Blockchain @ MediaA new Game Changerfor the Media Industry?

Blockchain @ Media A new Game Changer for the Media Industry?ContentIntroduction04What is a Blockchain?05Time to change? How blockchain can impact media08How it could be done10Use Case 1: New pricing options for paid content12Use Case 2: Content bypassing aggregators14Use Case 3: Distribution of royalty payments16Use Case 4: Secure and transparent C2C sales18Use Case 5: Consumption of paid contentwithout boundaries20Takeaways for Media Players2102

Blockchain @ Media A new Game Changer for the Media Industry?IntroductionBlockchain is currently one of the most widely discussed and hyped technologies. There are only a fewindustries that are not either excited or worried aboutthe concept, as use cases, proof-of-concepts, and fullyfledged businesses based on blockchain principles areemerging at an increasing pace. This much is certain:blockchain has the potential to disrupt existing butalso to enable new business models.This is particularly true for the mediaindustries, which have been heavilyaffected by the ubiquitous availabilityand the subsequent “commoditization”of content and been undermined bywidespread piracy of intellectual property(IP). Today, media users are largely accustomed to having free access to a widevariety of content, and most of them arestill reluctant to pay subscription fees for“premium” content behind paywalls. Inaddition, all media segments have sufferedsignificantly from digitization, sincecontent can be copied and distributedeasily and without loss of quality. So far,the introduction of Digital Rights Management systems has not substantially reduced copyright infringements. Theensuing revenue “leakage” has beenonly partially recovered through newconsumption models such as all-youcan-consumer streaming subscriptionsand micro-payments for articles.Blockchain-based technologies have the potentialto resolve some of the current challenges: Paid content can receive a boost fromnew, micropayment-based pricing models Copyright infringements and piracywould be nearly impossible Monetization options emerge for anincreasingly fragmented content inventory (e.g. blogs, news bites, photos)However, the technology and the mechanisms are still young and evolving, andindustry-wide adoption of standards ismost probably still a few years off. Allocation of advertising budgets becomes more accurate and targeted asmedia usage can be directly linked tothe respective content items03

Blockchain @ Media A new Game Changer for the Media Industry?CentralDecentralFigure 1: Central transactions versus decentral transactionsWhat is a blockchain?Before going into the industry specifics,let’s clarify what a blockchain is:“A blockchain is a digital, immutable, distributed ledgerthat chronologically records transactions in near realtime. The prerequisite for each subsequent transactionto be added to the ledger is the respective consensusof the network participants (called nodes), therebycreating a continuous mechanism of control regardingmanipulation, errors, and data quality.”The first blockchain transaction was created by Satoshi Nakamoto in 2009. Originallyconceived to serve as the underlying technology for the cryptocurrency Bitcoin, thetechnology offers innumerable further application areas. Blockchain enables thesettlement of transactions in a networkwithout a central authority, thereby increasing the speed and reducing the costs oftransactions.To better understand the underlying processes it is useful to memorize the fivekey characteristics of a blockchain:04

Blockchain @ Media A new Game Changer for the Media Industry?DistributedledgerDigital123Fewer thirdparties48Operates‘trustless’Updated nearreal timeChronologicaland timestamped7Irreversible andauditable65CryptographicallysealedFigure 2: Key characteristics of blockchainDistributedIdentical copies of all records are sharedin the blockchain. Participants can independently verify information. Verificationprocesses are not dependent on a centralized authority. If one node fails, theremaining ones can continue to operateensuring availability and reliability.Consensus-basedParticipants in the network collectively authenticate and approve transactions to theblockchain. There are different methods ofreaching the consensus. Generally speaking, a majority of network participants hasto agree to the transaction’s correctness,and rules can be tailored to circumstances.DigitizedAlmost any type of information can be expressed in digital format and subsequentlybe referenced through a ledger entry.Chronologically updatedThe blockchain is permanently timestamped,each block points to and refers to the datastored in the previous block in the chain, soall blocks are linked to each other.05

