on blockchain.

There is no doubt the blockchain offers numerous exciting applications to solve problems that have plagued the entertainment industry for decades. Stay tuned for my next piece on the role of the blockchain in the future of social media and content.

Resources:

The Disrupted Strike Back New rules and capabilities to survive

INFOGRAPHIC: Blockchain in Media and Entertainment: Is this the Needed Panacea for Digital Transformation - FROST & SULLIVAN