Though blockchain technology began as an innovative digital-currency tool in the financial sector, all kinds of companies are now experimenting with its core capability as a decentralized and secure ledger to manage digital assets more directly and to rethink how they compete in the marketplace.In a recent study, two of us found that more than 1,100 startups were attempting to develop blockchain-based business models in a range of settings, including health care, telecommunications, energy, retail, aviation, real estate, and supply-chain management. So far, there has been no significant impact on the respective markets in terms of revenue and market share, but managers’ and investors’ expectations for future returns are high, as indicated by the flow of money into blockchain startups.
In particular, several new business models are emerging in the media and entertainment industries, where monetizing value has been — and continues to be — a significant challenge. Newspapers and magazines, for instance, still struggle to monetize value in the face of plentiful free content and limited mechanisms for protecting intellectual property. Advertising revenue, long an important income source for publications, has shifted to social media and search platforms, and media companies must figure out how to compensate.In the music world, to cite another example, digital content distribution via streaming is beneficial to major record labels and top-tier artists. But it isn’t commercially viable for smaller labels or average musicians, who receive only a tiny fraction of the revenue generated from their music.
Some experts think blockchain may increase the share of revenue captured by content creators and producers by introducing new mechanisms for monetization. However, the current hype about blockchain, the diversity of use cases being proposed, and their potential disruptive effects make it difficult for companies to judge what might be possible for them and what’s merely a pipe dream. That’s true across industries, but media and entertainment companies are wrestling with this challenge in a way that many businesses can identify with and learn from in an age of digital transformation, so we’ll focus on them in this article.
Many companies are starting to use “smart property” to track and enforce rights for creators of digital content, including music, video, books or articles, or even art. This application relies on blockchain as a secure database. Consider Monegraph, which provides an ownership registration service for digital art using the Bitcoin blockchain, the foundation of the most popular decentralized digital currency. By storing IP information on digital artwork, Monegraph’s platform enables artists to define their licensing terms and facilitate transactions with publishers or digital-art buyers. Once their ownership of an asset is recorded in the blockchain, it can be easily accessed and verified by anyone — and cannot be refuted or falsified. This solidified ownership record makes smart property potentially useful in other industries, too, such as real estate and collectibles, where companies need to verify ownership history, simplify asset transfers to new owners, and reduce intermediation costs.
Smart contracts could have a significant impact beyond the media and entertainment industries. In the energy sector, for example, they are being created to manage billing and revenue allocation when consumers charge the batteries of electric cars. The contracts will calculate the amount due, generate invoices, collect the payments using cryptocurrency, and transfer the revenue to the charging station owners.9 Smart contracts can also be used to simplify settlements between parties in all sorts of areas, including e-commerce and supply chains.
Although the three applications discussed so far may be the most common and versatile, several others address challenges specific to the media and entertainment industries. One is blockchain time-stamping, which allows photographers and other creators of digital artwork to register proof of copyright quickly and inexpensively so that they can protect their creations from unauthorized use on the internet. Time-stamping is a simplified version of smart property. It doesn’t track ownership changes, but it does confirm that the creator owned the asset at a specific point in time. Another application that we refer to as “blockchain content ledger” records digital content information like asset metadata and social media transactions. It is a direct extension of smart property. Indeed, once a blockchain is used to store ownership information, it can also be used to hold additional information about the content. For music, this might include the songwriters, performing artists, publisher, and label. In the case of social media, it might include user posts and related activities such as “upvoting,” “downvoting,” and comments. Because the data is decentralized (not controlled by any single party) and irreversible (once entered and accepted, items can’t be changed unilaterally), it’s both highly secure and accessible to different parties.