Why other in­dus­tries are al­ready in­vest­ing in blockchain

The Insider - - TECHNOLOGY -

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

Fi­nance

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.

Travel

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.

Mu­sic

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.

Video

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.

Main­stream me­dia

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.

Ad­ver­tis­ing

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.”

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