Cryptocurrency

Bringing cryptocurrencies to mainstream entertainment: A guide

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If you are a fan of Last Week Tonight with John Oliver, you might know he recently did a segment about the remaining branches of Blockbuster Video that are still trading in the US state of Alaska. These few remnants of a fallen giant remained viable due to the high cost of broadband and low availability of ‘all-you-can-eat’ streaming in remote Alaska. However, with high-speed affordable connectivity now finding its way into these regions, even their days are now numbered.

The point is that streaming and digital downloads are replacing pre-recorded media wherever it is viable to do so, and with it, replacing the traditional transaction that used to take place when you purchased or rented a physical item. With the content increasingly a digital product, stored and delivered inside its own digital ecosystem, it is little surprise that the monetary units used for the transaction are also moving away from physical to digital currency units.

Services like Netflix, Spotify, Amazon Prime and Apple iTunes are already morphing into global service providers, with more joining their ranks to offer content and services from the gaming, sports, music, film, TV and even academic ranks. With such services operating across multiple countries, fiat currencies anchored to a single country quickly become an impediment rather than an enabler for a digital marketplace, and this is why.

Why digital content needs a digital currency

There are numerous reasons for having a singular in-app or in-platform token economy. Simplicity first of all. After all, an in-game economy or currency unit allows for clear pricing that doesn’t need to change from territory to territory. Rather than a game costing £14.99 in the UK and €12.99 in Europe, it can be 13 token units in all markets, and the exchange value of those tokens can be the element that fluctuates from market to market.

With users converting a variety of local currencies into a global currency unit, the money is already banked with the platform operator – like it would be with a gift card. Standardisation of in-game economics on this basis makes for easier marketing (the same pricing globally eliminates the need for market-specific marketing materials and offers), more accurate income estimates (as the money is already with you as you control the economy, it can be ringfenced and accounted for the second a transaction takes place, not when the card issuer finally transfers the money to you) and it harnesses customer loyalty (users are actively investing in your platform, not just making a purchase).

Operating an in-game or in-platform economy isn’t a matter of pushing the currency conversion burden from the operator to the consumer and content provider. It’s a matter of globalising the service, streamlining the transaction process and improving transparency. Pricing variations are one of the greatest frustrations effecting games and entertainment consumers. In-platform economies eliminate this, making the market value of currency conversion a transparent and user-controllable option (you can choose when to exchange your funds, where and at what rate – rather than accept the arbitrary and often uncompetitive exchange rate offered by the service provider).

The use of a platform’s own cryptocurrency-based monetary unit extends beyond the end consumers. It can also be the basis for paying content creators. The benefits are broadly the same as they are for consumers. What creators are paid for their work is global, fixed and predictable. The burden of exchange rates is firmly within the control of the creator, they need not lose out to having units converted into dollars euros, pounds etc. at the point the platform operator decides. The content creator can exchange their monetary units when they choose to, leveraging the peaks and flows of the global currency exchange markets to get the best price.

The blockchain component

Using cryptocurrencies as the basis for selling digital content, as well as paying content creators, is one of the scenarios where blockchain bookkeeping comes into its own.

Decentralisation, absolute transparency and undisputable journalising of sales, revenue accrued, games played, content streamed, in a public or private blockchain helps platform operators as well as content creators overcome some of the challenges associated with using ‘middle men’ between content creator and the end consumer.

Take the major music streaming services as a case example. It is commonplace for artists to wait for upwards of a year to receive royalties from these services, with little or no visibility of what they’ve earned over the course of a year, how they’ve earned it, and what deductions have been made on behalf of managers, agents, labels, marketing providers, lawyers etc. The blockchain provides a basis for all this to be laid out in the open. It also provides a basis for faster settlement of payments. With such accurate and near real-time journaling of transactions, there’s no reason that royalties can’t be paid daily, weekly or monthly. Such a prospect is a real boon for independent software developers and small production houses, people that don’t have the cashflow to allow them to wait a year to profit from their work.

The move to digital means that the market for games, video, sports, music and more becomes a global opportunity rather than a country-by-country one. The days of phased releases is over, and with it the days of pricing the same game at seemingly different prices to account for currency fluctuations is ending too. In-platform economies powered by cryptocurrencies represent a far more reliable, tradable and honest form of globalised currency unit than any gift card or on-deposit balance can offer. When the currency is global, so too is the user experience and the market opportunity.

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