Blockchain @ Media A new Game Changer for the Media Industry?Cryptographically sealedSealed in the chain, blocks can no longerbe changed: the prevention of deletion,editing, or copying creates true digitalassets.These multiplied and decentralizedblockchain processes lead to a high levelof robustness and trust. Every participantin the network has the ability to verify thecorrectness of transactions. Network consensus methods and cryptographic technology are used to validate transactions.Thus trust is not established externallyby a central authority or an auditor butcontinuously in the network. Furthermore,the decentralized storage in a blockchain isknown to be very failure-resistant. Even inthe event of the failure of a large numberof network participants, the blockchainremains available, eliminating the singlepoint of failure. New information storedin a blockchain is immutable. Its methodof recordkeeping prevents deletion orreversal of transactions once added to theblockchain, once further blocks have beenadded.A relatively recent but potentially keyconcept especially for media companiesis the concept of “smart contracts”, whichare essentially computer code stored in ablockchain that can perform actions underspecific circumstances.Ethereum, the second-largest blockchainnetwork by market capitalization, was thefirst platform to introduce the concept ofa smart contract that could be deployedand executed in a distributed blockchainnetwork. The Ethereum protocol is publicso the terms of each contract can beviewed by anyone accessing the Ethereumblockchain network.Smart contracts enable counterpartiesto automate transaction tasks that aretypically performed manually and thatrequire the involvement of third-partyintermediaries. Smart contract technologycan result in processes that are faster andmore accurate and cost-efficient.Smart contracts cover a large number ofcontractual application areas that can profit from increased reliability, faster transaction processing, lower costs, and fewermanual process steps via intermediaries.Smart Property for the Internet of Things,copyright law, or financial derivatives willbenefit from more efficient processing oflegal content, to name a few.The use cases for the media and musicindustries discussed below are all builtaround these unique blockchain characteristics as enablers for more reliable,tamper-proof, and failure-resistant applications.06

Blockchain @ Media A new Game Changer for the Media Industry?Time to change?How blockchain can impact mediaIn recent years, a set of heterogeneousplayers has become established along themedia value chain: artists as the primarycreators of content, aggregators, and platform providers plus (depending on thecountry and type of media) a collectingbody handling royalty payments.With the advent of blockchain this industrystructure could change significantly. Blockchain technology permits bypassing content aggregators, platform providers, androyalty collection associations to a largeextent.Thus market power shifts to thecopyright owners.While some applications of blockchaintechnology may still seem farfetched andrequire further technological advance-ContentProductionContentAggregationments, payment-focused use cases havealready been proved to work. Parts of themedia value chain are therefore alreadyendangered by new blockchain-basedpayment and contract options. These canfundamentally reset pricing, advertising,revenue sharing, and royalty paymentprocesses.Payments or advertising revenues nolonger need to be centrally collected. Payment transactions become less costly andthe distribution of revenues is automated,based on predefined smart contracts.The five illustrative use cases below areintended to trigger thinking on how powerful the blockchain concept can be in andfor ption through BlockchainNew pricing options for paid contentContent bypassing aggregators / distributorsRoyalty Payments (Identity)Monetization of C2C / P2P content sharingCompaniesConsumption of paid content without boundariesContent BrokersContent CreatorsAggregators / Platform ProvidersCollecting Society / Performance rights org.Media Value ChainFigure 3: Blockchain’s primary relevance in the media value chain07

Blockchain @ Media A new Game Changer for the Media Industry?Upcoming Media Opportunities from BlockchainFocus areaNew pricing optionsfor paid contentDescriptionAs micro-payments becomeeconomically efficient anddigital content is harder tocopy illegally, new pricingopportunities ariseBenefits Low-price content ( 1 )can efficiently be settledbetween seller and buyerContent bypassingaggregators/distributorsDistribution ofRoyalty PaymentsMonetization of C2C /P2P content sharingConsumption of paidcontent without boundariesBlockchain allows everybodyto become a marketer asreach of lead generationbecomes trackable and canbe compensatedContent consumption / usageis captured in Blockchain anda precise consumption-basedanalysis of playtimes ispossibleC2C / P2P content sharingand usage becomestransparent and monetizablethrough the BlockchainNational / regional limitationsof paid content subscriptionsand DRM complexibilities willbe decreased by theBlockchain Liberalization of advertisingmarket More precise performancetracking of advertisingefforts Near real-time allocation ofroyalty payments Alternative to impreciseestimates Transparent and“controllable” P2P transactions Automated“real-time” billing Automated “real-time”billing Decreased complexity ofrights managment Direct linkage of consumption to individual / userthrough BlockchainauthenticationFigure 4: Blockchain-based Opportunities08

Blockchain @ Media A new Game Changer for the Media Industry?How it couldbe doneHaving learned about blockchain technology in generaland its particular relevance for the media industry, ourfive blockchain-based use cases will show how changescould soon become reality.

