Why other industries are already investing in blockchain
II’ve always been a fervent supporter of innovation. Blockchain is innovation. It is revolutionary.
But as much as I believe blockchain has the potential to help publishers mitigate internetinduced risks such as plagiarism, copyright infringement, advertising fraud, and potentially fake news, I’m not of the opinion that media companies should pivot to it any time soon. The technology is still in the experimental phase and needs some really smart pioneers to shake it out and evolve it into something more useable by the media.
But I also believe that it is imperative that we truly understand it now so we can plan for its adoption when the time is right. Time that can sneak up on you when you least expect it.
Let’s not repeat the sins of the past
Most established businesses that venture into unfamiliar territory like blockchain will struggle mostly because what made them successful in the past won’t work in a disruptive economy — a wellknown impediment called the innovator’s dilemma. But just like with the internet in the ‘90s, there will be entrepreneurs who discover the secret sauce of the technology and reap unprecedented rewards. Think Amazon, Google, eBay, Match.com, PayPal, WebMD, Razorfish…
For years these early adopters were in perpetual beta mode, with media waiting for them to fail like
so many others before them. But by the early 2000s, they had proven that there was money to be made online. They helped pave the way for many other innovators including LinkedIn, Facebook, Yahoo, Priceline, Salesforce, Flickr, Airbnb, Uber, and Spotify.
Unfortunately, incumbents paralyzed by industry myopia, which culls innovation, were unable to follow suit.
Here’s an example of this corporate affliction. I’ve shared it before, but I think it’s worth repeating. Back in 1998, The Washington Post was approached by two Silicon Valley entrepreneurs looking for capital. After “kicking the idea around”, The Post executives decided to pass on the investment opportunity because they had other fish to fry. That myopia cost the company a piece of the largest advertising pie in the world — Google, with a market cap now over $US757B!
Global management firm, McKinsey & Company developed an interesting discussion guide for organizations to assess their ability to act in the disruption journey. I recommend you check it out for yourselves and see where your business stands. For some it will be motivating, while others will feel a dreaded sense of déjà vu as it reminds them how they perceived the internet when it was in its “detectable” phase back in the '90s, and how that led to where they are now.
Given the financial frenzy over bitcoin, it’s pretty evident that blockchain is now in the detectable phase of its evolution. There is no verified business model yet, but there is an awful lot of noise. This is great news because it gives us the opportunity to learn from our past mistakes, so that we don’t find ourselves, once again, on the wrong side of another major trend.
The early movers and shakers in blockchain
If you’ve just started looking into blockchain technology, you’re probably most familiar with bitcoin — a peer-to-peer electronic cash system that some believe is poised to revolutionize finance by removing the middleman in transactions.
On the surface, that sounds great because money can be exchanged without fees, right? Wrong. Although a physical intermediary like a bank is not required, bitcoin still charges transaction fees and they can be substantial when the network gets overloaded. As maturity sets in and stabilizes the network, the fees will settle down, but there will always be fees in blockchain.
That being said, financial institutions aren’t banking on volatility killing the cryptocurrency before it does them damage. Many, like the CEO of JPMorgan Chase who called bitcoin a "Fraud", are re-assessing. Now facing the inevitability of massive disruption to their industry, financial markets are trying to hold cryptocurrencies back until they can figure out how to control them. According to Benoit Legrand, chief innovation officer at ING, “We can’t deny that things are changing. The world will include cryptocurrencies in the way we work in the next 10 years. But it needs to be regulated. This is absolutely key.”
Efforts to regulate blockchain technologies from governments and banks will continue to happen, but should they? In February 2018, J. Christopher Giancarlo, chairman of the US Commodity Futures Trading Commission, testified before the Senate Banking Committee about blockchain, “Two decades ago, as the internet was entering a phase of rapid growth and expansion, a Republican Congress and the Clinton administration established a set of enlightened foundational principles: the internet was to progress through human social interaction; voluntary contractual relations and free markets; and governments and regulators were to act in a thoughtful manner not to harm the internet’s continuing evolution.
“This simple approach is well-recognized as the enlightened regulatory underpinning of the internet that brought about such profound changes to human society. ‘Do no harm’ was unquestionably the right approach to the development of the internet. Similarly, I believe that ‘do no harm’ is the right overarching approach for distributed ledger technology.”
I totally understand the fear, uncertainty, and doubt this highly-regulated industry is experiencing as blockchain threatens their status quo, but I hope Mr. Giancarlo’s forward thinking will prevail as it did with the internet.
You might not think that the travel industry and publishing have much in common, but there is no doubt that travel, like publishing, has been one of the most disrupted industries in the internet age. Global distribution systems (e.g. Sabre, Amadeus, and TravelSky) and Online Travel Agencies (Expedia, Hotels.com, Orbitz, and Priceline) have had huge impacts on airlines and hotels worldwide. And then came the sharing economy and its fill of disruptors — Airbnb, Uber, etc.
The travel supply chain is ripe with multiple levels of fees, markups, taxes, and currency exchanges — costs that, in some way, shape or form, are passed down to consumers. Blockchain is being looked at as the disabler of supply chains and associated business models.
Winding Tree is looking to create a true peer-topeer platform based on ethereum that connects hotels and airlines with travel agencies — creating a marketplace where availability and pricing is fully discoverable and transparent. There are no consumer-facing interfaces in this solution. It’s purely a B2B platform that will allow third-party developers to integrate with it. Lufthansa was one of the first to integrate their APIs into Winding Tree’s blockchain, looking to increase booking profits by cutting out intermediary commissions from the likes of Expedia and Booking.com.
