How Blockchain Is Changing The Digital Licensing Business

Today, the digital landscape grows ever so quickly and with it changes the way digital content is distributed and licensed. Just last year, The Walt Disney company has canceled its distribution deal with Netflix and will be launching it own streaming service in 2019. Disney is not unique in this game-changing strategy; just this last year a Federal Court overturned an eight-year-old dispute between Google and Oracle.

High-speed internet allows any type of content to be delivered to any user's device in a matter of minutes. But behind the scenes of user experience, there are long and inefficient processes that govern the licensing relationships between companies: copyright holders, distributors, and sales channels. A typical licensing deal might take many months to set up.

Did you ever wonder why only a handful of major online outlets hold massive Video-on-Demand content catalogs, effectively monopolizing the business? It's simple: they have proven contractual and technological channels with the world's top copyright holders, processes that are limited in scope, but are operational. Establishing new relationships and widening the distribution network is difficult and time consuming. For the copyright holders it's easier to work with a handful of majors. But easier does not mean better.

Why is copyright licensing so complex?

Licensing remains a highly centralized industry while the world is becoming increasingly more fragmented. In 2015 this situation has lead Nukri Basharuli, a nuclear scientist turned serial entrepreneur, to launch into his next venture: a licensing platform called Aggegion.

Basharuli realized that the pain points so closely associated with the licensing process did not just stem from slow organizational procedures and yellow tape, but from lack of visibility and control throughout the licensing chain. In other words, the problem was rooted in the lack of comfortable level trust, hindering the entrance of new players into the market.

Despite all the advancements of the digital age, a modern distribution chain is less a chain than a series of loosely connected links. Most current B2B digital distribution models do not permit the copyright holders — the companies that own the intellectual property — sufficient transparency and control to oversee the whole distribution chain.

And once the copyright holders provide their digital content (often in the form of files stored on a hard drive or an FTP server), they lose visibility; they only get to see as far as the next business participant in the chain. And then — it's a leap of faith. Will the distributor adhere to the contractual conditions? Will the content remain secure? Will the reporting on sales be accurate and how will they be presented? What happens if the contractual terms are violated?

Such lack of control is unsettling to large copyright holders, hindering possibly fruitful business relationships and opportunities. Matters get even more complicated for large global businesses, with multiple international subsidiaries and partners in dozens of countries, all with their own laws, cultural norms, reporting structures, and IT landscapes.

How can this fragmentation be fixed?

By now, you've probably heard of blockchain technology. But just in case: blockchain is a decentralized ledger where all participants hold an identical record of the database. The reason why blockchain is changing the world is because it resolves the issue of trust: with the absence of a single centralized storage, all transactions become permanent, immutable, and easily verifiable. It's one and only version of truth.

Basharuli's Aggregion platform is now taking advantage of blockchain to develop a single common governance framework of interactions and relationships between any types of digital objects, with focus on the fundamental concept of right: as in, a right to do something or a right of ownership. And these digital objects may refer to any types of content: video, music, ebooks, software, apps, or anything that's data, really, flexibly combined in any possible way.

In the Aggregion blockchain all business participants may license content rights to each other within a single ecosystem and using the same sets of rules. It's a game-changing concept that resolves the issue of trust and enables major copyright holders to define their content with licensing conditions and put it out there into a public blockchain for any outlet to pick up, with Aggregion enforcing the rules all the way to the user's device. It's an open market for content. And open market sparks competition, meaning better deals for the end customers.

In this ecosystem the paper contracts or anything paper will no longer exists — all contracts and all relationships are based on blockchain smart-contracts and financial settlements take place through cryptocurrency, instantly. In this concept, the world of content will no longer belong to a handful of major outlets. Instead, the licensing relationships will be established directly between the copyright holders and the end customers — instantaneously, with the help of artificial intelligence and advanced optimization algorithms.

It may seem utopian, but the Aggregion is well on its way to achieve this ambitious vision. Operating commercially for two years, Aggregion has already earned the trust of numerous global copyright holders. And as they migrate to this new blockchain ecosystem, they will bring their partners, until the snowball effect ensues.

In broader terms, the question of how information can be transferred has been answered plenty. The big question that remains is whether the information has the right to be transferred and on what terms, who owns it, and most importantly, how to enforce it. By attempting to create a single licensing standard, platforms like Aggregion are bridging the gaps of a fragmented digital world with universal rights governance.