Blockchain @ Media A new Game Changer for the Media Industry?„We are at an amazing point inhistory for artists. A revolution isgoing to happen, and the next yearit’s going to take over. It’s the abilityof artists to have the control andthe say of what they do with theirmusic at large. The answer to thisis in the blockchain.”-Imogen Heap, British singer and songwriter10

Blockchain @ Media A new Game Changer for the Media Industry?Use Case #1 –New pricing options forpaid contentConsumers demand an individual contentexperience – they want to consume (video)blogs, pictures, single articles, news bitesor short form videos from their preferredsources to complement the establishedcontent portfolio (TV, Newspapers, Radioetc.), and the success of music and videostreaming services has even intensifiedthis trend.Becoming more and more accustomedto “digital” business models, consumersexpect “per-use” payment models, insteadof paying a monthly / yearly fee for anonline subscription to one particularnewspaper / (Pay-)TV channel.Benefits Increased willingness to payespecially younger digital nativesare more willing to pay a few centsfor a music track they favor thanto be charged a flat monthlysubscription. Copyright tracking becomes moreaccurate, as does allocation tomedia copyright holders and thesubsequent distribution of royaltypayments. Efficiency increases, sincecostly monitoring of contractual agreements and complexdistribution of profits are notnecessary.The subsequent increase in the numberof transactions for each usage will alsodirectly affect the transaction costs incurrent billing systems and models.Transaction costs made it difficult tomarket low-priced content items or smallbundles competitively and with a profit.Blockchain-enabled micro-payments canhelp publishers to monetize this flexibilityseeking group of customers. With the helpof a blockchain, individual articles or otherpieces of content could be sold for centprices without disproportionate transaction costs.Micro-payments boost paid contentThe blockchain makes even micro-centpayments cost-efficient. Current cryptocurrencies, such as Bitcoin or Ethereumpermit transactions as small as fractionsof cents. It is thus an enabler for pennyprice content purchases, such as payingfor reading a single news article or streaming a single song. Also, traditionallyad-sponsored content such as YouTubevideos can be monetized with an “ad-free”alternative for a small fee. Moreover, thecombination of clearly-defined ownershiprights and the ability to track sales permitsthe launch of totally new pricing models.Thanks to blockchain, the distributionand monetization of bite-sized contentbecomes much more fluid and prevalent.Blockchains enable copyright ownersto track the usage of their material. Italso ensures they receive their fair shareof proceeds calculated and collectedaccurately and cost-efficiently.11

Blockchain @ Media A new Game Changer for the Media Industry?Impact on digital contentThe blockchain significantly affects theway in which media companies organizetheir workforce and payment schemes,e.g. articles posted on a news websitecould be directly linked to their respectiveauthors. This way, profit-sharing couldpermit the featuring of articles not just bywell-known columnists, but equally onesby freelancers. Micro-payments permitnew print media pricing models that canAs IsPublisherUserOnline NewsPublisheror AuthorSingle Articles(data off Blockchain,payment in Blockchain)Challenges Transaction quantity is massivebecause a large quantity ofhistorical data needs to beretained at the blockchainnodes, due to the numberof transactions.SubscriptionOne MonthTo Beattract new customer segments who arereluctant to purchase relatively expensivesubscriptions for access to a broad rangeof content. Instead, a blockchain-enabledonline news website could charge readersfor its articles by the article – for a smallprice of only a few cents per read. This way,ad-free content can be offered to userswho are sensitive about advertising andprefer to pay a small amount of moneyinstead. Common blockchain standardsstill need to be agreed on.User Initial user registration is inevitable. Users have to registerand provide payment detailsto activate pay-per-click.Figure 5: Micro-payments for digital content12