TUI Group, a multinational travel and tourism titan, has developed a private blockchain for hotel swapping called BedSwap. In an interview with Skift last year, chief executive Friz Joussen shared that blockchain technology will radically transform the B2B travel space and break the hold OTAs have today on tourism, “It will be very difficult for intermediaries to have sustainable business cases. These platforms [travel intermediaries] build reach by spending billions on advertising, and then they create monopolistic margins on top of what they have as sales and marketing. They do offer great sales and marketing. Booking.com is a great brand, but they create superior margins because they have monopolistic structures. Blockchain destroys this.”
But OTAs and alternative lodging businesses aren’t sitting back on their heels waiting for this to happen. In 2015, Airbnb started acquiring/hiring talent from blockchain startups. One can certainly see how a private ledger could benefit its supply
and demand management system, but the cofounder and CTO is far more forward-looking than that. Nathan Blecharczyk wants to share Airbnb’s users’ profiles and reputation with other companies. If they can do that, Airbnb could be an exporter of “trusted identities” to other platforms such as Uber. Is this a good thing? Convenient for users? Possibly. A cause for privacy concerns? You bet.
Other blockchain travel startups are popping up everywhere trying to unseat the US$31B company, but few will likely succeed with Airbnb’s proven ability to innovate in the face of disruptive technology. But never say never because no company is too big to fail.
I know, you’re tired of reading about how the entertainment industry has evolved and how publishing should learn from them. But the truth is, we really should.
Both music and video have been disrupted as much as mainstream media, but unlike newspaper and magazine publishers, the major record labels bit the bullet by recognizing that single-sale CDs and DVDs were heading fast into niche territory and that they needed new business models to survive.
It wasn’t easy and challenges still exist (e.g. unfair attribution of ownership), but major record labels did secure a profitable future in the digital world through consolidation, diversifying revenue streams, embracing aggregation (Spotify, iTunes, Apple Music) and using behavioral analytics to enhance their customers’ experience.
When looking into what startups are doing in the music space, I was surprised to see how many are all racing to crack the attribution and ownership problem. Mediachain was one of the first, which is probably why Spotify purchased the company last year.
You might recall an article in The New York Times in 2016 about Spotify’s multi-million dollar settlement to publishers ending a long-running dispute over licensing. Spotify’s defense was that it “lacked the data to sort out which publishers had legitimate claims over songs, or even how to locate all the parties, because no central and authoritative database existed covering all music rights.” Spotify hopes Mediachain’s technology will help fix that by matching the right royalties with the right titleholders.
DECENT is a bit different; it’s trying to decentralize all digital content by using blockchain to break down distribution restrictions like those imposed by regulators such as the FCC in the US and the CRTC in Canada. Good luck with that!
There are too many players in the music startup space to explore in depth here, but if you’re interested in digging further, check out MUSE, PeerTracks, Token.fm and Viberate.
The film and video industry is much the same as music. Most of the innovators (e.g. SingularDTV, Viuly, LBRY, LivePeer, Theta Labs, and YouNow) are looking to fulfill the promise of the internet by fixing attribution, democratizing content, and killing off cable companies and online aggregators like Netflix. Curiously, Netflix is being rather quiet about blockchain, but I would never underestimate Netflix CEO, Reed Hastings when it comes to capitalizing on disruption.
Some of the outliers include:
Spectiv is addressing the broken advertising industry, looking to share ad dollars not just with publishers, but viewers as well.
CinemaWell, the so-called “social network for online cinemas”, wants to connect filmmakers with viewing audiences by paying people (with cryptocurrency) for watching videos and providing more in-depth
analytics to film creators. This seems like a more equitable solution than most of the others I’ve seen and one I’m curious to watch progress.
Not to be outdone, mainstream media has also entered the blockchain space. Po.et, led by an exVP of The Washington Post, is another company in the race to solve today’s fair attribution and “proof of existence” challenges, by creating a “shared universal ledger designed to track the world's creative works.”
Some of the more interesting initiatives worth watching go beyond the protection of IP rights and attribution.
Publiq, built on DECENT, envisages a world without publishers and intermediaries completely. It is looking to connect readers and content creators directly in a blockchain.
Civil, that recently received US$5M in funding, is also focusing on the journalist-consumer direct connection. With its newsroom platform, content creators can collaborate inside Civil newsrooms, while readers sponsor them or offer ad hoc payments for content they consider of value — all using Civil’s cryptocurrency. Civil has also included a fact-checking capability into the platform. The thing that really intrigues me about this startup’s approach is that when people sponsor newsrooms in Civil, they get a cut of future revenues that result from that newsroom’s work. This is crowdfunding at a different level.
In the fight against ad fraud, ClearCoin is looking to use a distributed ledger to record digital advertising impressions so it can separate genuine ones from those that are fraudulent. Their goal is to protect the US$15+M/day lost to ad fraud. It will require a lot of advertising agencies to commit to using this new ledger, which won’t be an easy task. And with machines being “valid users” on blockchains, it will be difficult to detect humans versus the bots — one of the key problems with ad fraud today.
But ClearCoin’s goal is an honorable one and it would be nice to see it put into practice even as a proof of concept.
It’s not the technology that matters; it’s what you do with it
Blockchain, just like the internet was in the '90s, is poised to revolutionize the world, but we won’t succeed if we look to use it to undo what exists today. If we view blockchain as a way to destroy banks, Facebook, Google, and other centralized entities, then we will fail.
The only successful path with new technology is one of advancement. And what we need to move forward with this open technology is an equally-open imagination that focuses on building a better future for all, not just ourselves.
So keep your mind open to all possibilities while you keep your fingers on the pulse of what’s happening in blockchain and where its power truly lies. Because it won’t be that long before blockchain becomes an integral part of business and society. We don’t want to be left behind, again.
And as a closing piece of advice, think carefully about what Reed Hastings, said when he separated his DVD business from streaming, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”