Cryptokitties: trading clogged up the Ethereum blockchain network

Bitcoin and other cryptocurrencies grabbed the headlines last year and rocked a lot of boats, from banks to governments. But it’s the blockchain technology behind them that is starting to influence businesses beyond the world of finance – including media firms.

Using a blockchain system, media companies see huge potential to disrupt and reshape their businesses – from how advertising is sold to how IP rights are tracked and contracts written, through to how content is both funded and delivered to consumers.

In short, blockchain could start another media revolution.

Earnings increase

“In theory, most traditional media companies could be disintermediated by blockchain,” says Matthew Wright, an analyst at Founders Intelligence, part of corporate venturing hub Founders Factory.

“Content producers could put high-quality content directly on a blockchain-powered, decentralised network and be paid direct by the audience, with no need for Netflix, Sky or any other intermediary.

“In this scenario, content producers would get a higher share of the earnings, with no one controlling the content they make, and niche content producers could find a global audience, while fans could raise funds like a Kickstarter.”

This revolutionary, decentralised approach is very disruptive and underpins why there are so many start-ups emerging in this space, and why big corporates are beginning to look into the technology with increasing interest, as well as wariness.

Wright points out that it is still early days for how blockchain will affect the media, but one pressing problem is how well its networks will scale up.

Witness the case late last year of Cryptokitties, a blockchain game in which unique, digital cats are ‘bred’ much like cryptocurrency is ‘mined’. The digital cats became such a hit with collectors that their robust trading clogged up the Ethereum blockchain network, a rival to Bitcoin. “The point is that we are in the testbed of how the blockchain will work,” says Wright.

The power of the blockchain is that it is immutable, decentralised and quick. This has major implications for how content is tracked and protected.

“Transaction management has remained slow because it requires third-party verification and the updating of different ledgers. But a blockchain can provide an audit trail that has proof of ownership that is immutable, so it could be really powerful in the management of IP content – in terms of how it is delivered and accounted for.”

Securing the IP and confirming who gets paid for what and when is key for anyone monetising digital assets.

“The whole concept of chain of title and IP protection is really interesting with blockchain,” says Tom Davidson, managing director of media services firm Niche Media Global.

“Particularly in the music business, but also in the video business, it is difficult to have sight of who owns what. One of the big opportunities for media comes in seeing the entire ownership chain inside the secure blockchain ledgers.

“If you add on top of this a transparent rights management structure and secure distribution that the blockchain can provide, then you ultimately end up solving the piracy problem across media.”

In the blockchain world, rights ownership for a video file like a film or a TV show can be unequivocally recorded and assured. Theoretically, there will be one, independent record of who owns what.

For Jane Millichip, chief executive of distributor Sky Vision, while using crypto currency seems pretty far out in the future, the potential for blockchain to help with “labyrinthine” and very labour-intensive IP rights management in the nearer term is interesting.

As part of that, Sky will soon be adding its programming to the TRX digital distribution platform set up by RDF Media bosses David and Matthew Frank.

“We are all moving towards standardised contracts but there are still 1,001 exceptions that have to be worked out person to person. The appearance of an agnostic platform – and the TRX platform is part of this – would be a real asset and would help to greatly streamline the process,” says Millichip.

“It doesn’t catapult us into the world of cryptocurrency – at least not yet – but it’s a stepping stone towards the promise of blockchain.”

How content is distributed and monetised is another key focus for blockchain. Start-ups including Flixxo, LiveTree ADEPT and Treeti are all using blockchain to rethink how content is funded and delivered.

In the case of Flixxo, the idea is to use crypto tokens as payment for being part of a new-style, peer-to-peer distribution network for video content and advertising.

Set to launch with a limited number of users in June, the service will compensate content owners in line with the popularity of their content, creating a sort of YouTube without YouTube.

“The only way to fight against YouTube, Facebook and Netflix is to build distribution differently,” says Flixxo chief executive Adrian Garelik.

“We want the creators to own the communities they build around their content, which is not the YouTube model. If you decide to move off YouTube because you aren’t earning enough, then you can’t take your community with you. Ours is the YouTube model – but much more beautiful.”

LiveTree ADEPT chief executive Ashley Turing admits that the industry is at the “rudimentary stages” of using blockchain technology, but says transactions without a third party open up exciting new avenues for content makers and a safer place for users.

“Facebook is a centralised network and look at all the issues with leaking users’ data. Blockchain gives us transparency and trust and that is a good thing, especially in today’s world,” says Turing, who has captured a remarkable 5% of the UK crowdfunding market in the film and content category using blockchain.

Tailored content

For Treeti, which is set to launch in 2019, blockchain is about using the data its users decide to share with it to better tailor the content they are delivered, which sounds a lot like Amazon Prime.

However, according to Treeti chief executive Amorette Jones, the idea is to take the friction out of the relationship between the content creators, including independent film studios, and consumers.

“This is brand new territory and we are making the rules,” says Jones. “We are whacking the heads off some of the greedy people who have been taking more from creators than they are due. We are out to enhance the movie business by putting content owners and viewers together directly.”

There are also applications in digital advertising and search engine optomisation, where there can be little visibility throughout the chain from placement to delivery.

Many media owners are asking where all the money goes in a programmatic ad sale, for instance, which has put pressure on big agencies like WPP and Omnicom to be more accountable.

“We are at the beginning of a new age, where trust comes out of a distributed, cryptographically secure network, rather than from the history and perceived values of a counter-party,” says Ashley MacKenzie, founder and chief executive of start-up Fenestra, a platform that allows advertisers and their agencies to buy media space across multiple channels with 100% transparently so they know exactly who is paid what and when.

MacKenzie plans to launch Fenestra in the summer and is now negotiating with brands and ad agencies to do tests and partnerships.

“Unsurprisingly, we have had a tremendous response from media owners who recognise how clear channels to their customer base can benefit their business,” he says.

If anyone in the media business thinks blockchain is just a passing fad, then news that Amazon is building its own ‘blockchain as a service’ solution is proof that it is a powerful tool that should be taken seriously.