Revenue sharing with blockchain is a key to profitability
Video channels that pay content owners based on metered viewing and transparent, fair division of revenues can foster a more vibrant information economy. The success of such systems depends upon trust among all the parties involved, including publishers, content providers, editors, and affiliates. But as the scale of the system increases, the issue of trust becomes a dominant concern.
Blockchain technology promises to help establish the needed level of trust for greatly scaling subscription video-on-demand (SVoD) revenues. Enhancing the content monetization platform by incorporating blockchain ledger accounting could provide the missing ingredient, enabling exponential growth in video-on-demand services.
The market for subscription video-on-demand
In 2015, the worldwide video-on-demand market was about $9 billion, growing to more than $20 billion in 2017 for the U.S. alone, with projected growth to more than $30 billion by 2022 – an annual growth rate of 8.8%. PricewaterhouseCoopers estimates that SVoD accounts for almost 80% of these revenues, with the remainder being transactional video-on-demand (pay-per-view and video downloads). Netflix, the video rental and streaming company, is the largest SVoD player, with revenues of $11.7 billion in 2017 and $15.8 billion in 2018.
Companies exploring the connection of blockchain to video
A number of high tech startups are looking at ways to leverage the advantages of blockchain transparency and security into their commercial video offerings. Most of these companies share two common characteristics: using peer-to-peer services for storage and distribution of videos, and cryptocurrency-based reward systems.
- Breaker, formerly SingularDTV (cryptocurrency: SNGLS)
- Flixxo (cryptocurrency: Flixx)
- Popchest (cryptocurrency: The POP Token)
- Slate (cryptocurrency: SLX)
- Theta (cryptocurrency: Theta tokens)
- VideoCoin (cryptocurrency: VideoCoin)
- YouNow (cryptocurrency: Props)
A better approach to incorporating blockchain in video technology may be to focus on the problem of providing trustworthy and flexible accounting in the context of a revenue sharing service – without reliance on either peer-to-peer or cryptocurrency.
The benefits of the revenue sharing model to video
An increasingly popular way of selling digital content is on an all-you-can-eat subscription basis. Further, by combining content from many different sources, a channel can be made increasingly attractive. These ingredients can be the basis for building successful channels, especially for valuable, hard-to-monetize content, such as instructional, news, event, and special interest videos.
Combining content from multiple sources raises the thorny issue of fair compensation. Nevertheless, a verifiable revenue sharing system opens up the possibility of making video channels more profitable and less costly to build. A trustworthy system where compensation is based on subscriber usage could replace the complexity and risk of fixed price contracts.
Instead of requiring advance payment, subscriber usage becomes the basis for content compensation. Editors should be able to pick and organize videos efficiently, without the burden of financial decisions. Thus, revenue sharing makes it possible to build more profitable video channels for less up-front investment.
The opportunity for video publishing
What’s needed is a platform that allows publishers to combine videos from multiple sources and pay based on relative viewing times. The underlying model is simple: publishers of curated video channels pay content providers by splitting subscription revenues transparently, based on metered usage. Money could be credited to each party’s account on a daily basis.
By incorporating blockchain ledger accounting of subscription revenues and payments, these verifiable, immutable financial transactions can be tied back to the viewing details. In this way, a revenue sharing system can be sufficiently fraud-resistant to work for the largest publishers and the most valuable content.
Blockchain is essential to revenue growth
When large amounts of money are involved, there is a greater need for trustworthiness, which is the point of blockchain. In a revenue sharing subscription model, funds accumulate before they are disbursed, so the amount of these funds grows as the number of subscribers to a channel grows.
When a video channel pays content owners based on subscriber usage, there’s a substantial portion of the subscription revenues that needs to be held in bank accounts, “in trust”. That’s where blockchain ledger has an important role, along with the support of a commercial bank to hold and distribute the cash.
Blockchain can revolutionize video-on-demand
A subscription video streaming service that incorporates blockchain ledger accounting can open up a potentially huge, untapped market. The key is to persuade content owners to accept and trust a revenue sharing model based on actual usage. Solving this problem would lead to massive growth in the number of successful video channels and total video streaming revenues.
Steven Asherman, Founder, President & CTO of Content Galaxy,
Consultant on scalable SaaS and financial systems, as well as video-on-demand.