Notes From Silicon Beach: Can the Blockchain Disrupt Entertainment and Media?

By Nicholas DeMartino ● October 01, 2018 13:10

Blockchain is a technology invented to serve as a transparent public transaction ledger for the cryptocurrency, Bitcoin. Its design has inspired the creation of hundreds of other distributed applications (dApps), often backed by their own Bitcoin alternative currencies via Initial Coin Offerings (ICOs). In 2015, the value of ICOs ranged from $5-10 million, and approximately $5 billion in 2017. Currently, it’s around $10 billion. The global market for blockchain is projected to reach $60 billion by 2024.

Beyond this new way of raising capital, many entertainment and media entrepreneurs see the blockchain as a way to disrupt what they see as a broken media ecosystem deformed by immense centralized power, secretive deal-making, complicated and unfair rights and payment systems, and poorly structured incentives for both artists and consumers.

I spoke to the founders of some of these businesses to understand why blockchain may enable better business models than other startups in the entertainment sector. 

A header image that reads 'Blockchain + Hollywood'. The background is dark blue with white stars.

Check out blockchain entertainment startups on this infographic provided by Enlightened Digital, Brian Thomas

Documenting the Creative Process

Sendergram provides a blockchain-enabled file sharing, review, delivery, transaction and payments platform for digital media, such as fine art, photography and video. I spoke with cofounder Andy Rosen, who started his career as a rock photographer covering the punk music scene in London before moving to Los Angeles to build companies that produce music videos, web design and then database software.

“There are two sides in our business,” said Rosen. “Pick your side – screwing the artist or not. I always want to protect the artist. Two years ago, we set out to build a ledger for the creative process from the artist’s point of view. The creative business is quite abstract, things get lost in translation, and are often subjective.”

Sendergram offers a blockchain registry for creative work. Other startups offer this function, but Sendergram tracks every contact, email, discussion, contract, update and payment with its own communications system, which records it all on the blockchain. Sendergram also aggregates a user’s media files, whether they are housed in various cloud storage systems or on their own hard drives, allowing users to easily find and safely share files. It can be seen as a cross between email, Slack channels and file sharing – all tracked and secured by the blockchain.

Rosen is especially interested in the growing class of creator/prosumers, as well as distributed creative teams, agencies and corporations with multiple vendors contributing to projects. Currently, single accounts for the Sendergram beta are free, with business subscriptions paying a fee based on number of users on the account, and the company is preparing for a funding round.

The Business of Film

Gjain seeks to use the blockchain’s distributed ledger to bring greater transparency to the financing, contracts and payment systems required for media content. Gjain will offer a suite of business services built on smart (self-executing) contracts from inception to distribution, investment to profit disbursement or tax write offs.

Cofounder Vlad Lodzinski hopes to position the company between the different players in the film finance and ownership value chain with a reengineered model, one that eliminates the secrecy and contractual opacity that characterizes many film finance deals.

Gjain won’t replace legacy players, but it will make the process more efficient, cheaper and fairer. He sees Gjain as part of an emerging global digital economy that will be powered by new technologies like blockchain, and so will transform the way business is conducted. As he sees it, blockchain and artificial intelligence will help reduce risk for investors and improve financial returns for creators.

Their client base includes filmmakers (individuals and studios), investors (institutional, high net worth individuals, retail) and service providers (finance, distributors, legal, auditing). Lodzinski and his team of six based in London, New York, Los Angeles and Poland plan to launch in Summer 2019, though tests are already in development with key partners. There will likely be versions for different territories like Europe and North America to reflect different regulatory and finance factors. Gjain financial backing is targeted at traditional sources like private equity, and not a cryptocurrency.

Democratizing the Digital Studio

Crowded Cloud is an ambitious reinvention of the content production studio. It uses the blockchain’s decentralized governance model to attract working professionals who want a say in new projects, as well to share in profits they help create.

