How Blockchain Could Start To Make Waves In Media And Entertainment In 2018

Blockchain technology made big news in December thanks to the bitcoin cryptocurrency surging past $10,000 to a $20,000 peak, the launch of bitcoin futures in major exchanges, and the announcement that the Australian Stock Exchange will use blockchain technology for trade settlement. Blockchain could also start to be implemented in media and entertainment in 2018.

The beauty of blockchain technology is that it enables a digital marketplace that is both decentralized yet tamper-resistant. Transactions are recorded chronologically in a distributed ledger that is transparent to its participants, but encrypted so nobody can cheat by changing or faking transactions. Agreed business rules, logic, and contract terms can also be programmed to automate transactions, known as 'smart contracts'. (For more on how it works, see this Forbes tutorial-style article.)

To envision potential markets that are ripe for disruption in media and entertainment, you have to think of ones where participants would benefit from both security and transparency, like payments, funding, monetization, and contract enforcement.

Royalties

It is difficult to pay fairly for creative work in a digital world where it is easy to share and distribute copies, so royalty payment mechanisms are ripe for disruption. For example, music streaming sites and rights holders struggle to agree on compensation for trillions of song streams, leading to legal fights such as last Friday's $1.6 billion lawsuit against Spotify.

The Open Music Initiative (OMI), composed of 200 members including the three major labels Sony, Music, and Warner, as well as YouTube, Netflix, Spotify, and Viacom, seeks to modernize royalty payment mechanisms. OMI revealed last week on CNBC that it's considering blockchain as a foundational technology.

The vision? A transparent blockchain-based ledger that contains music assets and their rights holders. Smart contracts can then automate royalty payments based on a song's consumption, including streaming.

Crowdfunding Of Creative Productions

2017 marked the uprising of blockchain start-ups across industries, often funded with initial coin offerings (ICOs). ICOs use cryptocurrencies like bitcoin to crowdfund new ventures.

Creative productions could also leverage ICOs for crowdfunding. In fact, Indiegogo just launched in mid-December its own ICO platform. So ICOs for films and other creative ventures could ramp up in 2018, contingent on how the Securities and Exchange Commission (SEC) applies and imposes securities laws to ICOs.

A blockchain-based crowdfunding platform can securely record funding transactions that are transparent to all investors, allowing them to know real-time where they stand in the pecking order. Upon sale, licensing, or consumption of a creative asset, smart contracts can then automate payments to both rights holders and investors.

For example, iProdoos is a blockchain platform that launches in 2018 to enable aggregation of talent for premium TV & film production, and crowdfunding with traditional or crypto currency. This allows consumers to generate revenue from the projects they fund.

Digital Advertising

Despite the ability to target and personalize ads, the digital advertising ecosystem is pretty inefficient and opaque, to the extent that 40-70% of ad dollars can go to intermediaries. Developed in partnership with Nasdaq, NYIAX recently deployed a blockchain-based ad exchange platform that allows publishers and advertisers to efficiently trade advertising contracts. Richard Bush, Chief Product and Technology Officer, states: "With valuable experience in capital markets, NYIAX has a long-term vision to create a more financially rigorous model leveraging fin-tech best practices with advertising and media."

Madhive is also deploying an ad exchange targeting digital video content sites. Its CEO, Adam Helfgott, states: "Our platform enables ad-based monetization of video in a secure privacy-compliant way so a viewer's private information is shared only with an artificially-intelligent agent that pulls in relevant ads." This could come handy in the EU market, where new strict privacy laws go into effect in May 2018 that require companies to track and protect consumer data.

Distribution

Piracy is one of the main headaches that digital distribution brought to media and entertainment. Phil Gomes, blockchain thought leader at Edelman, states: "I personally believe that a lot of piracy comes from friction in the legal distribution mechanisms. Blockchain technology can enable more frictionless monetization of content to better compete with pirates." The key is to seamlessly match the legal user with the legally-purchased content, so that the payment mechanism is efficient and it is easier to compete with pirates, which by design don't process payments.

Clearly, from the examples above, blockchain is not just about digital currencies. And whether it's these or other ventures that succeed, all experts I talked to agree that 2018 will be a big year for blockchain in media and entertainment. Gomes stated: "2017 was full of corporate pilot projects to test applications of blockchain technology; 2018 will be the year when many of these will be deployed at scale."

We are entering a hype period for blockchain technology reminiscent of the Internet bubble, so it will be hard to distinguish between hype and true potential. So how to know where the real opportunities are?

Keith Montgomery, Vice-Chairman at CyberOi, a consultancy that guides iProdoos and other blockchain ventures like QuantM.one and Cryptowork, states: "While in 2017 there were plenty of hype and ICOs, 2018 will be when the first business disruptions happen. The winners will focus on solving real business problems and use media effectively to create communities of mass adoption."

So stay tuned. If you are in media and entertainment, 2018 will be a year to closely monitor and possibly experiment or invest in blockchain innovation, if you haven't done so yet. Otherwise, you could be left behind.

Dr. Granados is the Director of the Institute for Entertainment, Media, and Culture at Pepperdine Graziadio Business School. Follow him on Twitter, Forbes.