On Spotify, Youtube, and Netflix You’re Paying the Wrong Person

The world today isn’t the same as it used to be even ten years ago — the amount of total information out there now doubles every 13 months. A century ago, our predecessors were consuming the contents of only one or two newspapers a day at best. Nowadays, we have much more information available to us: we have thousands of news sites on the Internet, we have Wikipedia, we have streaming platforms with tens of thousands of movies and TV shows. The supply and demand, especially for entertaining content, is enormous, and it’s hard to even choose anything among all this high-quality content. The capitalization of entertainment-related companies and content distributors has skyrocketed. Just take Netflix for example, it grew eight times its original size in the last five years. The only people who don’t get too much from all this content abundance are the people who create it for distributors. For creators, it’s still hard to monetize their own content as the biggest slice of the pie goes to providers. Is there any way to change this situation?

Entertainment is poised for disruption

How come the most important people in the industry, the creators, are left with hardly any revenue? Let’s dive in and find out.

Today’s entertainment industry, currently worth more than $1.8 billion, is mostly a buyer’s market. The evolution of streaming platforms, such as Spotify, YouTube, and Netflix, diminishes the value of content by making it easier to obtain for consumers; the consumer can simply switch between channels at light speed.

On the one hand, as there is now a plethora of options for consumers to choose from, the dominance of platforms providing free content, such as YouTube, leaves creators to face increasing difficulty in gaining viewership and monetizing their videos. This doesn’t affect platform revenues, though — in 2017, YouTube had an annual revenue of $3.5 billion.

On the other hand, centralized streaming platforms have the full control over the monetization process for content creators. For example, a YouTube creator can earn only $7–10 per 1,000 ad views, so long as their video is compliant to YouTube’s list of policies. Also, the creator can easily become demonetized, resulting in receiving no income for their videos. Twitch streamers make even less — $2–10 per 1,000 ad views, and they only get 50% of the fee that the subscribers pay. Does that seem fair?

Yet, while the Internet has curbed the profitability of entertainment industry suppliers, continued innovation in this space has finally led to the blockchain, which holds promise to foster more inclusive monetization and engagement models for content creators and audiences alike.

Blockchain can foster open entertainment

The blockchain has demonstrated its value and applicability for several other industries, whether it’s being used in fintech to better serve underbanked communities in developing worlds or improving product authenticity for retail consumers. Now, the blockchain has its eye on innovating the entertainment industry, too.

Let’s make a quick list of all of the possible blockchain applications.

  1. Microtransactions
  2. Direct payments to creators
  3. Content distribution

All of these applications are very interconnected. Microtransactions are necessary when we’re talking about cheap content. iTunes sells songs for 99 cents per track and gets 29 cents from an artist as a fee per track. But what if you want to set the price at 10 cents? It’s impossible on iTunes. Nowadays consumers like everything cheap, so it could be a major advantage for a creator if he or she could set the prices themselves. But paying with a credit card or PayPal isn’t worth it, you can’t pay a few cents with these providers. Crypto, however, is another story because the blockchain can cut the costs, allowing for microtransactions.

By distributing content directly between the creator and consumer, we can get rid of the middleman. As a creator, you don’t need to sign a deal or get approval from someone to post a video. On a decentralized platform, no one decides who can post content and who cannot. All profits go to creators. All content distribution can be done via smart contracts. A recent example of this would be when Grammy-winning artist Imogen Heap tried to distribute their music on Ethereum.

Consumers can also benefit since blockchain technology can alleviate problems surrounding content access, especially in emerging markets where smartphone usage is on a meteoric rise but access to an established online content platform is highly limited. While certain markets have been notorious for peddling pirated (and low-quality) content, consumer demand for high­-quality content (that may come at a cost) is on the rise.

Are we ready for a blockchain-­based entertainment industry?

While applications for the blockchain in the entertainment are still in their infancy, we’re already seeing a host of novel ideas coming to light.

