Article By Jason Bloomberg
To understand the true power of disruption that streaming media leaders like Netflix and Spotify have brought to their respective markets, you need to follow the money.
True, industries as diverse as DVD rentals, commercial radio, and cable television have all felt the impact of such disruption – but the brunt of the changes have largely fallen on the content producers.
The pittance that Spotify doles out to the artists whose music it streams is now a well-trodden controversy. Lesser known, however, is the impact that Netflix’s business model has on the producers of the content it delivers.
While Netflix produces some of its own content, it licenses the vast majority of what its customers see – and it uses its influence in the marketplace to get access to content at bargain basement rates.
Insiders are all too familiar with Netflix’s model. “Netflix tends to license lots of product in bulk for discounted rates,” explains Gary Elmer, Director of Photography, Matchbox Pictures and Eye Line Cinematography. “Unlike pay per view, Netflix only pays once and after the initial payment no more funds are passed on no matter how many people watch the movie.”
Secondary Impacts of the Netflix Juggernaut
One way content producers are attempting an end-run around Netflix is via a new content form factor: ‘fast fiction,’ consisting of high quality short videos streamed to smartphones and other devices.
While Netflix customers can certainly view its content on their phones, the fast fiction category focuses on content that producers create specifically for handheld devices, in some cases integrating with interactive features specific to the device.
Perhaps the best-known entrant into the fast fiction marketplace is Quibi, the brainchild of showbiz veteran Jeffrey Katzenberg’s Hollywood/Silicon Valley powerhouse WndrCo, which invested a cool billion dollars into Quibi.
With the addition of tech industry stalwart Meg Whitman as CEO, Quibi is pouring its money and talent into creating top-quality content that should drive interest – and most importantly, subscription revenue – into Quibi.
What such a big budget content business model misses, however, is a way to bring a broader range of content producers into the fold.
Reinventing the Royalty System
Anybody can post original content to YouTube or Spotify, but only a small sliver of such producers can make any real money from such services. And by purchasing access to content at bargain basement rates, Netflix is doing little to encourage new producers to add their content to the mix.
Given its greenfield status, the fast fiction market is an ideal place to disrupt how content producers are paid – at least, that’s the vision of Quibi competitor Fiction Riot.
Fiction Riot’s vision: build a subscription-based fast fiction platform that fairly compensates the producers of all content on the platform, from the big-name pros to the individual crew members at shoestring startups.
Fiction Riot is the brainchild of former United Talent Agency agent Mike Esola, whose discouraging experiences as an agent led him to formulate the idea behind Fiction Riot. “Our motivation at Fiction Riot is the disintegration of revenue share royalties,” he explained.
The problem: concentration of wealth at the top. “The top tier is making more money than ever, but no one else is making money anymore,” Esola said. “Streaming was phenomenal for consumers and increased capital spend, but it led to a ‘lottery ticket’ system, where you’d need a few hits to make up for a lot of losses.”
Fiction Riot’s solution: a technology platform dubbed Ficto that brings together three groups of people: the subscribers, who pay for the service; the content producers, who earn royalties; and curators, who make money by reviewing and rating content.
An essential characteristic of Ficto – and an important differentiator – is the transparency built into the system. “We want to avoid the padding and corruption of traditional business models by rolling out a transparent royalty revenue share,” Esola explained. “I can’t tell you how disincentivized people in the business have become.”
The Path to Blockchain
This need for a royalty platform that delivered transparency to all parties led Esola to DECENT, a blockchain platform vendor that centered its DCore platform on delivering streaming content via a decentralized royalty model. In other words, DCore was a perfect fit for Ficto.
DCore provides Ficto with the best of both worlds. “We want to preserve the benefits of streaming with a verifiable way to calculate royalties,” Esola said. “We can also maintain a revenue share for every crew member.”
The DCore platform also supports utility tokens, which Fiction Riot plans to use to keep track of payments to the curators. “We’re rolling out a unique utility token to track their productivity, like a time card,” Esola added. “Tokens are just a way of keeping track.”
One of the greatest challenges of blockchain-based business models like Fiction Riot’s, however, is what I call the ‘tipping point problem’ – how can it build a subscriber base before it has a substantial library of content, and how can it afford to build such a library before it’s bringing in significant subscription revenue?
The solution: use investment dollars to seed the content library with high-quality, original fast fiction that will drive early subscription revenues. Fiction Riot already has at least 20 fast fiction series in the works, including a Ficto series connected to the upcoming action film Project Extractionstarring Jackie Chan and John Cena, as well as several others based on acquired rights to various New York Times NYT +0.22% best-sellers.
Will Ficto Fly?
Fiction Riot clearly lacks the deep pockets of Quibi, and it’s not clear if its initial content investment will bring in enough subscribers for it to pass its tipping point.
However, if it does manage to attract sufficient interest from subscribers to become a viable business, then its ability to compensate both curators and content producers for the work that they do might very well disrupt how the Netflixes of the world obtain their content – and give Katzenberg and Whitman a run for their money as well.
As for the role that blockchain plays in the Fiction Riot story: it provides the transparency and decentralization that the company will need in order to scale its ambitious plans.
But make no mistake: Fiction Riot isn’t a blockchain company that hopes to apply the technology to fast fiction. It’s a fast fiction company that hopes to leverage blockchain to disrupt the behemoths in the streaming video marketplace.
Too few ‘blockchain companies’ make this distinction properly, which itself bodes well for the future of Fiction Riot.