Blockchain has the potential to transform the relationship between consumers and brands
October 12, 2016
Online streaming of music grew by 80% last year, whilst overall revenues from music are stagnant, and the amount back to artists is falling. Piracy and arguments about IP are rife. As technology continues to disrupt the industry, several artists are turning to blockchain to find a new business model.
Blockchain was first talked about 2008 as the technology that underpins Bitcoin, the cryptocurrency. It operates as a shared ledger, which continuously records transactions or information. Its database structure, where there is a timestamp on each entry and information linking it to previous blocks, makes it not only transparent but exceptionally difficult to tamper with.
Whilst Bitcoin has grabbed the headlines, blockchain is making a much bigger impact elsewhere. Banks, insurance companies, even retailers, are already experimenting with it. One of blockchain’s most vocal advocates is the Grammy Award-winning UK singer, songwriter and producer Imogen Heap.
“Blockchain is completely enabling us to rethink the basic, core structure of how monetary distribution works in the music industry,” she says. “It can be used to build a united platform and create an ecosystem, but most importantly builds innovation under the standards that make sense for artists.”
A report by the Blockchain for Creative Industries at Middlesex University identified 4 areas where using blockchain could be a genuine asset to the music industry. Alongside aiding “fast, frictionless royalty payments”, blockchain can also help to create a networked database for music copyright information, enhance “transparency through the value chain” and enable access to alternative sources of capital.
Last October, Imogen Heap released her song Tiny Human attached to a smart contract on Ujo Music, which is built on the blockchain run by the decentralised application platform Ethereal.
For Heap it is all about creating fair value for the exchange between artists and listeners. By cutting out the middle men, there is a sense of getting back to the more intimate direct exchange between artist and listener. A bit like Kickstarter, it is also about democratising the creative process. It can offer her listeners a deeper insight into how she actually creates music, and can be the vehicle through which the people who work on her tracks get the credit they deserve too.
Transforming the relationship between consumers and brands
Whilst Heap’s story might sound peripheral, and easily ignored because it sounds too technical, it is an example of how the relationship between brands and consumers can be transformed. Some believe that blockchain will be the most significant step forward in the way technology supports brands and marketing since the birth of the internet.
The technology creates a new way of working, which transforms distribution and payments, and back office. But it could also fundamentally transform the engagement of consumers with brands. At a time when many consumers feel disenfranchised, and brands struggling to build re-engage them, blockchain could create a revolution in marketing.
Here is an extract from a great article by Jean-Paul Edwards:
At its simplest, relevant sections of personal data held in the blockchain can be shared with the right brands. The brands you trust would be held on the blockchain. This could see major household purchases such as a vehicle, or a dishwasher, being shared with your trusted brands that can let you know about associated services and goods that are right for you, from insurance to cleaning tablets, while you – the consumer – remain anonymous and in control.
Several big institutions are looking into the blockchain; the Bank of England is investigating the technology and IBM is looking at how the blockchain can manage the huge array of connected devices that we are likely to see in the connected home of the 2020s eradicating the need to remember passwords for to 200 devices.
In fact it’s set to benefit marketers the most in helping them realise the age of ‘intelligent value’ that’s set to define how we use technology over the next ten years – not only in monetary value but reputations, social interactions, experiences and memories, relevancy to tastes and ambitions.
For example, the blockchain might be applied to the use and management of a car. The blockchain would underpin apps that monitor petrol consumption, realise when it’s running low, match this with information around where the driver is most likely to go at any given time then suggest a fill-up at a cheap station. The car would also link driving behaviour with insurance provider details enabling automatic insurance cover based on driving performance. All these elements could combine to tailor the advertising shown on a mobile or home TV. The blockchain provides a secure, distributed platform for all this data.
Similarly, in the FMCG world, the blockchain might see consumers buy their household products direct from P&G or Unilever rather than through a supermarket. As ecommerce, powered by optimisation algorithms, becomes the norm, consumers may question the value that retail intermediaries provide over and above the products themselves. Sidestepping the middle man would reduce the cost to consumers considerably.
Supermarkets might react by providing new and innovative Artificial Intelligence services to customers. These services, utilising personal data from the blockchain, could include managing health goals with a service linked to health data collected from a smartwatch. In fact consumers will gravitate towards brands that provide most value to them and will quickly reject those that don’t satisfy their needs.
But in my view the technology will have even wider ramifications. I believe the blockchain will transform ownership as we know it and have a profound effect on business and society in general.
Consumers will begin to borrow or hire products, rather than buy them outright. Storj is a company spearheading a data hire solution of this sort. It allows people to use the blockchain to rent out unused parts of their hard drive to other people completely securely, a sort of Airbnb for data. The company claims to reduce storage costs by a factor of ten.
The potential removal of the middle man, the increased expectations of consumers around value, and new models of ownership that the blockchain affords, will transform the role of brands. Marketers need to work out how they fit into this new world and think hard about how they might use the blockchain to enhance their value proposition to customers.