Problems with Centralized Asset Ownership

The entertainment industry has long been dominated by centralized entities.

The original reason for this was related to the difficulties of distributing content. For example, if a band wanted to sell their music, they would have to rely on a record company to record it, turn it into a physical record and then ship it to a record store where consumers could buy it.

As such, in the 20th century we saw the rise of several entertainment-focused conglomerates such as:

• Movie & TV Studios: Disney, NBCUniversal, Paramount, Warner Media and Sony

• Record Labels: UMG, Sony and Warner Music Group

• Video Game Developers: Activision and Electronic Arts

• News Organization: News Corp. The New York Times Company, Daily Mail, etc…

• Auction Houses: Sotheby’s and Christies

• Book Publishers: Penguin Random House, Harper Collins and Simon & Schuster

• Internet Providers: Comcast, AT&T and Verizon

Initially, many thought the internet would fix these problems through digital distribution, but it actually made them worse. As internet giants such as Facebook, Amazon, Microsoft, Apple, Google, Netflix and Spotify grew, they began to consolidate power, monopolize distribution and insert themselves into the value chain.

Today the internet giants control over 60% of distribution in several industries.

FAANGs Controls over 60% of the Digital Publishing, Music and Video Markets

Source: Midia Research, Statista, Ebiquity

To be fair, a centralized internet does have several advantages – most notably the fact that it’s very efficient – but these benefits also come at a severe cost to both artists and consumers, including:

• Rent-seeking: Intermediaries take a large cut out of an artist’s revenue. After accounting for record labels, producers and streaming platforms, artists earn fewer than 12% on platforms such as Spotify. On the other end of the spectrum, the Apple Store can charge up to 30% taxes on every sale, which is almost certainly passed along to the consumer

• Censorship: Companies such as Twitter frequently ban users, and Apple banned Epic Games, the creator of the multi-billion dollar game Fortnite, from its App Store after a revenue dispute

• Interoperability: In their current form most online platforms aren’t interoperable – you can’t buy an Android app on Apple’s App Store and you can’t purchase an item of clothing in The Sims and wear it in Second Life

But what if there were a better way? What if we could keep the efficiency of the existing system but remove the threat of censorship, allow creators to keep their profits and guarantee interoperability between systems?

Fortunately, NFTs make that possible…