VOD Distribution in India + New Blockchain Distribution Platform/Service
by Orly Ravid
After participating in the Film Bazaar market in India (connected to the International Film Festival of India, now in Goa), I decided to investigate the distribution potential in India, specifically VOD and Blockchain and the distribution potential for independent cinema.
A 2018 report in Business Today noted that the OTT market in India is worth ½ billion and will grow to be 5 billion by 2023 with Fox’s Hotstar leading with 75 million subscribers with American companies such as Netflix and Amazon in hot pursuit. The reason for the growth is rising affluence and adoption across demographics including in rural areas. Today, the VOD market is AVOD-dominated but Business Today anticipates a flip with AVOD going down and SVOD and TVOD doubling from their present estimated 18% of the market.
This is fun—search “Film distribution in India” on Google and you get a nice scroll of logos with links to a bunch of companies. And you can find a list on Wikipedia.
At Film Bazaar I interviewed a couple of top players in the VOD distribution space, and also MinersINC, a new Blockchain distribution platform/service.
First, I spoke to Ajay Chacko is Co-founder & CEO of Arré, one of the country’s foremost original digital content brands. Arré was founded in 2015 by B. Saikumar, Ajay Chacko & Sanjay Ray Chaudhuri. Arré offers multimedia content across genres & formats and has won many international & domestic awards & accolades for its work in digital fiction & non-fiction. Arré Studio is also working on large-format original shows in collaboration with domestic and international OTT platforms as well as broadcast television networks. Ajay has over 2 decades of experience in media & financial services. He spent over a decade with Network18 and was Group COO and also President A+E – TV18 JV in his last held roles with the Group. He has also worked with IL&FS, Sharekhan and the Indian Express Group prior to his stint with Network18. The company’s website can be found here.
Q [to Ajay Chacko of Arré]: What are key trends today in India with respect to audiences/consumers getting content (please comment on both type of content and means of consumption/viewing (technology and price model))?:
A: The Indian digital media market has seen renewed traction ever since data prices crashed with the advent of JIO & the subsequent competitive intensity in the telecom market; the digital media audience is approaching the 400 million mark. More than (>)85% of content consumed is on the mobilewith the structure of consumption now pretty much getting aligned to what it was in the case of TV but with a different idiom i.e. audiences are watching long form shows and movies, albeit on-demand and of the kind they’d like to watch. This has also created a boom in original content commissioned by OTT platformssince TV content in India has isn’t really working when it comes to individual level consumption (remember India is a single TV household where most programming was catering to semi-urban and rural housewives since they formed the primary ratings driven chunk of viewership). The granularity of the Indian market is reflected by its languages and consumption driven by regional and national languages – these trend in the long run to be 50/50 or thereabouts (Hindi: Regional Indian languages like Bengali, Tamil, Telegu, Marathi etc.). The current roughly 800 million TV audiences which is fairly penetrated has reflected this trend and this is also showing up in digital with YouTube India reporting that almost half of its 200 million+ audience is coming from regional markets/ watching regional language content. Video market for English content is at the ‘uppermost socio-economic’ strata but it has never exceeded 4-5% of the overall pie. In fact, English TV entertainment did not cross 2% market share despite it being present in India for over two decades.
India has also been a predominantly ad-funded marketwhen it comes to even fiction/ entertainment. Currently the OTT space is 95%+ AVOD (audience numbers) and some players like Netflix, Amazon, Alt Balaji, Eros Now etc. are trying to push a subscription- based model with some degree of success. Even after 2.5 decades of the existence of cable TV with over 500 channels, India still remains a 70%+ advertising driven market and cable/ pay TV subscription packs are available for 300+ channels at less than 2.5 dollars a month.The consumption trend when it comes to the ‘pay for content’ aspect is still pretty much in the Indian idiom of being ad-driven (various models have emerged here – for example brand integrations into stories has also emerged as an important line of revenue for Independent content players as well as some AVOD platforms).
Q: What about piracy concerns and copyright infringement / protection in India?
A: Piracy has always been an issue in India though I would not put it to be the number one problem as most content in India is freely available since its ad driven/ AVOD. There are many steps being taken by industry associations to help tackle piracy when it comes to music and movies with some degree of success. Digitization has also helped in freeing the movie business from the distribution related leakages.
Q: To what extent is there an appetite / market for American independent cinema in India?
A: Like I mentioned in my earlier point, American Indie cinema has limited appeal, maybe restricted to the top tier of film-buffs etc. in terms of percentage share of the market. However, in terms numbers due to the sheer size of the market there maybe opportunities to have a couple of hundred thousand folks access these thru digital platforms/ OTT services.
Q: I hear documentaries are more popular in India than they used to be in large part due to services such as Netflix—what can you say about that?
A: Much as one would love for this to be true, it isn’t. Docs haven’t really taken off in any meaningful way and one can spend an entire day analyzing why 🙂
A couple of stray examples really don’t break this trend.
