The Potential of Blockchain Technology for the Media Industry

An interview with Sebastian Posth

This interview by Steffen Meier first appeared in German language in No. 11/2017 of Steffen Meier’s digital publishing report. Original title: “Building Blocks for the Content Community. Blockchain und Verlage”.

Introduction

Blockchain is a future-oriented technology as well as a hype, in which rash expectations and technical ignorance unite in a unique way. There is plenty of fascination, but only a few experts actually know what is hiding behind terms like Bitcoin or blockchain. A digital currency? A decentralized database? A ‘network of trust’ without centralized institutions? The technology for the ‘internet of values’?

Blockchain is primarily known from the world of finance, as the fundamental technology underlying the crypto currency Bitcoin. Individual financial transactions between persons (peer-to-peer) are registered within data blocks and stored in an unforgeable way in a distributed network spanning hundreds of computers. At the same time, the blockchain is designed as an open network; everybody is allowed to read or write. Additionally, security is guaranteed by a complex encryption technology. It is in actual fact impossible to compromise the transactions stored on a blockchain. It would literally cost too much energy. Trust, reliability and assets of a blockchain are therefore not created by institutions, but they are the result of the distributed structure of the blockchain.

There are numerous use cases for blockchain technology. Not just the financial services industry values (and fears) its potential, but also insurance companies and political institutions . The media branch, too, is starting to take an interest in blockchain technology. Image and art trade, news and music industries are reporting rising numbers of start-ups and initiatives, and at the last Frankfurt Book Fair and at Berlin’s Publishers’ Forum, there were speakers calling upon book publishers to engage themselves in the blockchain matter. Bookstores and publishers, e. g. in Arnheim (NL) or Berlin, are already accepting Bitcoin payments for book purchases.

In order to sound out the opportunities this new technology is offering the media landscape, Craft AG, Creations Media GmbH, iRights.Lab and the entrepreneur Sebastian Posth have teamed up for the Content Blockchain Project. The consortium receives funding from the Digital News Initiative, a partnership between Google and European publishers. The project partners ZEIT Online, Golem.de, the online-Verlag GmbH based in Freiburg and dpa Infocom are providing additional expert input. The partners are striving to jointly develop the technological and legal foundations as well as business models, which enable journalists, publishers and media start-ups to create their new products and services for an open blockchain economy. We talked to Sebastian Posth, who is working on possible business models for the blockchain technology.

– What does “Blockchain” mean for the media landscape?

First of all, what blockchain technology means for the media landscape is mainly one thing: as with the internet, it poses rather a challenge – it is technologically sophisticated and provocative to mainstream business models and institutions.

Blockchains are adding a new dimension to the internet as an information medium. The actual innovation of the blockchain is that for the first time it allows to conduct transactions, in which values like money or ownership are exchanged in an unmediated, automated and binding way between persons without the need of an intermediary or a central entity. It’s not only the business model of banks or notaries that will change significantly due to the inherent mechanics of the blockchain, where trust is no longer generated by authority, but by algorithms. We are confident that blockchain technology will also have a great impact on the digital trading of media products.

– What spurred the idea for the “Content Blockchain” project?

When you’re looking at the distribution of digital media products within the publishing industry, sooner or later you’ll come to the point of realizing that the ISBN does not meet the requirements of digital content trading.

We asked ourselves what a content identifier that is genuinely conceived for the digital world should look like. What are to be the design characteristics of a standard number in order to meet the requirements regarding the granularity of content as well as the innumerable digital formats, variants and editions? How can content be clearly identified and tagged across complex distribution structures, independently of central institutions and closed systems?

Being decentralized and reliable, blockchains come with structural advantages as to these requirements. Thus, we developed the concept of a new, digital standard number on this basis, which we want to call ISCC (International Standard Content Code) for now.

– Yet another standard number? How does this ISCC work? And who is issuing it?

The ISCC is generated from the basic metadata and the content itself; it is therefore fundamentally different from existing standard numbers. Anyone in possession of a certain content is able to generate the corresponding standard number. Anyone who desires to trade content is able to unambiguously identify it. Thus, the standard number is generated in a decentral way and can be used reliably in distributed trade structures – without a central authority issuing the numbers, restricting access to metadata and thus controlling the way in which content is used.

The purpose of the new, digital standard number isn’t just to clearly identify content and to make title metadata available in a decentralized way. In addition to this, rights holders shall be enabled to ‘piggyback’ basic usage rights and licensing information onto the content thus referenced – so-called Smart Licenses. They allow to considerably facilitate the trading of digital content.

– And what is hiding behind these “Smart Licenses”?

Everyone who has tried to offer or purchase licenses on the internet knows what a tedious process this can be. Where can I obtain a certain content? What will I be charged for its usage? To what extent am I allowed to use the content?

The idea behind ‘Smart Licenses’ is to attach a lean set of license rules to the digital content, consisting of simple, standardized and machine-readable rights profiles. The dream of automation of license transactions has been dreamed for quite a while. Now, blockchains offer the technical capabilities to considerably simplify the distribution, the licensing or the sale of digital content. This will save costs and at the same time increase the circulation of content.

– Let’s be upfront: Where’s the beef? How and where are media companies enabled to earn their profits?

In general, the question arises, in which way media companies will earn money in the future. The success of Spotify or Netflix shows that models based on ownership or downloads are becoming less relevant. It’s possible to reproduce established models with blockchains: subscription based services or download-to-own. But new offerings are possible, too: affiliate and reward systems, even the resale of digital content, at which the rights holder is compensated according to the licensing terms stated in the Smart Licenses, is theoretically conceivable.

– What’s next for the “Content Blockchain”?

The goal of the Content Blockchain Project is to evaluate the technological fundamentals and to provide the basic applications in an exemplary manner for rightsholders to develop their business cases. We will develop and describe these commercial models in the course of our project and in cooperation with our project partners.

To this end, we have set ourselves a number of milestones. In the next step we are working on a first Proof of Concept for the ISCC. This will initially deal with the identification of text-based content. For this, we are developing an open source software and testing it with our partners from the media sector. Simultaneously, we are developing the first drafts for the license and rights profiles. Additionally, we are planning to start a public blockchain for testing purposes in order to examine the registration of ISCCs and transactions under realistic conditions.

We are very open to exchange and new cooperations and will document and publish our results continuously as open source code on Github as well as on our website.

– Are the players of the media landscape, especially traditional book publishers, ready for such blockchain based models?

It will certainly take some more time until blockchain-based business models are ready for the market. But as with the internet or digital books, blockchain technology is here to stay. It’s important for rights holders and media companies to familiarize themselves with the technology and its far-reaching implications early on. And we hope that we can motivate and contribute to such efforts with our project and its documentation and technical developments.

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