Blockchain @ Media A new Game Changer for the Media Industry?Use Case #2 –Content bypassingaggregatorsPaid content is increasingly gaining traction,but the monetization of online media stillheavily depends on advertising. As thereis no overall willingness to pay for digitalcontent, ad-based distribution modelswill remain important in the next decade.So far, the digital adverting ecosystem iscomplex and involves numerous stakeholders. There are several intermediariesbetween the content creator and thepotential advertiser. The slice of theAggregator/ DistributorUserAdvertisingAs IsProduceror AuthorTo BeProduceror AuthorAdvertisingUserFigure 6: Direct media customer interactionmonetization cake for the initial creatorof digital content becomes smaller withevery additional party involved. For emerging media assets such as blogs or usergenerated content, the complexity of established advertising processes can evengenerally impede ad-based monetization.Blockchain facilitates customerrelationshipsBased on the blockchain, everyone fromleading media houses to small bloggerscan easily generate advertising revenues.As blockchains permit an exact trackingof content usage, it also enables a direct allocation of advertising budgets.Together with new, blockchain-enabledmicro-payments, content creators areable to establish direct relationships withtheir customers. In an extreme scenario,aggregators could even become obsoletein the future.As soon as artists tie up digital copies oftheir songs or videos in a blockchain theywill be able to sell them directly to theirfans without any intermediaries such asrecord labels. Moreover, a fair allocation ofrevenues from music streaming becomespossible, whether advertising- or paid content-based. Artists can market their songsindependently of big platform providerswherever they want, since a blockchain permits easy tracking of usage and deductionof the associated payments.13

Blockchain @ Media A new Game Changer for the Media Industry?Shifts of powerWill aggregators soon become obsolete?Probably not, because media consumersstill need to discover new content. Furtheron, the collection and aggregation ofcontent will remain an important stage ofthe media value chain. However, powerin the media industry will probably shiftback to the artists, and the dominating roleof huge platform providers will decline.The business model of large advertisingnetworks is also endangered. In a blockchain age, the allocation of advertisingbudgets can be directly measured andbilled. The flat marketing of advertisingspace will come to an end.Aggregators need to repositionOverall, blockchain is a serious gamechanger for the media and digital advertising industry. CEOs might need to reposition their companies for the newera. Media business models have to beadjusted to new balances of power. Withfair billing models, aggregators can meetthe requirements of content producersin good time. In this manner they will beseen as a fair partner in the blockchain agetoo. Smart search and recommendationfunctionalities will secure the significanceof platform providers in the medium term.ChallengesBenefits Content aggregators and advertising networks are likely to losetheir dominant market positionin the media world. Blockchain permits direct customer relationships between fansand artists. Monetization of content becomesmore democratic and entry hurdles could vanish. Marketing performance andimpact become more accuratelymeasurable. Existing complex media and advertising ecosystems becomesimple and transparent.14