Q: Please comment about Amazon, Netflix, and Blockchain with respect to your market (India).
A: The entry of international players like Netflix, Amazon etc. has hastened the process of creation of quality original programming made for digital. This is an important breakthrough in the Indian market and a lot of the OTT platforms (who were banking on catchup tv content) now have realized that they need to up their game and come up with quality original programming in Indian and regional languages. This has thrown up a lot of opportunity for creators, film-makers who were earlier left out of the TV boom as that idiom of programming was considered regressive by most. So, I am hoping that one would see a deluge of quality original programming targeted at various demographics and geographies coming out of India in the near term. As for Arré, we are already working on over 140 hours of high-quality original shows (some for our own platform and a few in partnership with some of the domestic and international OTT players).
On Blockchain, I believe it’s a tad early, but it helps really disintermediate efficiently and this may be a boon for independent film makers and creators.
Then, I spoke to Suri Gopalanis, the Founder of Vista India Digital Media Inc., which distributes to the largest Indian studios and broadcasters with a focus on featuring films prominently on its partner platforms. Vista’s client list includes Red Chillies, Sun Network, Viacom18, Balaji Motion Pictures, Disney UTV, among others. Vista claims to be a pioneer in taking regional films on OTT platforms and having successfully delivered content in Indian languages like Marathi, Tamil, Telugu, Malayalam, Bengali, Kannada, Punjabi, Oriya, Assamese and Gujarati across all our digital platforms. The company’s website can be found here.
[Suru Gopalanis of Vista India Digital Media Inc.]: With a remarkably young population and low cost of bandwidth, the Indian market has seen explosive growth in online video. While YouTube continues to dominate AVOD, we have a hyper-competitive OTT space (both domestic and International players) operating at all the different segments. As of now, we have over 32 platformswith financial muscle fighting for a pie of the Indian market which is expected to touch $ 5 billion by 2023. While primary consumption is still on mobile devices it is expected to gravitate towards TV with dongles and apps built into TV sets.
India is a price sensitive market. With average cable bundling at less than $2.00 per month, the ability for Indian consumers to pay in comparison to International markets still remains to be proven. Having said that, there are a number of price tiers at work domestically with a mixture of AD (AVOD) and SVOD to provide maximum economic value to consumers.
India is a very diverse country with many different regional languages and audiences. The segmentation of this online is relatively easier compared to standard broadcast TV. This, in turn, is leading to a number of niche regional platforms emerging in the pay markets that are targeted via language and tastes.
Sports continues to the biggest driver both offline and online with Cricket dominating minutes watched. There has been a lot of inflows into content development as audience tastes are changing and continue to beinfluenced by what’s happening in the West.
Indian audiences have been habituated to YouTube which has grown very aggressively in India and continues to attract advertising dollars. Given the diversity of content consumption, it is little wonder that DIY content in a host of niches has found audiences on YouTube.
With so much of competition, there is a need to create differentiated content and almost all the platforms including YouTube are investing in new original shows to attract and retain eyeballs. We have seen a number of new shows which have been localized to multiple regional languages which is a new feature that OTT platforms have the advantage to experiment in.
In terms of independent features, there is not much good news. The consumption at this point appears to be to the big budget highly promoted features. Our hope is that a new generation of Indians will be more receptive to both foreign and Indian original films.
When at Film Bazaar I mentioned the launch of the Blockchain company to filmmakers and industry professionals the reaction was always extremely enthusiastic—It seems the right model for the market.…So I interviewed Nitin Narkhede, Founder & CEO of MinersINC, a new Blockchain platform/service that provides a unique opportunity to watch critically acclaimed films in India:
[Nitin Narkhede of MinersINC]: 2018 saw a progressive step forward for Indian independent cinema when Rima Das’ Village Rockstars became the country’s entry to the Oscars Best Foreign Language Film category.A passion project where Das and her school going cousins got together with a bunch of village kids to write, shoot, edit and direct this film entirely on hand held camera—Village Rockstars embodies the untapped, underutilized potential of self-trained, inspired and independent filmmakers in the country. That there is an audience for such cinema is evident to a logical mind, yet often left un-catered to by the country’s established filmmaking, distribution and exhibition segments. Das’ lilting, surreally beautiful film released in over 30 theatres in Assam and West Bengal and stayed on for over a month in very limited multiplex screens in Delhi and Bangalore, cities with sizeable and concentrated diaspora from the state. Village Rockstars had been screened at 88 film festivals, won 44 awards including four Swarna Kamals, the highest honors offered by the National Film Awards (India), to finally claim a restricted space in movie theatres.
This film elucidates aptly the absolute lack of a distribution mechanism for small, substantial and freethinking cinema or entertainment content within India. Another prime example is Mukti Bhawan, an introspective and moving film about death, old age and detachment. This film won critical acclaim in ten of the most respected film festivals, found theatrical releases in Japan and Germany, territories where familiarity with Hindi as a language is sparse.
