Although blockchain is still most associated with cryptocurrencies like bitcoin, the emerging technology has the potential to offer multipurpose business applications for a range of industries. Media and entertainment offer an interesting use case because of two challenges the industry has struggled with as content has gone digital: the ability to protect as well as monetize intellectual property.
Blockchain technology is still in the early stages of development, but given the excitement around the many ways it could be put to use, it’s not too soon for media and entertainment companies to start thinking about the possible implications for their businesses and the industry as a whole. Blockchain has the potential to disrupt the way content is produced, aggregated, distributed and consumed—and the possibilities for content creators, brokers and arbiters of intellectual property are too big to ignore.
What Is Blockchain, and How Does It Work?
Blockchain is, in basic terms, a secure and encrypted digital database shared by all parties in a distributed network. Any transaction that occurs in the network is recorded, verified and stored in the database and visible to all participants, creating an unalterable transaction log. “This essentially results in a golden source of truth that everyone can trust. That’s primarily one of the reasons why it’s called the ‘technology of trust,’” says Christine Moy, program lead of J.P. Morgan’s Blockchain Center of Excellence. This structure bestows special properties on a blockchain, including greater transparency and security, because transaction activity can be tracked, fully verified and audited.
Blockchain is a form of distributed ledger technology. In a distributed database, multiple copies of data exist across a network rather than a single centralized server or database. Because control of the database can be distributed across the entire network rather than a centralized authority, participants access the same version of the data in near real-time. The decentralized management of the database allows for faster, less costly processing of transactions, which can lead to efficiencies and cost savings for businesses.
Media and Entertainment Applications
Blockchain has the potential to transform several markets within media and entertainment, but particularly those where participants would benefit from the security and transparency that blockchain would offer, such as distribution of payments, funding, monetization and contract enforcement.
1. Micropayments for Content
As content creators place media behind subscription-based paywalls, they may be missing out on revenue from consumers who aren’t willing to pay for an entire subscription, but who would pay a smaller fee to read a single article or binge-watch a season of a television show.
Pay-per-use consumption could become feasible thanks to blockchain-powered micropayments. Blockchain’s ability to keep a comprehensive record of its data could allow for more accurate tracking of when and how copyrighted content is consumed. A micropayment pricing model would normally be inefficient to implement, but its execution could be fully automated and cost-effective with blockchain.
2. The Elimination of Content Aggregation
The decentralized structure of blockchain could enable content creators—such as musicians or writers—to directly distribute their work to consumers, bypassing traditional distribution channels and leaving a larger share of revenue for content creators themselves. This could impact everyone from large media houses to independent bloggers, helping artists form a direct relationship with consumers.
3. Royalty Distribution
The collection and distribution of royalty payments in the music business has only become more complex and opaque with the growth of music streaming services. Each time a song is streamed online or played in the background of a TV show, for instance, the distributor must compensate the music’s copyright holder—but disputes can arise over the accuracy and compensation rates of such royalties.
Smart contracts built on a blockchain and attached to a given piece of music could add precision, speed and trust to the process by executing contract terms automatically among eligible parties. This would allow for more accurate tracking of a song’s usage, quicker royalty payments and more transparency over contract terms and the division of revenue among artists and other stakeholders. It would also likely disrupt or eliminate the role of copyright collection associations, which currently act as centralized intermediaries in gathering payments for rights holders.
4. Consumer-to-Consumer Sales
As with the enhanced tracking of music use, blockchain could empower other types of content owners to retain better oversight of their copyrighted material. Illegal peer-to-peer file sharing of television shows, movies or other content is already common, but file sharing could become a legitimate practice that can be controlled and monetized. When consumers purchase or subscribe to blockchain-hosted content and then share it with a friend, content owners could track and charge a fee for that distribution. This would create an additional revenue stream for content creators and provide better transparency on how copyrighted assets are consumed and shared.
Challenges of Blockchain
Blockchain could create additional revenue streams for new and existing content and greater protection of content intellectual property for content owners. But the technology is not yet mature and these applications are still being developed. Early adopters must be aware of the potential challenges and costs. Blockchain is currently unregulated, and common standards for utilizing the technology to create value still need to be created. “For any proper blockchain use case that requires multiple constituents to participate in it, there needs to be a driving of standards between those participants,” says Moy.
Additionally, achieving the full benefits of blockchain could require replacing current technology in certain cases. Integrating the technology into existing processes—and building, testing and ensuring it’s secure—will take time. There’s also the question of where all of this intellectual property will be stored. Will the massive amounts of transaction data need to be stored with a third party, and in that case, who owns that real estate? Addressing these questions and finding common ground will take time. It’s important for media industry participants to work toward developing standards for applying blockchain and identifying areas where the technology could benefit key players in the industry, from content creators to content aggregators and distributors.
Preparing for Blockchain
The media and entertainment industry is a contracts-based business that places a premium on the protection of intellectual property. Blockchain has the potential to increase profits for content creators and media companies and provide real-time consumption-based pricing. As blockchain technology matures, media and entertainment executives should be learning about the technology and the potential use cases for their business.
Understanding how blockchain plays into the broader strategy of the company, what the company’s priorities are and if the business model can be significantly impacted by the technology will be essential. While the technology is still new, it has industry-wide applications with the potential to transform how content is created, consumed and protected—and it’s important to start thinking about the potential benefits and challenges to adoption now.
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