Is blockchain the next disruption?
Blockchain has become one of the biggest buzzwords in the IT world in 2016. While the technology is very promising, its applications are still in their infancy. Here’s an overview of this complex technology and its potential benefits for the content industry.
Imagine if it were possible for content creators to sell their work directly to consumers and imagine if the entire operational chain—from distribution and payments to rights holders all the way through to recording transactions—was handled without intermediaries and beyond the territorial limits enforced by the current rights management system (which encourages salami-slicing that is more profitable for distributors).
Such a vision’s sustainability depends on the use of blockchain technology. In simple terms, a blockchain is a database. However, it is not your run-of-the-mill database. It stores the history of all exchanges between its users since its date of creation. Also, it is secured and distributed, i.e., shared between its different users, and there is therefore no intermediate centralization of the data.
According to author Don Tapscott, who specializes in the socioeconomic impacts of technology, blockchain technology will completely transform the world. He explains its virtues in the following terms: “This is a protocol that enables mere mortals to manufacture trust through clever code. This has never happened before—trusted transactions directly between two or more parties, authenticated by mass collaboration and powered by collective self-interests, rather than by large corporations motivated by profit.”
This technology’s initial applications are monetary in nature: this is the technology behind the bitcoin and other digital currencies, i.e., virtual currencies that are not attached to a monetary policy or bank and that are implemented based on encryption algorithms.
Over the course of the last three years, according to the World Economic Forum, more than US$1.4 billion have been invested in the promises opened up by blockchain technology, and close to 100 patents have been registered by financial institutions the likes of Amex, Visa, MasterCard and Bank of America—to name only the most well known.
The mechanisms behind the revolution of blockchain technology are complex. However, what’s important—as pointed out by Deloitte in a report on blockchain technology published in July 2016—is to remain abreast of all emerging technologies that have the potential of shaking up entire industries. That is particularly the case of content industries, which were the first to be disrupted by the waves of the Internet.
Moreover, Tim Berners-Lee, who invented the web, sees in blockchain a tool that could contribute to ‘re-decentralizing’ the web, which is today dominated by a single search engine, a single tentacular social network and a single microblogging site which all depend on advertising for their revenue.
By helping content creators and owners to get paid and thus reduce the importance of advertising as a source of revenue on the Internet, blockchain technology thereby contributes to weakening certain monopolistic strongholds over access to content.
Blockchain and the content industry
Music, the first creative industry to have been shaken up by the Internet, was also the first industry to have seen its salvation in blockchain. At the head of this movement was English singer Imogen Heap who launched her song titled ‘Tiny Human’ in 2015 with the help of start-up Ujo Music. This latter company developed a blockchain application showcasing the possibilities opened up by this technology.
Users can purchase licences for parts of works (e.g., the track for a single instrument) or a full piece of music as well as for one or several purposes (streaming, downloading, etc.). Blockchain technology is used to automatically redistribute each payment received. Consequently, Imogen Heap and her collaborators each receive their respective shares.
What is the advantage of blockchain for the music industry, according to its backers? Simply put, blockchain should lead to the elimination of the intermediaries separating the artists from their fans, make possible the distribution of all elements (along with complete metadata) that make up a musical work in a secure database and bring on the assignment of a fair value to each of these elements.
Ultimately, the ecosystem could lead to the emergence of a whole new market for music and music services, a market in which artists would be front and centre. (For more information, read this article written by Imogen Heap and Don Tapscott.)
Bruce Pon, who founded two startups focussing on blockchain (BigchainDB and ascribe.io) and who imagined the scenario described in the introduction, believes this technology is going to hit the media industry hard, just like the Internet.
He sustains that blockchain will contribute to reducing distribution, licensing and rights recovery costs while disrupting the distribution infrastructure that still dominates today and that was erected before the Internet arrived. Keeping it in place allows dominant media companies to segregate their rights as they please to maximize their benefits and thus impose a profitable artificial rarity that is, however, less and less compatible with the digital economy.
Consequently, Bruce Pon imagines a nearby future when independent creators and producers could exploit blockchain technology to handle all distribution and payment collection steps which are today handled by 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.”
The missing links in the blockchain
All of these initiatives are still nothing more than projects and prototypes. To truly revolutionize the content industry, they will need to be adopted on a massive scale, i.e., not only by creators, producers and distributors, but also by consumers. The latter will need to be compelled to adopt new consumption practices that are not yet very user-friendly. (In this regard, you must read this amusing tentative purchase of an Imogen Heap song on the Ujo Music blockchain platform.)
Things are going very well for banks and financial services. According to IBM, which released the results of a survey conducted on this subject with 200 banks in 16 countries, the industry is adopting blockchain technology faster than expected: 15% of the banks surveyed expect to have commercialized blockchain applications on a large scale before the end of 2017.
As far as the content industry is concerned, Credit Suisse has proven itself more pragmatic in a recently released analysis of the potential impacts of blockchain technologies on several industries. The analyst in charge of the section on media emphasizes that the technology’s more practical contribution to the music industry could be limited to a modest reduction in hacking activity in the medium term. For this reduction to become significant, the entire industry would need to adopt the new technology and keep pace with new standards, formats, platforms and interoperability considerations. The idea currently remains hard to entertain.
Blockchain technology has obvious advantages—as pointed out in Credit Suisse’s document—but one must go beyond the initial hype that some compare to the hype that accompanied Internet’s arrival in the 1980s. Beyond the uncertainties surrounding the adoption of this technology by a critical mass, several issues could lead to a derailment of optimistic forecasts, such as various security issues (as proven by this hacker who successfully stole $53 million from Ethereum).
Despite this, the media industry will need to remain on the outlook. Blockchain technology promises to reduce costs and open up potential new revenue sources. However, it is also very probable that growth will come from applications that have yet to be imagined.