Yet, in India, it barely found sufficient screen space- ultimately nesting on an OTT platform for viewers. Films that don’t boast of stars, celebrity filmmakers or the wizardry associated with mainstream movie making do not have a mechanism for their exhibition and distribution. Notwithstanding recognition globally, international independent films also never make it to an Indian audience’s viewing menu. With OTT platforms emerging in the country, some expected the restrictions that independent films, faced from a traditional, profit oriented distribution-exhibition system to change. Unfortunately, change for the small film, which rides on passion for a good, relevant story, is barely visible.
OTT platforms from international giants offer varied content but stay firmly focused on star-driven films and shows. English language content is also preferred by these platforms. Small, substantial films find room in a space where glitzier behemoths dominate.
Over the years, what we’ve come to firmly believe is that there is a definite audience keen on watching quality films, engaging stories from across the world here in India. With the country’s aspirational youth, levels of interest in cinema beyond typical Hollywood and Bollywood are evident. Given the challenges of access for such content, piracy often becomes a habit. Increasingly, world cinema that is shown at the film festivals, Cinefan by Osian and MAMI, based in Mumbai, runs to packed auditoriums. These films travel from across the globe, ranging from Iran, to South American nations, to East Asia and Europe. Watching them is top priority for the keen Indian cinephile today.
myNK, the OTT platform from MinersINC firmly focuses on filling this gap between demand and distribution of quality world cinema. Utilizing Blockchain technology, it ensures a safe, assured distribution platform for filmmakers to access a whole new audience that has only just begun consuming content on smart phonesand hand held devices. Currently, approximately 299 million people use smartphones in India. Over time, this number is expected to grow to 499 million as Reliance Jio expands access to high-speed data at very low prices. This is a market for movie consumption that simply has no match in terms of reach and numbers. The Hollywood Reporter has argued in a well-researched column that OTT giants like Netflix and Amazon PrimeVideo are battling it out to grow their share of the Indian video on demand market; simply because the numbers of video in India are mind boggling. In a scenario when mobile phones will often become access point for one’s personalized entertainment choices, myNK’s offering of critically acclaimed and quality world cinema offers a never before opportunity to access content for cinephiles.
Rapidly evolving digital technologies and declining costs of filmmaking equipment has led to a growth in the number of filmmakers worldwide. Rima Das, as explained, provides the perfect example. Finding an audience for these films though holds a real challenge. Additional problems that emerge are, firstly, a shortage of screens. India has just 10 screens per million people. When films don’t get released, they run the risks of getting pirated.Combined with high costs of acquiring distribution for a film often leave the film producer with no profits. Aside from this oligopolistic distribution model controlling content that makes it to a film theatre, marketing, sales and publicity for films are huge additional costs. Adding to the woes of the creator, there is a huge market of illegal downloads. Lopsides royalties and revenue distributions further reduce a creator’s earnings.
Conventional distribution mechanisms work in silos, somewhere incapacitating filmmakers and producers financially. Blockchain technology, as used by MinersINC, can help in resolving this opaque situation making a radical positive change by empowering creators in the long run. Blockchain technology naturally extends to the fundamental framework of how digital media gets distributed. It is a peer-to-peer decentralized network that brings the filmmakers in direct contact with their consumers without passing through the archaic distribution system. It gives leeway to filmmakers to bypass the costly distribution mediums and distribute their films directly to consumers. It has the potential to liberate the filmmakers by putting them back in control of their work and gives them complete autonomy on how their content gets distributed and priced. Parellely, consumers are empowered as they get the freedom to chose from a global library of films.
myNK, a product created by MinersINC envisages creating an entertainment ecosystem that will liberalize the industry from oligopolistic distribution practices, revenue dilution across middlemen, piracy, revenue leakages, copyright issues, breach of contracts, lost monetization, non-transparent earnings and unjust right attributions. Apart from addressing the current set of challenges, myNK aims at achieving greater goals by weaving the entities and components together in a fabric of trust and transparency, work on business models that make value sets more direct, less intricate and more rewarding.
In the long term, myNK aims to use blockchain technology to build an autonomous marketplace for creators to discover the real worth of their creations based on market governed dynamic pricing principals and community-driven curation. Consumers would have a significant role to play as they would act as a prudent community who will be collectively responsible for reviewing, rating, distributing, recommending and doing intelligent curation of content.
myNK empowers the creator and the consumer in Indian entertainment. Focused on bringing independent, recognized quality films from across the world, it will encourage interactions within the community, creating social media that has a definitive purpose. For those who love and live cinema, this platform is a valuable new opportunity to access worthy content while adding to a democratic, fair and collective voice for quality over hype in entertainment.
