I recently blogged about blockchain where I described the technology and why it could be a revolutionary development, and also explored its various applications across a number of industries. Today, let’s take a closer look at blockchain in entertainment and media: its various applications, how it is transforming the industry, and its implications for the near future.
A blockchain is type of data structure that can be purposed to create a digital ledger of transactions that can be shared among a distributed network of computers. By using cryptography, each account on the network may access and manipulate the ledger securely, without the need for any central authority or middleman – this is the supreme concept to take away. 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.
Given these characteristics, blockchain technology will likely be a catalyst for transformative innovation in nearly every industry.
Blockchain as purposed in Entertainment and Media
One of the most obvious applications of blockchain in the media is its ability to support micropayments that can be processed without the need for an intermediary payment network or its fees. Generally speaking, without blockchain, intermediary payment fees are too cost-prohibitive to enable micro-payments of values less than $1. Chris Dixon explained this wonderfully in an an article by venture capitalist Marc Andreessen:
Let’s say you sell electronics online. Profit margins in those businesses are usually under 5 percent, which means conventional 2.5 percent payment fees consume half the margin. That’s money that could be reinvested in the business, passed back to consumers or taxed by the government. Of all of those choices, handing 2.5 percent to banks to move bits around the Internet is the worst possible choice. Another challenge merchants have with payments is accepting international payments. If you are wondering why your favorite product or service isn’t available in your country, the answer is often payments.
Ostensibly very little would change from a consumer standpoint; consumers are used to purchasing songs for $.99. But behind the transactional curtain, everything would be transformed.
Without a middleman, when digital objects can be cryptographically associated with their creators, then there is no need for distribution channels. Think about that for a moment. This technology can put all kinds of media directly in the control and management of their creator, obviating the need for iTunes, Netflix, or Amazon. Or record labels. Or publishing houses. Blockchain has the potential to erode away the financial paradigms that conglomerate media companies have been using for the past century. Says Bruce Pon:
Imagine a future where creators upload their content to Facebook. There’s a “Buy” button on the bottom right corner. A consumer clicks it, and in a split second, the content is licensed to them, payment flows in the opposite direction to the creator, and the transaction is recorded on the blockchain.
Today, we are already seeing startups that are exploring new payment models through blockchain technology that are focused upon bringing more value to content creators. Ujo, in their own words, is a “home for artists that allows them to own and control their creative content and be paid directly for sharing their musical talents with the world.” The Ujo platform uses blockchain technology “to create a transparent and decentralized database of rights and rights owners, and automates royalty payments using smart contracts and cryptocurrency,” says Phil Barry, founding partner at Edmund Hart, which oversees Ujo. “We hope that it will be the foundation upon which a new more transparent, more efficient and more profitable music ecosystem can be built.”
Generally digital objects can lose value because they are easily copied. We see this especially in the area of pirated music, movies and TV. But because blockchain makes it possible for creators to register origin of work and set sharing permissions, structure the means of exchange that they’re willing to accept, it is possible create conditions for “digital scarcity”.
Consider a situation where an artist creates a piece of music in .mp3 format, and programs the ability for only 1000 people to listen to it, with the price of the .mp3 increasing with each new listener.
Relationship to consumer
Because blockchain precludes the need for a middleman, the technology creates new opportunities for large corporations to get closer to their customers and consumers. Because the playing field allows for individual creators to connect with their consumers directly, the onus on the bigger media companies is to operate more nimbly, and to offer more varied and interactive pricing models for their content based upon every individual consumer's actions and purchases. And because provenance, payment, and distribution becomes simpler and less expensive to manage with blockchain, bigger media companies can concentrate more on creating quality content itself.
While we haven't seen it just yet, blockchain technology promises to transform a myriad of industries – especially media and entertainment. To the media consumer, it likely means more access to more content, from more creators, on a much more personal, secure, and granular level. For content creators, it means a much simpler attribution, payment, and distribution system, and the ability to be creative with payment models and the concept of "digital scarcity". It will be exciting to see what happens.
If you are an SMB owner and want to learn more about blockchain, check out my first post on the subject. And by all means, get in touch with an expert. The time is now to begin exploring implementation of blockchain technology in your business. Consider these statistics:
- A billion dollars in venture capital has flowed to more than 120 blockchain-related startups, with half that amount invested in the last 12 months.1
- Thirty of the world’s largest banks have joined a consortium to design and build blockchain solutions.2
- Nasdaq is piloting a blockchain-powered private market exchange. 3
- Microsoft has launched cloud-based blockchain-as-a-service. 4
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