Led by a former aerospace engineer and digital media services executive, Javier Benavente, Crowded Cloud’s studio model reflects the distributed and global character of the media workforce. Unlike legacy legal and production models, however, in which all decision-making is held by a centralized corporate entity, Crowded Cloud embeds democratic decision-making into every phase of production.

Benavente will seek to raise $100 million in conventional funding by year’s end, with as many as 10 shows going into production next year. Most of the cash raised will convert to Crowded Cloud’s own HAVI token and be held in a Project Development Pool that can be applied to projects voted upon by token holders. As with other tokenized systems, its market value increases as its use cases generate successful projects. Benevente plans to focus initially on catalog content ripe for conversion for multiplatform distribution, especially AR and VR.

His passion for building a democratic studio stemmed from Benavente’s own history in Hollywood, where he came to blows with a major studio over control of software his company developed for use in a motion picture. 

A Studio in the Cloud

To execute on the distributed content production model, Crowded Cloud is partnering with MetaPipe, an existing virtualized visual effects and animation studio infrastructure. I met CEO Aaron Estrada two years ago as the company was completing ABQid, an Albuquerque NM-based seed accelerator.

Estrada and his team will be customizing MetaPipe’s production pipeline to Crowded Cloud’s project needs. Eventually, he sees a future in which every frame can be registered on the blockchain and integrated into conventional production management tools to form the backbone of vendor payments, change order reconciliation and other business sticking points between different participants in the workflow. Blockchain technologies could enable a new kind of multi-company software for enterprise resource planning (ERP).

Tracking of every change in massive, petabype-scale production files on the blockchain may be a way off, if only because blockchain platforms like Ethereum, upon which many distributed applications (dApps) are built simply cannot handle the volume. Which is why Estrada and his team are looking at newer blockchain platforms like EOS that claim greater speed, scalability and flexibility.

Video Explosions on 5G Networks

I met Yves Daost at the TV of Tomorrow Show last June, where he was touting IVEP, an Interactive Video and Experience Protocol designed to support AR and VR experiences. Turns out that IVEP is a proof of concept for a much larger vision from Montreal-based 8xLabs that has developed to securely manage the distribution of video over new 5G mobile networks, which will begin to become available in some markets as soon as early next year.

The internet is already straining as consumers continue to move away from conventional cable and satellite vendors to digital streaming services like Netflix. New 5G networks support the greater bandwidth needed for video, and with computing intelligence across these networks, they will be able to support peer-to-peer and edge distribution architectures so long as security can be assured. Blockchain tracking and verification will provide authentication and trust between and among every computer, server and piece of equipment processing video files from origination to end user and back again.

If a verification layer is proven to work, not only will distribution speeds and network efficiencies increase, entirely new capabilities such as user interactivity, real-time ecommerce and verified advertising (no bots, no fake news) can be created on top of the verification layer.

8xLabs’ blockchain solutions will part of two trials: Encqor, a testbed of 5G technologies in the corridor between Quebec City and Waterloo, Ontario; and in Open Air Smart Living Laboratory in Montreal. 8xLabs is raising traditional capital, rather than a cryptocurrency offer, and will earn revenue from licensing its solution, as well as sharing in commerce and advertising.

Video Consumption Rewarded

TaTaTu is a new media platform on the blockchain that rewards users when they watch content. A social layer will also allow users to invite friends to the platform and earn additional rewards when their friends watch. TaTaTu is the brainchild of Italian-Canadian film producer Andrea Iervolino, head of AMBI Media Group and Toronto’s AIC Studios. The beta version of the viewing platform is live now in five countries – Australia, Canada, Italy, New Zealand and the U.S. It will roll out globally within the next year.

In June, TaTaTu’s private initial coin offering (ICO) raised more than $575 million of its TTU tokens, the third largest round ever, raising eyebrows and much attention.

According to Iervolino, the platform already has 500,000 users and expects to launch 30 original productions in the next year, many in collaboration with his AMBI Group.