The Film Collaborative has had little or no success with its American or European indies in India but is now trying again with a curated selection to be distributed via MinersINC. Here’s hoping! And we will write again to update about changes in the India VOD market and with respect to Blockchain distribution.
Orly Ravid February 4th, 2019
Posted In: blockchain, Blockchain, Digital Distribution, Distribution, Documentaries, International Sales
Legal Issues with Blockchain Technology (Part 3 of a 3-part series on Blockchain)
by Max Hacker
Nathan Apodaca, also known as 420doggface208 on the popular social media video site TikTok, recently announced that he was selling an NFT of his virally iconic skateboard-riding, Fleetwood Mac-lip synching, cranberry juice-swilling 2020 TikTok video. Bidding for the NFT starts at $500,000. If you’ve seen the video, you may be surprised to learn that Fleetwood Mac’s “Dreams” and Ocean Spray’s logo are absent from the NFT version.
Unless you’ve been living under a digital rock, you’ve probably come across this somewhat new form of digital collectible. If not, you can learn more here, here or here. It’s clear from the $69 million price tag digital art piecerecently fetched, NFTs provide a way for creators to capitalize on a seemingly insatiable market. Calling the crypto craze a “digital gold rush” is not far-fetched.
Proclamations abound that NFTs are a massive untapped revenue source and are here to save the arts and entertainment industry. While the financial upside for sellers (copyright owners/licensors) is tremendous, it’s uncertain how the smart contracts that form when an NFT is acquired will impact those purchasers (NFT owners). Are the restrictions in the smart contract consistent with U.S. copyright law or are purchasers at risk of facing punitive measures beyond copyright protections? Transactions on a blockchain are immutable, so do NFTs open the door for harsh penalties enforced on NFT purchasers who are never put on notice of what terms they violated?
First-sale doctrine
One specific issue to monitor is whether NFT smart contract terms reach beyond the first-sale doctrine. The first-sale doctrine, codified at 17 U.S.C. §109, establishes the clear right for purchasers of copyright works (e.g. songs, albums) to sell copies of that work without seeking the original seller’s consent. In other words, the copyright holder can control the initial sale by setting the price and choosing distributors to sell copies of their copyrighted work. However, for example, once I buy Fleetwood Mac’s Rumours on vinyl (which this author can confirm he does indeed own a copy of), I can freely transfer that copy. No need to get consent from Mick, Stevie or (most thankfully not) Lindsay to sell my copy to a friend or a used record store.
But imagine in a not-too-distant future in which the Mac releases an NFT version of Rumours. It’s possible that the smart contract controlling the purchase bars me from selling to certain sellers, via certain platforms or otherwise restricts my transfer rights in an overreaching or even hostile manner. One of the intoxicating elements to the crypto craze in general is the wild, investment-like nature. Purchasers are seeing large returns within weeks of their initial investment. However, if smart contracts controlling NFT sales are more prohibitive than my first-sale doctrine right to sell my vinyl copy to my local record shop (don’t worry, I’d never sell my copy), potential purchasers may start to shy away, and industry skepticism may set in.
IP licensing for NFTs
Back to 420doggface208, why didn’t he include the song or the logo in the NFT if he was allowed to include it in his TikTok?
For the song, TikTok has a license to use the song and that license allows users of TikTok to upload songs for use on TikTok. That license is likely very narrow; TikTokers do not have the right to take their TikTok videos w/ songs included and then sell it in some other medium or version. Fleetwood Mac no doubt loved the resurgence in their streaming numbers, but apparently not enough to let Apodaca use “Dreams” in the NFT (more on this later).
As for the juice, despite Ocean Spray’s public embrace of Mr. Doggface, his use of the logo in the NFT without consent is trademark infringement, a clear attempt to profit off of the brand’s logo without any license to do so. Or so a lawyer for OS may claim.
What does the future hold?
As the NFT market grows, many artists and creators will benefit from a hot, emergent revenue stream. Works of digital art and music are selling for eye-popping figures, and we haven’t yet scratched the surface regarding licensing revenue. NFTs have the potential to breathe new life into older works, presenting an ocean of new licensing opportunities for use within third party NFTs. Despite the fact that smart contracts have been designed to simultaneously and instantly kick all interest holders their piece of the pie, significantly reducing transaction costs and delays in receiving payments, it appears no such licensing deal was struck here for “Dreams” or the wave logo. Once intellectual property holders grasp how relatively quick blockchain-based payments are triggered, the aforementioned proclamations may come to fruition. Soon, they will realize that like any gold rush, it’s best to be the one selling the picks and the shovels.
Max Hacker is the owner and founder of the Law Offices of Max H. Hacker. Max earned his J.D. from Southwestern Law School in 2013 and is licensed to practice in California and New York. His practice includes representing individuals and businesses in transactions across the digital media, TV/film and music industry landscapes.