When it comes to visual content, YouTubers and Twitchers may look at blockchain solutions as better fits towards for the content they produce. But the blockchain is also seeping into slow­-moving industries like Hollywood. One such example is “No Postage Necessary,” which is a dramedy directed by Jeremy Culver on 35mm film. For its release, the movie’s producers collaborated with Vevue — a P2P network sharing app powered by the Qtum blockchain platform — and allowed viewers to pay to view it on demand via cryptocurrencies.

There are already several projects that intend to create blockchain-based entertainment platforms. Some of them are closer to their goal, and some of them are still far. Among the first ones we can name is BOLT. It already has what is usually needed the most — a customer base, and now it has a blockchain solution for giving access to entertainment for unbanked and for people from the third world countries, so-called emerging markets, who don’t have a fast access to the Internet.

The BOLT team believes that instead of profiting from users’ data, like many centralized platforms do, the ecosystem of decentralized platforms should serve its community. A noble goal, but how would they overcome the speed limitations of the current blockchain platforms? BOLT is built on Zilliqa — theoretically, one of the fastest smart-contracts platforms. Its mainnet will be launched in Q1 2019. Zilliqa will allow them to maintain high speeds, which is necessary for a high-load platform with many users.

One of the most interesting features that could draw attention to this project is broadcasting highly compressed video to low-bandwidth smartphones. This feature could come in handy for the users in regions with a slow Internet connection.

BOLT has a reliable list of content partners, such as Al Jazeera, Discovery Channel, Citizen TV, Channel NewsAsia, and a sleuth of telecommunication companies in the emerging markets, including Maxis and Digi in Malaysia, which serve over 20 million subscribers in Malaysia, and Safaricom in Kenya, which serves over 39 million subscribers. Collaborating directly with these providers in markets with low credit card penetration and a high number of underbanked people allows them to adopt a layer of blockchain invisibility to ensure a widespread, seamless, and elegant adoption of the BOLT token. This, in turn, increases the utility value for access to services including news, education, and entertainment.

Another decentralized platform with a similar goal is Contents Protocol. They also fight the unfairness of centralized content platforms, but in their own way. A project by Watcha, Inc. and the developer of a popular South Korean mobile app, Watcha Play, Contents Protocol solves an interesting problem. They give their content creators detailed data about the consumers of their content that will allow them to create a better content in the future, based on these data insights. This is something that centralized platforms don’t like to share; they keep this information to themselves and sell it to advertisers. This project has solid backers, according to its Onepager, such as the OKEX exchange, Arrington XRP Capital, and many others.

And the third project that’s worth a brief mention here is Qravity. It works on the Ethereum blockchain and it also allows users to distribute and sell content, but its most interesting feature is the set of tools for collective digital development. The two previously mentioned platforms, BOLT and Contents Protocol, are only focused on what happens AFTER the content production phase, but Qravity concentrates on both the production and distribution for digital content creators. A set of smart contracts allows users to record every small contribution that every team member has done for the project on the blockchain, and it rewards team members with shares of project ownership for every completed task. It could be useful for big projects with many team members and would help to ensure that everyone gets rewarded according to their efforts and the value they brought to the project.

Conclusion

Entertainment is one of the basic needs of the modern human. The industry grows every year, and its revenue will reach an estimated $2 trillion this year globally. It’s growing mostly in the digital sector: in 2009, the revenue in digital entertainment was only $342 billion, relatively small, compared with $1,038 trillion in the non-digital sector. But now it’s catching up; 9 years later, they are nearly equal in size. Digital entertainment revenue is nearly $1 billion this year, while the revenue in its non-digital counterpart is almost the same.

The spread of the Internet gave us the opportunity to become content creators and to earn money for them. More and more people are entering this industry, and very soon the same process that we’re seeing in the banking sphere will take place in entertainment: the existing status quo of centralized distributors, which cut a big portion of creators’ profit, will become unacceptable for many people. And the blockchain will become a great solution for fighting this unfairness. Many years ago, the Internet transformed the music industry. Now it’s possible for the blockchain to do the same to the whole entertainment sector, and projects like BOLT or Contents Protocol could give creators new opportunities. Will it be the same industry that we know now?


On Spotify, Youtube, and Netflix You’re Paying the Wrong Person was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.