New tech is changing the media and entertainment industry. New business models are being generated to cater to consumers who are increasingly expecting media and entertainment providers to deliver better choice, convenience and value packaged in personalised and customisable experiences made available on demand and on a cross-platform basis but with little to no advertising backed by strong data protection frameworks.
Media and entertainment companies therefore need to adapt to new realities. With intensifying competition for viewers and advertisers, combined with ongoing declines in subscribers, there is mounting pressure on topline performance at many companies across the industry. The proliferation of video distribution platforms and uplift in engagement metrics, subscription fees, advertising revenue as a consequence has created enormous competition with respect to developing and acquiring the best content. And with increasing costs of procuring content and talent new operational practices and mechanisms will inevitably be introduced.
Where does blockchain fit in?
In considering how blockchain impacts media and entertainment businesses, there are apparent risks and opportunities. For content creators, blockchain provides more control, flexible content licensing models, better content revenues and faster monetisation. For aggregators such as music businesses, publishing companies, performing rights organisations, it means less need for intermediaries and more efficient distribution of revenue across the chain which potentially makes them less relevant. However, incorporating blockchain-driven technology into existing offerings could help aggregators concentrate on activities where they can add real value. Managing contracts, relationships with labels, legacy catalogs, and even the collection of royalty payments for musical events may still require human involvement.
For distributors, the threat of disruption is much more significant. Online distributors such as Spotify and Amazon, which have reaped huge profits from the digitisation of content, may face some of the biggest risks. As content consumers are able to connect directly with content creators, distributors may play less significant roles. Even if this change takes many years to materialise, the threat is real. Like aggregators, distributors need to figure out what they provide that’s distinctive beyond being an access and payment channel. To prepare for the future, they need to experiment with blockchain-enabled business models so that they can position themselves in a new digital content market built on this technology.
The state of blockchain-based technologies in media and entertainment – what progress has been made?
Monetising value continues to present significant challenges despite new business models emerging in the media and entertainment industries. Newspapers and magazines still struggle to monetise value due to the unlimited free content and limited mechanisms for protecting intellectual property.
Advertising revenue has shifted to social media and search platforms. In the music world, for 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.
Companies have started building innovative business models that not only offer new monetisation strategies for their digital assets but also streamline critical business activities such as relationships with business partners and distribution of revenue across the value chain. These developments could create completely new ecosystems for content creation and consumption.
Monetising content for creators and curators
The first new business model involves creating a social network in which users can earn financial rewards (in the form of micropayments or payments of digital currency) by posting their own content or curating and promoting others’ posts. Rather than allowing the platform owners to reap all the monetary benefits, as happens today with established players like Facebook and LinkedIn, this model compensates independent content creators (bloggers, experts, hobbyists) and consumers (social network users who enjoy sharing their opinions) for their contributions. For example, Steemit, a blockchain-based social network, rewards content creators with digital currency (called “Steem”) based on the popularity of their posts. Although it was initially geared toward users interested in the topic of cryptocurrency, the content focus has expanded to include technology, science, news, art, food, photography, and travel. As a post is upvoted and becomes popular, the author’s reward increases, and early promoters can earn a slice of that. The platform also generates reputation scores for users. According to the Steemit website, this system helps foster the creation and curation of quality content.
Steemit isn’t alone in rewarding users financially. Yours, also pays content creators and allows them to set their own rates for how much they will receive when someone reads or views a post. Authors and artists can even charge users for the right to comment. Compensating users on both sides represents an entirely new concept for monetizing social network activity. Whereas Facebook’s and LinkedIn’s business models rely on targeted advertising based on insights drawn from a user’s platform activity history, blockchain-based social media platforms aim to monetize the relationships between authors and their followers, thus stimulating the creation of new content. Letting users monetize their own content is a key element in attracting users to the social networks. However, there are different mechanisms for monetization available to platform owners as well. Yours uses a commission model and charges fees for transactions that occur on its platform. For now, Steemit is using an approach that’s closely linked to the value of its own cryptocurrency, although its revenue model is still evolving.
Creating a one-stop content shop
The second new business model simplifies the value chain by decreasing or eliminating the need for intermediaries between users who create content and those who consume it. The model does away with many of the traditional steps and layers, such as content aggregation and distribution, thereby reducing the amount of time it takes to bring new content to consumers and realize revenue. It relies heavily on cryptocurrency and blockchain-based applications like smart contracts and smart property to facilitate and process direct transactions between creators and consumers.
One company that uses this model is Breaker, formerly, SingularDTV, a blockchain film and television studio and distribution portal. Breaker caters to video and film producers by giving artists more control over their work, allowing them to launch, distribute, and monetise content without the usual intervention from studios or production houses and without being tied to exclusivity agreements with distribution channels. At the same time, it uses smart contracts to enable consumers to browse, access, and pay for content instantaneously with digital currency.
Similarly, startups Creativechain and Musicoin offer their own marketplaces for digital content, where creators and consumers can interact without intermediaries. Creativechain targets artists, including musicians, designers, and writers, using a blockchain designed to support content registration, distribution, and monetisation. Artists can choose from different licensing methods, ranging from free distribution to paid limited editions. This flexibility lets them select the method that is best suited to distributing their work. Under this scenario, there is no need for third-party distributors to bring the content to consumers and collect revenue; the platform handles that directly. Musicoin, meanwhile, focuses exclusively on the music industry and encourages independent artists to register and publish their work on its own blockchain-based platform. It uses a standard pay-per-play smart contract to reward musicians based on preset fees each time a song gets played. In addition, consumers are encouraged to reward their favourite artists with tips. Besides distributors, other players typically involved in music rights management (including what are known as “performing rights organisations,” which essentially collect royalties for music performance on behalf of rights owners) are not needed on this platform since it connects music consumers directly to artists or labels and automatically customises revenue distribution.
The startups adopting this business model are capturing revenue in different ways. Since content is being sold and payment transactions are handled in the platform, one straightforward monetisation strategy is to charge commission fees. Other options companies are considering are licensing platforms for use by third parties and creating and selling original content. In addition, some startups are following an open-source model: The platform is published as free software, and the startup works to drive its further development while earning money by providing services like consulting, training, or onboarding. As with the previous business model (monetising content for both creators and curators), one-stop content shops are still experimenting with different revenue model options until the most effective ones consolidate.
Monetising content and building a one-stop content shop were the most disruptive. In both instances, companies are starting small by serving a low-end market niche (for example, indie music labels and their audiences) with a value proposition aligned with users’ goals (helping both artists and consumers capture more financial value and making their transactions less cumbersome). Because the underlying blockchain technology is not sufficiently mature to handle billions of users and millions of content titles, startups are not yet able to challenge established mass-market players like Facebook, Amazon Prime, and Netflix. But that’s partly what makes the new models serious threats: Industry leaders might not recognise them as threats in time to protect themselves. As the technology matures and the blockchain-enabled startups begin serving broader segments of customers with a wider range of content, for instance, or ad-free social media environments, it will be the beginning of a new era in the media and entertainment industry.
Sources: MIT, EY