A Media Owner’s Guide To Blockchain
How blockchain technology will impact media distribution and data exchange
By now, you’ve probably heard a thing or two about Bitcoin, the encrypted digital currency (or cryptocurrency) whose value recently hit a record high and is now worth nearly three times the price of gold, capturing the attention of digital-savvy investors around the world. You may also have read about the quick rise of Ethereum, another cryptocurrency that is gaining support among investors and emerging as a Bitcoin challenger.
While there is certainly a lot of buzz surrounding those cryptocurrencies, their long-term value and reach are still too early to determine. However, regardless of whether the likes of Bitcoin strive or bust, it is clear that the underlying blockchain technology powering them is here to stay and change our world.
How Blockchains Work
A blockchain is an open, real-time database or ledger that maintains a continuously growing list of data or transaction records. In other words, think of a special live spreadsheet that everyone in the network can edit and verify. When a new transaction happens, it is instantly pushed to all participants in the distributed network (known as “nodes”) for documentation and verification. A blockchain, such as bitcoin and other cryptocurrencies, can be open to the public and accessible for anyone that downloaded an open-source software, or it can remain private, with all its records of data and transactions accessible for approved members only. Most of the enterprise use cases of blockchains will be running on private ones.
The “block” refers to a grouping of transactions while the “chain” refers to the linkages of the blocks, both created with complex mathematical functions. It innovatively combines the distributed model of a peer-to-peer (P2P) network, which eliminates the need for a central authority to verify the data input or validate the transactions, with the cryptography that ensures privacy and transparency. At its core, blockchains are about distributed trust. Once a new block is created and linked to the previous one, it becomes immutable and irreversible, barring a consensus agreement across the distributed network. And because each block is linked to a previous one, no information would get lost in the network as it might in a P2P network.
Blockchains are also extremely valuable for it allows logic to be built into the transactions on the chains, which enables the kind of smart contracts that will be automatically carried out once the predetermined conditions are fulfilled. For example, smart contracts could be used in real estate to ensure the quick and safe transfer of ownerships or release escrow when a transaction is confirmed. Some small economies are already planning to use blockchains to leapfrog the need for building a centralized real estate property registry. While it is too early to pinpoint how exactly blockchain technology will impact the media industry, especially with regulations being a big unknown, some major implications are clear to see.
A Game-Changer for Media Distribution
Unlike a traditional centralized network where every node keeps a copy of what is on the central server, blockchain technology enables a value exchange that prevents the copying of information. Once a transaction is made and verified, only the receiver will have the private cryptographic key to unlock that specific transaction data, even though the existence of this transaction is duly noted in the blockchain for all to see.
Applying in this to media distribution, one could easily see the potentially revolutionary implications. As a distributed ledger, blockchain can be employed to democratize the management of digital assets, facilitate true distribution on a global scale, and reduce payment frictions via micropayments.
1. Improving Digital Asset Management
Today, most of the existing media distribution rely on big platforms — be it broadcast TV, streaming services like Netflix or Spotify, or digital stores like iTunes or Google Play. If your media products are not available for purchase or consumption on one of those major middle-man platforms, then there would be very limited ways for you to reach the audience.
Blockchains, in contrast, bypass the need for such aggregated centralized content hubs by establishing a distributed network that turns the end device of each consumer into a node that verifies access and further disseminates content upon confirmation. This boosts security of the network while also reduces the overhead cost by eliminating central servers. No longer will media owners need to worry about the terrible hacks and leaks that many have suffered lately, as blockchains encrypt and distribute data across the network, making it exponentially harder to hack. The decentralized nature of blockchains also increases transparency, making security breaches and leaks easier to be located and held accountable.
Startup Example: Custos Media applies its blockchain-based “imperceptible watermarking technology” to keep track of the spread of digital media assets like movies and eBooks through blockchain technology. It helps increase security and combat piracy.
