Founder of Ocean Protocol, BigchainDB, ascribe.io, Avantalion
Blockchain is going to hit the media industry hard, just like the Internet
In countless conversations with creators, artists, and media executives across photography, music, publishing, TV and film, it’s clear that the media industry is destined to make the same mistake in underestimating the disruptive force of blockchain technologies to their business, as they did with the Internet.
Few have even a passing interest in learning about blockchain technologies, and thus, seem doomed to repeat their mistakes from 20 years ago.
But media industries, in my opinion, have the most to gain by adopting blockchain technologies. Here’s why: the management and defence of copyrights globally is a never-ending struggle for all content creators and owners and blockchain technologies can help to unravel the tangle of assigning rights, tracking usage and collecting on licenses and royalties.
If the media industries were to embrace blockchain technologies, they could reduce costs for distribution, royalty and licensing collection and allow consumers to obtain the content that they want and are willing to pay for.
The Internet was only the beginning
The media industries have been buffeted by wave after wave of computer advancements as described in the Second Machine Age. They are the whipping boy on the frontlines to a host of forces that they cannot control.
These forces are:
1) digitization of all content which makes it easy to reproduce any piece of work,
2) the ever-advancing progress in sustaining Moore’s Law which drives ever more powerful computers and the miniaturization of computer components,
3) the growing inter-connectedness of humanity via the Internet.
Digitization makes content accessible
In the past, one would need to laboriously photocopy a book, as Daniel Ellsberg had to do with the Pentagon Papers and then deliver by hand or transport media via large cassettes. Today, bits and bytes can now be transmitted invisibly in the blink of an eye across the globe and across borders. The digitization of all content makes it so that information can always seep out and be distributed.
Content owners cannot have a realistic expectation to sell their digital content without having it leak out onto torrent sites and be used in all geographies, outside of the royalty and licensing schemes.
Moore’s Law makes information free
Meanwhile, because of Moore’s Law, the cost of processing and storage continue to halve every 18 months, leading to miniaturization of electronic components and a Cambrian explosion of computerization in all facets of our lives.
Today, more knowledge and media can be stored on a hard drive the size of an iPhone6, than could be stored on 20,000 Compaq Deskpros from 1996 — taking up enough space to fill a 3,000 sq. ft. home. Knowledge can be copied and stored for fractions of a cent, making it possible for every person on earth to have a copy of all their favourite movies, books and songs.
Mobile phones make information available globally
Mobile phones are the great equalizer. By 2020, seven billion people are going to own one and in the process, connect the world in a global Internet. It’s a one time event in world history thanks to Moore’s Law. The shrinking of processors and memory allows for miniaturization of components and falling costs making this miracle possible.
People in the far corners of the earth, until now untouched by roads, clean water and access to education, will have access to the knowledge of the world through their mobile phones. It means that content can be created and distributed by anyone who has a computer and a connection to the Internet. Talent is evenly distributed around the globe, but access to capital and markets isn’t. The Internet, in the form of mobile phones, is a great equalizer.
Information is global and doesn’t know boundaries
It also means that our national and geographic borders play less and less of a role in how we relate to content. One can hop from San Francisco, to London and then to Shanghai — carrying all the content that they want with them. Increasingly, global citizens expect to be able to consume content wherever, whenever and however they want as Kevin Spacey forcefully argued in his 2013 MacTaggert Speech. Creators who can offer consumers the media that they want, in the form that they want, serve to benefit.
The lock on information is waning
The media industry is stuck with licensing, distribution and collection structures that are pre-Internet. We live in a global world but our copyrights are frustratingly local. Old structures serve a purpose in allowing media companies to slice and dice licensing arrangements across distribution channels and countries to use intransparency to maximize revenue, while maintaining local collecting societies. This is possible because there are a handful of global players in music, publishing, and media who use their cartel power to extract their cut.
These global gatekeepers are fighting a battle that goes against the way people consume media now. They are being challenged by open streaming and sharing sites like Spotify, Soundcloud and YouTube — where people consume content, geography independent, and on any mobile device, whether a phone, computer or on the TV, almost in spite of the licensing.
So how will blockchain affect the media industry?
I believe that blockchain will reduce the importance of distribution channels and disintermediate their power of collecting on royalties and licensing.
It’s not only having access to content that made the content industries powerful in the past, but also they had the most powerful distribution channels, including legal teams to strike and enforce licensing deals, and third party payment channels to collect.