Orly Ravid December 18th, 2018
Posted In: Blockchain, blockchain, Digital Distribution, Legal
Will The New Blockchain Technology Put the Trust Into Film Distribution? (Part 2 of a 3-part series on Blockchain)
May 2, 2018 • Sheri Candler, TFC Social Media Advisor
Part 2 of a two-part series on blockchain technology. Please access the first part here.
Heralded as the “trust machine,” blockchain aims to tackle a big issue: lessening the intermediaries that could potentially interfere with data and information. Processes that rely on a high degree of trust (banking, property sales, insurance, etc.) usually rely on a multitude of third parties to add expertise and integrity to transactions, especially those involving agreements between unknown parties.
With blockchain, counterparties don’t need to have an established trust relationship.
The reason this can be an a game-changer for the business of film is it could eliminate many of the intermediaries (and fees!) involved in rights management, revenue disbursement, and content licensing. Currently, the film sales process depends on written agreements between sales agents and distributors within a variety of mediums (theatrical, educational, broadcast, VOD, EST, etc.), geographical territories and currencies. These agreements can take many months to finalize before allowing for consumer sales, and revenue collection is slow.
Moreover, the revenue disbursement is often murky when it comes to the repayment of expenses, the subtraction of fees, and the parceling out what remains to those who have invested in the project. In theory, blockchain technology could ease this process through the use of smart contracts, facilitating virtual currency transactions, and protecting intellectual property by authenticating ownership and allowing rights to be granted.
But how close are we really to seeing this as a reality?
Edward Klaris is an attorney and recognized expert on intellectual property, privacy, and media law. He has spent 25 years in the media and entertainment industry for powerhouse companies like Condé Nast and The New Yorker Magazine. I asked him about digital rights and intellectual property rights management, where blockchain might be beneficial.
Ed Klaris: “First of all, let’s define the blockchain a little bit. The way I look at it, there are three different types of blockchains. There is a private block chain where the users and the providers are limited and identified through a private entry point. It’s a limited universe of people on that private blockchain. On the other side of the spectrum, there’s a public blockchain where neither users nor providers are necessarily identified in any kind of a rigorous way. This is like with Bitcoin where it doesn’t really matter who you are, you can buy Bitcoin by just going in and registering as whomever, you can be anonymous. The third type is a hybrid, all of the users are open so anyone can use it, but the providers of the content, for example, are governed. You can only be a content provider if you’ve satisfied certain registration requirements. That kind of block chain is really the type that I foresee being the media ecosystem where somebody is governing that blockchain and making sure that those who are providing content are known and trustworthy.”
Regarding protection against piracy, Klaris doesn’t think blockchain will stop this, but the new technology isn’t really conducive to pirated content.
Klaris: “In the open blockchain model, you can just rip somebody else’s movie just like they do today and put it onto a blockchain and it’s kind of immutably there. There is a risk that some piracy will occur, but I’m on the side of a not being particularly worried about that. The internet that’s been around for over 20 years is a much better vehicle for pirated work. Why would anybody want to go through the trouble of using blockchain for piracy today when you can do it so much easier on the Internet?”
One aspect that Klaris does see blockchain being suited for, and it is already being set up to service, is registry of rights holders and payments to them.
Klaris: “That part of the equation has largely been focused in the music space today. There are a couple of entities that are focusing on it in particular. There is a company called Dot Blockchain, which is producing a registry of copyright holders in the music business.”
“As you probably know, a given song might be owned by 10 different people with different addresses each of whom share 100 percent in the royalties. You need to know who they are, and where they are, and blockchain could be an excellent place to create these registries because people are authenticated or registered. Who they are, where they live, and what percentage of ownership they have can be packaged in the blockchain and payments can be made to them.”
“In a place like the music streaming services, people will listen and there is a small royalty that needs to be paid to the musician. Often those individuals cannot be found, therefore money goes unsent. But in the blockchain scenario where you’ve got a big registry of people who have identified their tracks and identified themselves, you could be able to find them and pay them through their registration.”
“But everybody is trying to go at this in their own little silos, solving for the same problems because there is a bit of a gold rush going on. There’s not a lot of cross platform use. If you register in one place, that information will not be carried over to the next place and, right now, there’s just no standardization whatsoever and that’s causing trouble. But as a concept, definitely people will be registering themselves and their works so they can be paid.”
In the realm of independent film, there are a few companies planning to start employing blockchain technology for a variety of applications. One such company is Vevue, a peer-to-peer video network app running on the Qtum blockchain platform. Vevue currently offers an iOS app. Founder Thomas Olson says their platform is different than video social networks like YouTube, or streaming professional content from Netflix because Vevue is engineered to seamlessly integrate with blockchain.
Thomas Olson: “Vevue chose Qtum because it’s a mobile first platform. With mobile, we’re targeting the easiest path to consumer adoption and ultimately benefit from the mobile viewing experience easily transferring through to our web portal. Qtum, also seeing potential in Vevue, invested in our team early—making us the very first app to build on the Qtum blockchain. We actually spent the last 10 months incubating in their Shanghai office space, the first and only team to do so.”