2. Facilitating Global Distribution
Many content platforms today are confined by international licensing rights and censorships to reach their full global potential. Even Netflix, a self-proclaimed global content platform, is blocked from entering mainland China, thus missing out on a vast media market. While there are instances where media owners voluntarily utilize geo-blocking to protect their windowing strategy, it more often than not just ends up limiting the reach and encouraging piracy. There are certainly many challenges to solve when it comes to releasing a media product on a global scale when most of the distribution platforms are still tied up in regional constraints, and that’s where blockchains may come in handy.
The distributed nature of blockchains means that a blockchain-based distribution channel can easily bypass borders and censorships, given that there is no central authority or entity that can unilaterally block valid access to the content. All content and transactions are logged and safely distributed across the network via complex cryptographic encryptions that make them indistinguishable from other web traffic to someone with no access to the private blockchain network in question.
Startup example: DECENT is a Chinese startup that aims to build a decentralized, secure, and auditable platform for publishers to distribute their content globally, allowing them to bring content directly to consumer.
3. Enabling Micropayment-Based Models
Every transaction online is charged a process fee by the payment method provider, be it Mastercard or PayPal, which makes it uneconomical for legacy payment system to process micropayments, especially for international transactions. This is the reason why many merchants are unwilling to accept credit cards for transactions under $10, as a credit card company would much prefer processing one $500 charge than 500 $1 charges.
Facilitating micropayments is something that blockchain-based cryptocurrencies is good at. By eliminating the central authority to approve and validate transactions, it vastly reduces the overhead costs and instead evenly distribute the responsibility for verification across the entire network. Even though the transaction fees for bitcoin has skyrocketed in recent years along with its rising value, it is still much better suited to facilitate micropayments on a global scale than the legacy digital payment solutions.
When and if such cryptocurrency hits critical mass adoption, it would unlock a great new micropayment-based business model for media owners. At the moment, the dominant business models in the media industry are either ad-supported or subscription-based. Consumers gains access to content either by watching ads, which disrupt the viewing experience, or comminuting to a monthly fee upfront. In contrast, a micropayment-based model would allow users to pay a small amount of money directly to the content creators or curators for accessing the piece of content they want to enjoy. This would be particularly useful for publishers, musicians, and short video creators.
Startup example: Mycelia is a fair-trade music distribution platform that British singer and songwriter Imogen Heap created using blockchain technology. It aims to sidestep intermediaries like Spotify and record labels, allows fans to pay musicians directly for their work using cryptocurrencies, thus giving musicians more ownership over the money and data generated.
Impact On Data Exchange
Another major way that blockchain technology will impact the media industry is that it will democratize the way data is shared and exchanged. With no central institution to track the ratings and measure attention, all data exchanges are logged into the blockchain and therefore available for all parties involved to access and audit. This is set to bring a paradigm shift to a wide range of developments from autonomous cars to the Internet of Things, which, in turn, could potentially change how media products are monetized in cars and elsewhere.
For example, say you have a connected washing machine, which logs the usage data showing that you use the “delicates cycle” quite often. In a blockchain-based network, your connected washing machine could share that data directly with your connected TV in a secure and private manner, so that you will receive a targeted ad for softwash laundry detergent without your data having to go through a third-party audience data exchanger.
With a distributed database, advertisers would be able to access more audience data in a secure and anonymized way across the network, and using that to secure eyeballs via a distributed programmatic ad network. Building smart contracts into the network would ensure the smooth execution of performance-based media buys, increasing efficiency while protecting audience data privacy. (The employment of blockchains in ad tech is a whole other topic that we will visit in another post soon.)
All in all, the blockchain technology is a revolutionary force that will decentralize and democratize the way information, value, and digital assets are distributed and managed. Although the implementation is mostly focused in the cryptocurrency space at the moment, there are many companies outside the financial industry that are starting to experiment with blockchains. In response to the rising enterprise interests, tech companies such as IBM and Microsoft are also eagerly developing blockchain platforms to developers and businesses to build on. As a blockchain ecosystem starts to take shape, the industry foresees a development and implementation period of five to ten years. In the meantime, media owners should pay close attention to the development in this area and be open to exploring the numerous applications of blockchains.