If you wanted to reach the widest audience, have your books on every airport stand and in all the media outlets, you needed to strike deals with them.
To now, independent content owners who didn’t want to strike these deals had to solve a multitude of issues — creating quality content, getting awareness amongst their target audiences, building distribution channels to fulfill the demand and collecting on payments.
The most successful independents needed to master a variety of creative and business skills — which, although not impossible, happens rarely.
With the onset of blockchain, the last piece of the puzzle — distribution and payment, can be taken away from centralized intermediaries.
Creatives have the tools of production on their computers. Via social media they can attract followers. With the blockchain, they can make the process of obtaining and paying for content, seamless. Early applications using blockchain technologies to facilitate this include Ujo Music, Monegraph and our very own ascribe.
Blockchain will make it easy for services to arise that serve creatives to undercut the lock on distribution and payments that media companies have on content, and in the process, empower individual and collectives of creators to cut out middlemen.
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.
How is this any different than buying digital goods today?
First, the Facebook platform has no control over the flow of goods or payments because it’s all decentralized.
The files are stored on a decentralized file server that no one controls, but anyone can put their content on.
The payment happens via Bitcoin or another cryptocurrency directly between the creator and the buyer so no one can intercede or take a cut.
The sale is recorded on a blockchain that is powered by a combination of smart contracts and a decentralized database to ensure that all the steps of delivery, payment, and registration are properly performed so that the entire process happens only between the creator and the buyer.
No middlemen. No media companies to control distribution. No geographic boundaries on licensing. Happier customers. Better compensated creators.
Facebook would earn money by offering a platform to creators and charging a monthly access fee or a sales commission but there would be no way for them to lock the content or distribution channels, as it’s possible today.
Creators would be free to take and post their work on a multitude of social and sharing sites — each site having to compete to attract the best creators and content, while the underlying rails of distribution, payment, and the recording of a sale transaction all happens on blockchains.
If Facebook gets greedy and asks for too much, creators can try other platforms, bringing their content with them in the blink of an eye — just as easy as switching to a new mobile carrier or utility.
In fact, a group of likeminded creators and collectives could set up their own blockchain infrastructure to manage this entire process, using Facebook only as one of many distribution platforms.
And in this way, little by little, and then faster and faster, the remaining lock that the media companies have on creators and content, disappears. In the future, creatives will use decentralized platforms for storing, delivering and collecting licensing.
How could media companies leverage blockchain?
Media companies also create and control a large portion of the content that consumers want. Using the recipe outlined above, they can also start to generate new revenue streams by leveraging blockchain technology to sell directly to consumers.
In fact, if media companies embrace the efficiencies in rights management, payment collection, and additional distribution channels enabled by blockchain, they can spend more time focusing on what they’re relatively good at: making and marketing content. Media companies should be excited that Facebook and Snapchat will be new, monetizable distribution channels sitting right next to Walmart, iTunes, and HBOgo. That’s an exciting brave new world for them.
Just as an indie band could start to use Facebook to sell directly to fans, large media companies could be nimble themselves and get closer to their fans also. This means that they would need to question existing distribution models, pricing, and the partitioning of rights by geography so that their content can be consumed globally by anyone.
The blockchain enables new ways to think about the value exchange between creators, middlemen and consumers. And it seems that media companies are sleepwalking into this next technology maelstrom, without knowing what’s going to hit them. Just like with the Internet.
Thanks to Carly Sheridan, Peter Harris and Vinay Singh for reviewing drafts of this post.
Blockchain can play a role in simplifying digital rights management. DRM, as it is commonly known, is complex as solutions here were not designed for today’s changing business models such as the downloading of music, streaming of content, and use of set-top box for television says Anurag Vardhan Sinha, Senior Vice President and Industry Head Americas – Communications Service Providers, and Media & Entertainment, Infosys. The consumption and management of content in the music, movies and publication industry are siloed. Blockchain can do away with the current problems with self-executing smart contracts and monetize assets quickly. In telecom, blockchain can simplify the settlement of roaming fees, faster. Today this is being done by third parties and is expensive. Software-defined network is another area where blockchain can play a role by delivering bandwidth on demand with greater flexibility. IoT service management is another area where blockchain has wide applicability. Billions of devices are going to be on the IoT network and blockchain can help manage these. Blockchain can also enhance security of IoT solutions – especially of those that do not have much intelligence.