“Distributing a film on the blockchain means filmmakers can reach a worldwide audience without having to go through centralized services like Netflix or YouTube. The process is quite simple for organized professionals:
- Visit CoMakery.com and create a Token representing ownership in your content, then distribute accordingly among your contributors. For the film industry, this is especially important as investors need to be paid back their initial investment plus a premium before those same investors can share in the profits with the producer pool. In short, more revenue and a transparent accounting of that revenue ensure all parties are paid in a timely and fair manner without the need for audits.
- Next, you upload your content to Vevue and put the blockchain paywall in place. For the film industry, as opposed to commercial and amateur Vevue users, there are a few additional steps regarding deliverables. To handle this, we’ve partnered with Two Roads Picture Co., the distributor of the film No Postage Necessary, to be our exclusive aggregator to service both studio and independent films wanting to distribute through Vevue.
- Finally, collect revenue. Anytime someone pays—revenue immediately flows back to contributors per the CoMakery Token.”
Indie film “No Postage Necessary” is teaming up with Vevue for distribution in June 2018
Olsen: “Domestically, we can support traditional theatrical distribution by dropping tokens into each theater playing the film. Audience members simply record a review, upload it, and collect token reward. Then our API organizes the reviews for sites like Rotten Tomatoes or IMDb to easily add next to written reviews. This incentivizes audiences and provides feedback and audience building for the distributor. On the streaming side, we’d enter the competition fold alongside traditional TVOD platforms such as iTunes, Google Play, and Amazon. We’d provide the same viewing experience with the benefit of copyright protection and transparent royalty payments for the filmmaker. And since there would be no middleman, the filmmaker would get to keep more of the revenue.”
“On the foreign side—distributing a film on blockchain means filmmakers can reach a worldwide audience without having to sell to traditional distributors in international territories. It also means we can reach more people. When you consider there are over 2 billion unbanked people in the world and many of them have smartphones, we’re now providing an entirely new group the ability to legally purchase entertainment content.”
“Other than the fact they’ll be using Vevue Tokens to interact with our functions/features, audiences should barely notice they’re using blockchain. When it comes to film, our aim is to provide the same viewing experience one would have if he or she were using a traditional centralized platform.”
Perhaps this is the best way to look at the technology. Blockchain will be the unseen backbone that powers virtual currency, content distribution, rights management and revenue payments, to name a few examples. Much like the Internet, it isn’t necessary to dive deeply into the mechanics of how this information is transferred in order to use it. In the near future, this technology will be used to power the functions that, for now, are opaque and unnecessarily complicated. An open and distributed ledger, or record book, will keep track of information and validate transactions without being centrally controlled by any one entity. This technology is only in the experimental stage now, but within 10-15 years will power many parts of the film business that we struggle with today.
Sheri Candler May 1st, 2018
Posted In: Blockchain, blockchain, Digital Distribution, Distribution
Tags: bitcoin, blockchain, Digital Distribution, Sheri Candler, The Film Collaborative
What the hell is the “Blockchain” and why is everybody talking about it? (Part 1 of a 3-part series on Blockchain)
April 19, 2018 • Kathy Susca, TFC Films Manager
‘Blockchain’ is 2018’s buzziest word in regard to film distribution, so we want to make sure all of our readers are savvy to what it means, how it works, and its potential for distribution. This is the first post of 2-part blog on blockchain—in this article, we’ll define what the blockchain is, explain its technical structure, and discuss some of the possible applications for media. In part 2, we’ll discuss industry perspectives on advantages of these systems.
At its core, blockchain technology is based on a very simple concept. It is a distributed ledger system, meaning that its primary purpose is tracking transactions, like a pen-and-paper accounting ledger. ‘Distributed’ means that it is de-centralized; it is not maintained or controlled by any single authority or company. Rather, it is maintained and updated by the user base, on a peer-to-peer (P2P) basis.
The ledger is organized as a sequence of blocks (the “blockchain”), each including multiple transactions. It generally works like this:
- Any user can join the network and read all past transactions in the blockchain.
- To create a new transaction, the user signs a request and broadcasts it to the network.
- Other users can collect pending transactions, create a block and add it to the blockchain.
The special thing about blockchains is that blocks added to the chain are a permanent, verified, and public record of the history of all transactions within the system. To avoid tampering of blocks, the process of adding new blocks to the chain is made intentionally difficult: users compete to verify blocks and add them to the chain, and they are rewarded when they succeed.
In this article, we will be using Bitcoin as an example because it was the first successful large-scale implementation of a blockchain, where each block contains records of money transfers. However, blockchain technology is not limited to financial transactions—it can be used to record copyright ownership, royalty payouts, etc. It is important to understand that blockchain technology is just a method of recording data and verifying its existence at a certain point in time; different systems that we will discuss later in this article all employ their own unique implementation of these concepts.
