A number of articles across different websites have attempted to explain what’s known as “blockchain technology.” The New York Times alone features articles with titles like “A Guide to the World of Blockchain,” “Demystifying the Blockchain,” and “What Is the Blockchain? Explaining the Tech Behind Cryptocurrencies.” As these examples suggest, blockchain remains an intriguing but largely unknown concept—particularly as it relates to the American film and television industry. In this post, I will offer my own understanding of blockchain and Hollywood’s interest in the technology.
What Is Blockchain?
“Cryptocurrency” refers to decentralized, digital currency—with Bitcoin representing perhaps the best-known example. Each cryptocurrency transaction is shared with all users in the currency’s network; before it is added to a database—or “block”—of other recent transactions, however, a transaction must be authenticated. This involves a process called “mining,” by which a group of computers on the currency’s network attempt to solve a cryptographic puzzle (i.e., a highly complex math problem) that grows in complexity as more computers try to solve it. Once solved, the most recent transactions are added—or “chained”—to the record of existing transactions, creating a “blockchain.” The ledger cannot be changed after the transaction has been chained, discouraging fraud; furthermore, given that the data is stored across many computers in the same network, hacking is more difficult.
Because no single computer can solve each puzzle, blockchain technology helps to maintain a collaborative, decentralized network. Any user on the network can access the record of transactions. By comparison, a centralized financial institution like a bank maintains and controls access to its own ledger. Simply put, blockchain helps to maintain a secure, transparent record of every transaction involving a particular form of cryptocurrency.
Why Is Hollywood Interested?
Blockchain has attracted the interest and investment of diverse industries and groups; the technology can track health and voting records, for instance. Beyond entertainment companies such as Comcast hoping to see financial return from investing in blockchain startups, the American film and TV industry remains interested for several reasons:
- Accountability: With films, investors, guilds, and talent can track how the money is spent. Budgeting and spending, then, become transparent.
- Consumer/fan engagement: With blockchain, artists can directly interact with fans and directly sell their content without an intermediary (e.g., a film studio distributor or record label).
- Distribution: Consumers can purchase a film using cryptocurrency. This would give independent creators a better sense of who purchased their content. Because blockchain eliminates the need for an intermediary (e.g., Netflix, Vudu), a studio can directly sell a film or TV episode to consumers. As studios continue to launch their own streaming services, blockchain could help to secure the distribution of their film and TV content and provide a more accurate tracking of viewership.
- Efficiency: Blockchain technology provides an efficient form of payment across various parts of the production, distribution, and exhibition process.
- Marketing: Blockchain allows studios and other companies to track their advertisements across different websites.
- Profits: As streaming has overtaken physical media sales (e.g., Blu-ray and DVD), artist compensation per transaction has changed dramatically (as streaming music sales make clear). Using blockchain, artists can collect a greater share of the profits.
- Royalties: Blockchain can help evenly distribute royalties to artists involved in a given media product, such as a film. This is particularly notable for an industry where productions tend to “lose” money through the process of “Hollywood accounting.”
- Security: After the 2014 Sony Pictures hack, blockchain can provide a more secure database. For consumers, blockchain would provide a relatively safe use of data, with all users able to audit any transaction.
Remaining Risks
Ultimately, blockchain technology promises to reduce the role of intermediaries and therefore lower costs. Several risks, however, remain. The cryptocurrency market tends to be unregulated and speculative; unsurprisingly, a number of disreputable companies have taken money from investors, prompting attention from the SEC. Furthermore, just as centralized control of data now rests in the hands of companies like Facebook and Uber, powerful miners could come to control blockchain data.
Hollywood studios remain resistant to change (due in part to corporate-specific traditions and regimes as well as more general industry practices). For instance, scheduling the release of films in theaters and home video has led to significant tension between distributors and more exhibitors. Because of this, blockchain will take a considerable amount of time to noticeably affect the American film industry—if at all.
