Blockchain can change the way contracts are executed, security gets enforced, money changes hands and new value chains spring up. Blockchain can bring interesting opportunities to the media and entertainment industry and might disrupt the big studio-centric model of today.

A blockchain is a public ledger that can be used to link a series of chronological records (“blocks”) in an immutable type of decentralized, secure, multiparty repository. Blockchains can be either public (available to all who want to participate) or private (available to a predefined closed set of participants).

Together, blockchains offer some great new financial opportunities to media and entertainment companies. That’s because the media industry’s complex ecosystem and underlying technologies are inhibiting the free flow of creative products and talent. Rather than a true merit-based system where talent and content can come from anywhere, the industry still works primarily with an aggregator model, with many layers of middlemen between talent, products and consumers.

Take the music industry. Of course, there are songwriters and performers. But there are also talent managers, recording studios, composers, sound engineers, producers, publishers, lawyers, labels, distributors, retail stores, agents, broadcasters, subscription services, promoters, live venue providers and even unions. Rights, licensing agreements and royalties can pass through many hands before a single fan hears a song.

This model causes two huge financial disadvantages, especially to artists: ambiguity about copyrights and royalties owed, and delayed payments of royalties. It’s no wonder indie artists look more to co-op models and direct access to potential fans through YouTube and Spotify.

The industry complexity also creates a problem for the aggregators — the big movie houses and music groups — that have to keep track of digital rights, royalties owed, payment methods/systems, and copyright infringements.

A music blockchain, for example, could offer transparency within the ecosystem. First, confidential deals would be struck between each of the parties throughout the ecosystem based on their roles and the value added (spelling out, say, the percentage of share between an artist and the label).

These contracts specify rights, licensing and royalties. Rather than a hornet’s nest of transactional systems between each of the players based on how content flows, all parties join a single private blockchain that would include the following elements:

  • Each entity registers as a participant in the blockchain (becomes a “node”) and receives a unique blockchain identity.
  • Registrants would each have their own interfaces and functionality for the purposes of their specific types of transactions.
  • This private blockchain gets linked with a consumer-friendly public blockchain, with “bridge nodes” connecting the two to track fans and their downloads.

Every financial transaction in the process of creating a song becomes a part of the blockchain and gets seen and known by all parties. Based on the previously contracted terms, the blockchain triggers micropayments according to the rules agreed upon by the parties.

Essentially, the blockchain executes the business and legal terms and settlements in what we call “smart contracts.” One important point: The song itself does not become a part of the blockchain. It resides on a centralized or distributed platform protected by watermarking or other security methods. Only metadata about the song is recorded in the blockchain.

Ultimately, a blockchain could mean that more money flows from the fan to the creator. But this disintermediates the very powerful content aggregators, platform providers and royalty collection associations. While blockchains force a shift in the balance of power, they also open new business models and frictionless opportunities for new media licensing and micropublishing value streams.

In this kind of decentralized marketplace, there’s a stronger need to establish trust among diverse parties for information and intellectual property sharing, transparency of decision making, and an objective, immutable history of transactional exchanges within the ecosystem. All this needs to run as a tamperproof system, with no single point of control or failure. Ideally, that’s the role blockchain can play.

Aside from enhancing digital rights management and payments with secure, reliable audit trails, blockchains allow for micropublishing (a single chapter, a short video, a music stem) and related micropayments. Plus, the creative types can also know exactly where, how and who’s using their content, which will help them establish more creative control.

For all the industry players, blockchains can facilitate real growth opportunities for new media licensing and micropublishing. While the new evolving model represents a dramatic change, blockchains can help devalue and limit pirating, fake tickets and other malicious content rampant in the media industry — something the big music companies and studios have been looking for since the dawn of the internet.

The big media companies must come to recognize that the old way of doing business no longer serves a truly thriving creative industry.