Because of cryptocurrency’s prominence at the moment, there is a wealth of information available for further reading. The New York Times recently posted an excellent animated video with a basic explanation of cryptocurrency. Using Bitcoin as a lens, we can start to understand blockchain systems, their uses, and their limitations.
Hash functions are a key element of blockchains: they are used to “chain” blocks together and to verify their contents. A hash function generates a unique numeric ID from the data of an input block, like a fingerprint. If even one character is changed in the input data, the resulting hash can change entirely: this makes it very difficult to alter input data and get the same fingerprint. Bitcoin uses the SHA-256 hash function: you can try to enter some text here and see how the resulting hash changes if one character is altered.
Hash functions play two roles in the blockchain: linking a new block to the previous one and controlling the creation rate of new blocks.
from BraveNewCoin.com’s introduction to Blockchain technology
Linking new blocks to previous ones: Each block contains the fingerprint (hash) of the previous block. See the illustration above: when a block is added to the chain, it links itself to the chain by including the prior block’s fingerprint in addition to pending transactions. In this way, each block’s fingerprint is dependent on the chain of all blocks coming before it. Therefore, each block’s hash is a fingerprint for the history of the entire chain.
Controlling the creation rate of new blocks: In Bitcoin, blocks are added to the chain when they are “mined,” and users can earn money for mining blocks. To mine a block, miners must add a mystery number to the block, to make its hash start with a required number of zeroes. Given that hash functions are, by design, almost impossible to reverse-engineer, the only effective way to mine a block is to simply keep plugging in different values for the mystery number until it works. Once a block is mined, it is broadcast to the network and it becomes part of the blockchain, together with all of its transactions, and additional transactions rewarding the miner with new Bitcoins and transaction fees. There are server farms doing this lucrative work, all day every day.
One of the main points of a blockchain system is to do away with a potentially fallible central authority overseeing the record keeping. Thus blockchains are necessarily public – at least to the users on that system. The monetary rewards coming from mined blocks are how the Bitcoin system motivates its users to participate in processing transactions and adding them to the blockchain. But how does the system guarantee that recorded blocks are trustworthy, that a transaction won’t be removed or altered, creating an alternative history of recorded transactions?
Well, imagine that two blocks are added to the chain at exactly the same moment, creating two competing branches of the blockchain (this is called “forking”). As each chain grows, how does the network decide which one is the official record? The longer chain wins, and the transactions in the shorter fork go back into the pool of pending transactions. A transaction isn’t considered ‘confirmed’ until it is several blocks back in the chain, and therefore unlikely to be in a forked chain that will be dissolved. It currently takes about 10 minutes for a block to be mined, so transactions are considered ‘confirmed’ after about an hour (6 blocks). As the chain gets longer, the individual blocks (and the records they contain) become more and more secure.
To tamper with a block that is already in the chain, it would be necessary to do the difficult work of re-mining that block, and all the other blocks after it, in order to create a forked chain that is longer than the original chain. Meanwhile, other miners would be adding blocks to the original chain, making it longer and longer. In order to beat the rest of the network (working on the legitimate fork), a malicious user would have to implement what is known as a“51% attack”—to control 51% of the mining power in the entire network to have a statistically likely chance of mining several blocks in a row. Since having 51% of the hashrate is prohibitive both logistically and financially, and even then the success of the attack would not be guaranteed, users stand to make more profit by protecting and securing the blockchain.
Blockchain systems use a variety of methods to determine the probability of a user/node being the next one to add a block, but by far the most popular method is “Proof of Work.” In this system, a user’s hashrate (how many hashes they can compute, per second) determines their likelihood to mine the next block. Server farms, for instance, are more likely to mine a block quickly than an individual user. This is the system used by Bitcoin that we’ve been describing so far. Other systems are Proof of Stake (a lottery based on how much commodity a user owns), Leased Proof of Stake (users pool their commodities and share earnings), Delegated Proof of Stake (users elect nodes), and Proof of Importance (‘worthy’ users are selected). In each of the systems above, the users are financially motivated to maintain the integrity of the system, whether the benefit is direct, indirect, or collective.
This necessarily-public nature of the blockchain carries with it some privacy concerns for the users. All transactions a user engages in are publicly available, and therefore traceable. Anybody with access to the blockchain records is able to reconstruct a user’s entire history of transactions (and therefore discover their account balance). If that user is successfully identified as a specific person or entity, their privacy has now been compromised.
With Bitcoin, this problem has been tackled through the use of addresses – unique alpha-numeric identifiers linked to a user’s account. Each user can have multiple addresses, and it is standard practice to create a new one for each transaction in order to ensure privacy of both parties. When used properly, addresses can anonymize transactions.