Blockchain @ Media A new Game Changer for the Media Industry?Use Case #3 –Distribution of royaltypaymentsToday, the distribution of royalty paymentsbuilds on multiple contracts betweenartists, producers, and music publishinghouses. For instance whenever a song isplayed on TV, radio, at events or is streamed online, the rights holders should receive a royalty payment in a contractuallydefined split. In order to ensure that thisis happening, the national copyright collection bodies act as a collection platformfor copyright holders and compensate theeligible parties.Blockchain permits for transparent royalty distributionWith the help of a blockchain, the distribution of royalties could become more efficientand transparent. This would include a musicdirectory with the original digital music file –associated with all relevant identities ofpeople involved in the content creation.It is also possible to store instructions inChallengesBenefitsHowever, contractual complexities cancomplicate the settlement activities,leading to opaque proceeds (“black box”).The share of royalty payments distributedin this manner relates to music consumption that cannot (yet) be linked to therights holder. That can be a playlist at awedding, music played in a store, or musicin a YouTube video. At the moment, thecollecting body gathers airplay statisticsand uses that same relative distributionfactor for the royalties that are not directlyassociated with a rights holder. As a result,the payments distributed are mere proxies,and e.g. lesser-known artists with only afew dedicated statistics are potentially notbeing compensated with a fair share ofroyalties overall. Large amounts of historical datato be retained at the blockchainnodes due to the number of“transactions” (airplays, streams,club-rotations etc.) across allmusic consumption channels Near real-time and exactallocation and distribution ofroyalty payments according tousage, based on smart contracts- no more black boxes Common blockchain platformand interoperable blockchainstandards need to be agreedupon by the many relevantparticipants The position of a trusted thirdparty might not be granted tocollection associations by marketparticipantsform of smart contracts that specify howthe artists are to be compensated and howsales proceeds are to be divided among alleligible parties. Preferably, an embeddedblockchain-based mechanism tracks usageon streaming services, radio stations, television etc. and automatically accumulatescredits or disburses actual payments to therespective copyright owners. Cost efficiency – no costlytracking and monitoring systemsfor music usage required, asevery consumption / usage willbe tracked in the blockchain New role of collection associations – blockchain platformprovider and verification ofsmart contract details throughcollection asso-ciations astrusted third parties15

Blockchain @ Media A new Game Changer for the Media Industry?As IsMusicArtist Publisher Aggregator DistributorTo BeArtistSharedBlockchainDistributorFigure 7: Potential change in distributionof royalty paymentsUserUserOpportunities and threats forcollection associationsCollection associations could use a blockchain to create a permissioned blockchainecosystem for musical rights. Based ona broad consensus amongst the partiesinvolved, the industry bodies would actas “gatekeepers” to grant and/or withdraw access to the closed ecosystem. Inaddition, collection associations, typicallyacting domestically for one or a handfulof countries, could use a blockchain as anenabler to enter new markets, since established measurement and disbursementmechanisms in use with radio stations,broadcasters, and other parties which, forinstance, play music commercially, couldbecome obsolete through the introductionof smart con-tracts. In a different scenario,blockchain could also become a threat totraditional collecting bodies. Up to nowthey have been ‘chasing’ certain commercial users who “do not pay their bills”, asexemplified by YouTubers illegally usingcopyrighted music in their videos, or royalty dues incurred by an event DJ. With thehelp of blockchain, every play of a song isrecognized, counted, with royalties trackedand allocated to specific users. The roleof the collecting body, collecting and distributing royalty payments, could soon be-come obsolete, as blockchain-based smartcontracts take over the work instead.To sum up, collection associations mustimmediately start thinking about how toadapt their business model and how to establish attractive permissioned blockchainecosystems on a global scale.16

Blockchain @ Media A new Game Changer for the Media Industry?Use Case #4 –Secure and transparentC2C salesBlockchain has the potential for contentrights owners to enable additional revenue streams by leveraging consumer-toconsumer sales.Thus while the idea of peer-to-peer content sharing is not new, it is and has beena serious threat to music creatives andmovie / TV producers in the past. Peerto-peer networks and the respective exchange of(media) files is almost impossibleto control due to the sheer number of exchanges and of users exchanging files.infringements are nearly impossible. Inaddition, the transparency of blockchainenables content owners to “control” peerto-peer content distribution and thus tocreate new business models such as consumer-to-consumer marketing of content.For example, now a subscriber can accesstheir blockchain content and share it with afriend. The subscription holder will then beAs IsDistributorFor example, a subscriber records a showon DVD which a friend without a subscription is interested in. Giving or selling thisDVD to someone without a subscriptionis theoretically illegal but an establishedpractice.Attempts to legalize file exchanges and tomonetize the transactions and contentshave failed, owing to lack of customerinterest and acceptance. Also due to thesuccess of streaming media, platforms likeNapster have changed their business model towards flat fee and all-you-can-eat consumption models for streaming services.Nevertheless, illegal file sharing still remains a major problem for media companies, while the blockchain has thepotential to solve that problem. With ablockchain, content owners have full control and visibility of the consumption andnumber of uses of individual songs and /or movies. Therefore piracy and copyrightcharged directly with the fee for the specificcontent they shared. This permits easy andlegal sharing of paid content among users,and forms an additional source of revenuefor aggregators and copyright holders. Thesame logic applies to physical copies thatare shared among consumers, if the physical asset is authorized on a blockchain.UserFriend of UserIllegal copyDirect purchaseTo BeDistributorUserUser’s BlockchainFriend of UserFigure 8: Secure and traceable C2C / P2P content sharing17

