Presentation about blockchain technology and its potential to support the entertainment industry, prepared by Diana J. Stern, Founder of Distributive, Inc.

1. Distributive
Blockchain Technology
and its Potential to Support the
Entertainment Industry
© 2016-2017 Distributive
April 2016

2. Blockchain Technology | Entertainment Industry
1913: Hollywood’s first
full-length feature film,
Squaw Man, is filmed in
a barn on Selma Ave.
and Vine Ave.
Centralized
Runaway production
further decentralizes the
film industry across the
U.S. and abroad
Decentralized
Foreign markets bolster
the worldwide B.O.;
viewing occurs across
an individual audience
member’s devices. Direct
sharing user-user and
creator-user and user-
generated derivatives
increase
Distributed
© 2016-2017 Distributive

3. Overview of Blockchain Technology
Blockchain technology is software that enables data sharing across a network of
computers. The computers in the network maintain blocks of records in a chronological
chain.
A blockchain is an authenticated record of the history of a network’s activity.
A distributed ledger refers to the concept of each user sharing the same “ledger”,
or set of accounts, as defined by the software.
Sources: Morgan Stanley, Global Insight, 4/20/16; Eris Industries
© 2016-2017 Distributive

4. Overview of Blockchain Technology
In contrast to today’s networks, distributed ledgers eliminate the need for central
authorities to certify ownership and clear transactions. They can be open, verifying
anonymous actors in the network, or they can be closed and require actors in the
network to be already identified. The best known existing use for the distributed
ledger is the cryptocurrency Bitcoin.
Source: Santander InnoVentures, Oliver Wyman & Anthemis Partners
Clearinghouse
Centralized Ledger Distributed Ledger
© 2016-2017 Distributive

5. Characteristics of Blockchain Technology
Sources: Wright, Aaron and De Filippi, Primavera, Decentralized Blockchain Technology and the Rise of Lex Cryptographia (March 10, 2015).
Time-stamped
Immutable
Tamper-resistant
Cryptographically
Secured
Blockchain
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6. Types of Blockchains
Public
Open to the public
Open Ledger
Allows control over
who validates blocks
and who transacts
on the network
Permissioned
Blockchains
© 2016-2017 Distributive

7. State of Blockchain Technology
Ideation
Proof of Concept
Business Analysis
Product Dev.
Testing
Deployment
© 2016-2017 Distributive

8. ttps://openclipart.org/image/2400px/svg_to_png/195966/Soundwave-Dark.png
Use Case | Music Industry
Payments delayed by
years; artists often go
into debt
Problems
Information about rights
-holders is inaccurate
and difficult to access
Nearly impossible to
track the high volume
of individual revenue
streams (700,000 for a
single song)
ht
Source: Fair Music: Transparency and Payment Flows in the Music Industry, Rethink Music Initiative, Berklee Institute, 2015
© 2016-2017 Distributive

9. ttps://openclipart.org/image/2400px/svg_to_png/195966/Soundwave-Dark.png
Use Case | Music Industry
Real-time
micropayments
using
blockchains!
Blockchain tech
also provides a
record of
transactions.
Solution?
© 2016-2017 Distributive

10. Industry-wide Experiment | Finance
Participants
A consortium of 40 of the world’s largest banks, including Bank of America, Goldman
Sachs, and Deutsche Bank; other financial institutions worldwide experimenting more
independently
Investment
Financial institutions spent ~$75M on blockchain technology this year; expected to
spend over $1B in 2017
Road Map (defined by J.P Morgan)
2014 - 2016: assessing blockchain’s value for financial assets
2016 - 2018: proof of concept
2017 - 2020: shared infrastructure emerges, estimated cost savings of 30-50%
2021 - 2025: assets proliferate
Sources: Morgan Stanley, Global Insight, 4/20/16; Ian Kar, “Banks will quintuple spending on blockchain by 2019“, Quartz, 12/17/15.
© 2016-2017 Distributive

11. Transatcionts
IT systems architecture emerging from
Blockchain development
Front End / UI
Metadata and Licensing Protocols
Blockchain App Platforms
Distributed Databases
Distributed File System
The Decentralized Stack
© 2016-2017 Distributive

12. Entertainment Industry Trends
Home Entertainment
Home entertainment revenue excluding SVOD: -8% YoY in 2014, -6% in 2015
Physical sell through (discs) revenue: -10.9% YoY in 2014, -12% in 2015
SVOD revenue: + 25% YoY in 2014 and 2015
Consumers cite good price and convenience as top reasons to purchase digital
Although SVOD comprises 94% of transactions, it generates only 24% of studio profit
Sell-through still generates 54% of profit despite being only 2% of transactions
Challenge
Consumer transactions and physical sales are most profitable, but declining. Streaming
has low profitability, but subscriptions are rising, in part because of changes in con-
sumer viewing habits.
Sources: Andrew Wallenstein, “Why Home Entertainment Figures Should Worry Studios,” Variety, 1/6/2016; Neilson – 2015 Home Entertainment
Trends – Physical and Digital; [Source redacted for confidentiality]
© 2016-2017 Distributive

13. Entertainment Industry Trends
Theatrical
Compressed theatrical window
2015 theatrical B.O. broke $11B, but attendance was the 3rd lowest since 1995
Foreign countries are increasingly bolstering the worldwide B.O.
Challenge
Domestic share of worldwide B.O. is declining, and metrics for subsequent windows
can be based on a picture’s regional success in theaters. With less people going to the
movies, there may be less buyers for home video.
Conclusion
Home entertainment is shifting to streaming and digital, which are not as profitable for
studios as physical.
Home entertainment is increasingly critical to the bottom line because of decline in
domestic theatrical attendance, condensed windowing, and consumer viewing habits.
Sources: John Calkins, “Exhibitors Should Open a Window to New Possibilities,” Variety, February 2016 print issue; David Hancock, “The film indus-
try’s shifting centre of gravity,” HIS, 11/2015; Wade Holden, “Theatrical release window shrinks 14 days in 2014”, SNL Kagan, 12/19/2014
© 2016-2017 Distributive

14. A Potential Solution
Blockchain
Technology
Connecting Blockchain Technology
and the Entertainment Industry
Tra
© 2016-2017 Distributive
Entertainment
Industry

15. ansatcionts
The
Studio
Blockchain technology could make it more efficient to manage pre-existing
business models & processes, and add new models and revenue streams
Blockchain
Technology
Digital Distribution
Shared Registry
Micropayments
Chain of Title
Something new!
Analytics and
Transactions
© 2016-2017 Distributive

16. Thank You
© 2016-2017
Distributive