Copyright Management: A blockchain system would be ideal for verifying who owns the copyright on a piece of intellectual property at any given point in time. Any sale of rights could potentially be recorded and accessible to the public. Furthermore, quoted in Information Week, Tiffany Li of the Yale Law School’s Information Society Project says, “Technically, one could imagine generating a hash for every piece of intellectual property you would like to identify as your creation and using a public blockchain-based registry to authenticate ownership of IP.” Other experts point out that integrating the new blockchain copyright management systems to work seamlessly with ‘legacy systems’ would be a complex, costly, and years-long process. However, some companies have already begun this work, like Po.et.
Royalty tracking and payouts: In a system in which media is created by more than just a single artist and distributed across a variety of platforms worldwide, royalty payments can become very complex. Blockchain Royalty Corp is one company doing this type of work in the music industry, and their system integrates smart contracts to automate the process and ensure that payouts are done accurately. The Open Music Initiative takes the idea of royalty tracking to the next level, by designing a system that also helps fans discover other works the artists are credited on.
Crowdfunding: iProdoos will allow the users of the platform to “decide what content is made and available on the iProdoos platform and how long that content lives”—essentially they’re crowdsourcing programming via crowdfunding on the blockchain. Initial Coin Offerings (ICOs) are a way to raise funds for a startup by pre-selling your cryptocurrency to investors. This type of model could be applied to fundraising for a film project, and facilitating paying back the investors using the blockchain records.
Direct Distribution: Creators could potentially use blockchain technology to track transactions. However, the content itself would likely have to be stored and distributed using a different platform, as the blockchain is not intended to store large amounts of data like a video file. One potential path would be to integrate blockchain verification with BitTorrent P2P technology, in which media is shared directly between users and the dissemination of the files is crowd-based. Like blockchain technologies, BitTorrent negates the need for a central company or figure to maintain records or even be involved in transactions beyond providing the platform. IPFS seeks to replace the current HTTP web with a decentralized P2P system (that employs hash functions to identify information in nodes)—ideal for saving bandwidth when sharing large files. Decent, Lightstreams, Treeti, White Rabbit, Cinezen, SingularDTV, Stream Space, and Vevue for example, are just a few of the companies already focusing on this type of distribution.
Some hurdles to consider: We’ve spent a lot of time discussing how users in Bitcoin are motivated to participate in the upkeep of the system. In decentralized systems, users must be incentivized, and a non-cryptocurrency-based system (that cannot necessarily offer financial incentives) complicates that issue. The public vs. private tension must be resolved as well—if a copyright attribution is anonymous, what good does it do? We have also discussed data storage concerns for large media files. Furthermore, while the blockchain may in itself be a secure ledger system, the peripheral systems that make it practical for use (data storage, cryptocurrency wallets, file encryption, smart contracts, etc.) are not necessarily as invulnerable as the blockchain itself. Finally, cryptocurrencies using blockchain technology aren’t necessarily well-suited to microtransactions due to transaction fees, so setting up royalty payouts on individual consumer purchases as they happen would be cost-prohibitive.
Kai Stinchcombe, a prominent critic of blockchain technology points out that “ten years in, nobody has come up with a use for blockchain,” and goes on to detail the lack of recourse if you are defrauded in these systems, as well as the overall clunkiness of the technology in comparison to centralized systems. In a subsequent article, the same author writes, not without reason, “Blockchain systems do not magically make the data in them accurate or the people entering the data trustworthy, they merely enable you to audit whether it has been tampered with.” We are just scratching the surface here, but these are conversations that must be had if artists are going to monetize their work using these new technologies.
Of course it is not possible to know what the future will bring, but let’s imagine these hurdles are all surmountable, that you could integrate the above technologies (Cosmos for example facilitates interoperability between blockchain systems). Then, you could develop a system that brings together copyright management, royalty payouts, direct-to-consumer-sales, distributed storage of media, and smart contract functionality; a system with completely decentralized, direct distribution and rights management that is functional across all cryptocurrencies. That would be a real media revolution—and it may not be too far off.
Keep an eye out for the second part of our series on the blockchain, in which we explore some entertainment industry perspectives on the advantages that blockchain technology can bring to some of the more challenging pieces of film distribution that we currently have.
How Bitcoin Mining Works
Bitcoin Wiki
Blockchain: What Business Leaders Need to Know About This Disruptive Technology
Blockchain Technology Moving Into Cable, Advertising Sectors
Can Blockchain Technology Solve Copyright Attribution Challenges of Digital Work?
Film Slate To Be Financed by Digital Currency and Distributed Via Blockchain
What is Blockchain and How Will It Change the World?
How Blockchain Could Start To Make Waves in Media and Entertainment in 2018
Betting on the Bitcoin Blockchain
Kathy Susca April 19th, 2018
Posted In: blockchain, Blockchain, Digital Distribution, Distribution, privacy, technology