Blockchain @ Media A new Game Changer for the Media Industry?Challenges foraggregatorsBenefits forcontent ownersBenefits forconsumersIn order to participate in C2Ctransactions, media aggregators(such as (Pay-) TV players andmusic streaming providers) willstill play a role in the marketingof contents. Nevertheless, weexpect the dynamics of the marketto change in the long run dueto the “democratizing” effect ofblockchain. The aggregator rolewill shift towards curated discoveryplatforms to find new content andwill lose their “gate-keeper” role, asmonetization and real-time billingwill be available to content ownersvia blockchain.Content owners can fully leverage,control, and monetize all copyright assets that are recorded inthe blockchain. In addition, illegalfile sharing and other copyrightinfringements will be impossible,due to the transparency of theblockchain details through collection associations as trusted thirdparties. The blockchain records everyusage of a specified contentand enables real-time andfully transparent consumption-based pricing mechanisms. Consumers do not haveto pay a monthly up-front fee,instead, only the actual usagewill be billed to consumers. Due to the very low transaction costs in the blockchain,consumption-based businessmodels are also applicable tomicropayments.18

Blockchain @ Media A new Game Changer for the Media Industry?Use Case #5 –Consumption of paidpaid e last use case deals with a situation thatmany subscribers of paid content subscriptions (e.g. for pay TV, VoD, streaming services) have witnessed in the past. They cannot access the contents they subscribedto once they are in another country / region, for example during business travelor on vacation.The reasons: Licenses for content are usually soldcountry by country and therefore access from another country / territoryis prohibited by the licensor.Aggregator/ DistributorUserCountryplatformAs IsProduceror AuthorTo BeProduceror AuthorNevertheless players are currently rollingout models whereby sub-scriptions andaccess to content are not limited to specificcountries / regions. But that can only beattained if the aggregator has acquired therights for all geographic areas and the DRMsystems are integrated.The blockchain isnot a technical prerequisite for this endeav-or since more sophisticated Digital RightsManagement systems are also capable ofdealing with complexities like multi-countryaccess.Nevertheless the blockchain has the poten-tial to make DRM systems obsolete orat least to reduce the complexity of thesesystems, because every transaction/ consumption is tracked in the blockchain anddirectly linked to a user. The payment willbe automatically initiated according to theunderlying smart contract terms for thecontent.ChallengesBenefits Transformation from currentlyinstalled DRM and billing systemstowards multi-country accessand integration of blockchainfunctionalities is fraught withcomplexities Improved customer experiencethrough “seamless” subscriptionmodels across different geographic areas Players could become obsolete asaggregators since content ownerswill have the ability to market andsell their intellectual propertydirectly to consumers Less complex and real-time billing Transparent and “self-executing”rights management due tounderlying smart contractsCurated int.platformUser In addition, DRM systems are notseamlessly integrated between different countries. Therefore the respectivesubscription rights and packages are notaccessible in other countries.Figure 9: International access to paid content19

Blockchain @ Media A new Game Changer for the Media Industry?Takeaways forMedia PlayersIn a nutshell, blockchain’s potentialbenefits for the media industry primarily relate to payment transactions andcopyright tracking. Possible applicationsand technical innovations will have a farreaching impact: content creators maybe able to keep a close track of their playtimes, royalties and advertising revenuescould be shared in an exact and timelymanner based on consumption, and lowcost content could be purchased efficiently,even if priced at mere fractions of cents.However, there are several fundamentalissues and technical obstacles which mayundermine the realization of our use cases: Trust in blockchain technologies andplatforms Opaquen

payment and contract options. These can fundamentally reset pricing, advertising, revenue sharing, and royalty payment processes. Payments or advertising revenues no longer need to be centrally collected. Pay-ment transactions become less costly and the distribution of revenues is automated, based on predefined smart contracts.