Blockchain technology has the potential to disrupt existing business models and enable new ones, and the media industry will be the first to feel the effects, a new report from Deloitte reveals.
The report – titled, Blockchain @ Media: A new Game Changer for the Media Industry? – explores five potential use cases with the aim of triggering thinking on how powerful the blockchain concept can be in and for media.
According to Mark Casey, Global Media & Entertainment and TMT Africa Leader at Deloitte, blockchain – the same technology behind Bitcoin and other crypto-currencies – permits the bypassing of content aggregators, platform providers, and royalty collection associations to a large extent, signalling a shift in market power to the copyright owners.
“While some applications of blockchain technology may still seem far-fetched, payment-focused use cases have already been proved to work. Parts of the media value chain are, therefore, already endangered by new blockchain-based payment and contract options. These can fundamentally reset pricing, advertising, revenue sharing, and royalty payment processes,” says Casey.
In Use Case 1, “New pricing options for paid content”, the Deloitte report details how consumers are increasingly demanding an individual, customised content experience, as evidenced by the success of music and video streaming services.
While transaction costs have made it difficult to market low-priced content items or small bundles competitively and profitably, blockchain-enabled micro-payments can help publishers to monetize this flexibility seeking group of customers.
“With the help of a blockchain, individual articles or other pieces of content could be sold for cent- prices without disproportionate transaction costs,” Casey says.
Use Case 2, “Content bypassing aggregators”, predicts that while ad-based distribution models will remain important in the next decade, the intermediaries between the content creator and the potential advertiser will increasingly find themselves cut out of the equation.
“Based on the blockchain, everyone from leading media houses to small bloggers can easily generate advertising revenues,” explains Neville Hounsom, Director: Strategy & Operations, Deloitte SA, who adds that as blockchains permit an exact tracking of content usage, they also enable a direct allocation of advertising budgets.
“Together with new, blockchain-enabled micro-payments, content creators are able to establish direct relationships with their customers. Artists can market their songs independently of big platform providers wherever they want, since a blockchain permits easy tracking of usage and deduction of the associated payments,” Hounsom says.
Use Case 3, “Distribution of royalty payments”, explores another source of income for content producers and explains how the blockchain can enable a far more equitable distribution of royalty payments.
Today, the distribution of royalty payments builds on multiple contracts between artists, producers, and music publishing houses.
“With the help of a blockchain, the distribution of royalties could become more efficient and transparent. This would include a music directory with the original digital music file – associated with all relevant identities of people involved in the content creation. It is also possible to store instructions in the form of smart contracts that specify how the artists are to be compensated and how sales proceeds are to be divided among all eligible parties,” says Casey.
Use Case 4, “Secure and transparent C2C sales”, unpacks how blockchain has the potential for content rights owners to enable additional revenue streams by leveraging consumer-to- consumer sales.
While illegal file sharing remains a major problem for media companies, the blockchain has the potential to solve that problem, giving content owners full control and visibility of the consumption and number of uses of individual songs and / or movies.
This could create new business models such as consumer-to-consumer marketing of content. “For example, now a subscriber can access their blockchain content and share it with a friend. The subscription holder will then be charged directly with the fee for the specific content they shared. This permits easy and legal sharing of paid content among users, and forms an additional source of revenue for aggregators and copyright holders,” Casey says.
Use Case 5, “Consumption of paid content without boundaries”, tackles a common consumer complaint: The inability to access the contents they subscribed to when they are in another country or region on business or on holiday.
The report points out that the blockchain has the potential to make digital rights management (DRM) systems obsolete, or at least to reduce their complexity, because every transaction or act of consumption is tracked in the blockchain and directly linked to a user. The payment will be automatically initiated according to the underlying smart contract terms for the content.
In light of these use cases and other potential scenarios, Hounsom advises that media players start considering blockchain-based applications and their potential impact on the whole industry. These include micropayment-based pricing options for paid content, a shift of market power caused by content bypassing aggregators, and an improved distribution of royalty payments.
“To ensure timely and appropriate measures, we recommend an immediate review of the individual consequences for the existing business. In addition, companies should lose no time in identifying applicable blockchain based opportunities as a fundamental component of their future business strategy,” Hounsom says.