TaTaTu is one of many crypto-powered competitors to Netflix and other video on demand platforms. The platform will feature movies, games, celebrity profiles, music, other content formats – and advertising. In the TaTaTu model, according to Iervolino, advertisers buy access to users using either currency or TTU tokens at a cost-per-thousand calculated by the market value of the token. Users receive a portion of this ad revenue. This activity increases the market value of the token, and therefore the rates and money go to users. Iervolino believes that rewarding users for their consumption is a key element of a business model that is better than existing on-demand subscription-based services or ad-supported social networks.

Back to Earth’s Down-to-Earth Story

Twenty-two year-old game developer and crypto entrepreneur Clay Space had a dream to build a multi-platform transmedia game powered by crypto tokens. His company Blockspace Media teamed up with veteran transmedia producers from NoMime Media and other talent to create Back to Earth, a sci-fi experience that includes a graphic novel, web series and interactive gameplay. The project is scheduled to launch in October. $100,000 worth of tokens will be offered to early users to jumpstart the platform, a kind of crypto freemium model.

If Back to Earth succeeds, it may give whole new meaning to the concept of speculative fiction; their financing efforts were caught up in the speculation inherent in ICOs. In April 2017, Blockspace’s ICO raised more than $1 million. The ICO did not go well.

As Space has written, “We started to get reports that people were unable to access their tokens.” According to Space, the company he hired to manage the offering misallocated an estimated 10 per cent of the offering and refused to remedy the problem. It took three months to validate every investor and reissue the entire token. Space still worries that the experience may have jeopardized his reputation.

The presence of scam-artists in the ICO market has been widely reported, with up to 80 per cent of the ICOs in 2017 analyzed as outright frauds, not counting those companies that failed to reach their goals due to mismanagement or other problems. Another report found that more than 1,000 crypto projects have failed so far in 2018, leading some to see the ICO frenzy as just another financial bubble filled with fraud and greed. It is indeed a gold rush, with many of the same risks.

Conclusion: Wither Blockchain and Entertainment

It’s still early in the life cycle of these and other blockchain and crypto companies in entertainment. Many have yet to launch, and none has yet to prove its model or scale to mass success. The legacy entertainment giants are hardly endangered by many of the blockchain’s core values of transparency and trust.

Still, major media are paying attention. Sony has been seeking patents for blockchain-based solutions for user authentication and digital rights management. In May, it was reported that Facebook is looking at blockchain solutions in a new startup headed by a group of its senior executives. Variety reports that Comcast Ventures has begun investing in blockchain businesses.

The sheer number and scope of new blockchain businesses being developed suggests the emergence of a genuine ecosystem that can grow into a force to be reckoned with as new companies grow and prove their viability. 

Check out these Blockchain Entertainment Startups

  • Sendergram — Blockchain IP registry and creative trail for content makers
  • Gjain — Finance and payment system for the business of film
  • Crowded Cloud — Democratizing digital production
  • MetaPipe — A studio in the cloud
  • 8xLabs — Verification layer for 5G video distribution
  • TaTaTu — VOD platform that pays users to watch
  • Blockspace Media — Transmedia using crypto currency in game play
  • Alpha Networks — Netflix-like experience on the blockchain
  • White Rabbit — Coordinates payment between film owner and end users
  • Cinezen — Buy and sell films online
  • MovieCoin — Partial ownership of movies for investors and consumers
  • SingularDTV — Rights management, funding and distribution
  • FilmChain — Film finance and payments to all participants in a project
  • Ujo Music — Music self publication
  • Steemit — Social media network that pays its community
  • Ethereum Movie Venture — Crypto crowd-funding platform
  • Consensys — Development incubator for new apps
  • Civil — Crypto backed development environment for journalism and publishing
  • Binded — Copyright and IP registry
  • YouNow — Props decentralized video apps
  • Flixxo — Community-based video distribution