PricewaterhouseCoopers (PwC) has published a report which claims that digital currencies, namely bitcoin, are already driving digital innovation across several industries.
The report, titled 'Digital Disruptor: How Bitcoin is Driving Digital Innovation in Entertainment, Media and Communications' was published by the multinational professional services firm earlier this week and its conclusions are largely positive.
PwC's pros and cons
The PwC report is the latest in a series of consumer intelligence reports, and it explores the impact of bitcoin on entertainment, media and communications (EMC) companies. It is based on the 3 - 4 million online mentions bitcoin had in 2013, alongside an online consumer survey commissioned by the company.
The report opens by outlining the risks and benefits for companies and consumers alike. Benefits for businesses include low transaction fees, daily cash outs, no payment reversals and the availability of merchant tools; while consumers also stand to gain from low fees and pseudo-anonymity. According to the document, consumers can also benefit from fluctuations in value, and the fact that financial institutions don't control digital currencies.
The list of risks for businesses is somewhat longer: volatility means they have to use dynamic pricing, and network security is an issue. Additionally, bitcoin is not legal tender in some countries, there is no central entity backing it and processing times can be slow.
Consumers have to struggle with the complexities of buying bitcoins, cashing them out and using digital wallets. Since there are no payment reversals, they also face more risks than merchants in any disputes that may arise, it claims.
Free publicity for emerging brands
The report also found that bitcoin is a media phenomenon. The currency had 3.4 million online mentions in 2013, the equivalent of all General Motors' brands combined. Bitcoin was the subject of 11,200 traditional media stories in 2013, and in November alone it was featured in more than 14,100 online stories. The report stated:
"Bitcoin is not only a brand, it's a digital ecosystem whose decentralized architecture makes it ideal for entrepreneurship. History shows that when that happens, disruption follows. With more than 1,000 brick-and-mortar businesses and 10,000-plus merchants accepting bitcoin, its early influence is taking root."
The report also concluded that early adopters enjoy a public relations and marketing advantage. Being noted as a bitcoin innovator can lead to favourable press and social media mentions.
"In 2014, social gaming company Zynga added bitcoin to its most popular games and garnered thousands of media mentions," PwC notes.
Beyond the click-and-mortar model
The report outlines a number of down-to-earth uses for bitcoin which are far from new, but it also makes a good case for monetization. Thanks to extremely low fees, bitcoin is much more than an interesting alternative to existing digital payment services. Unlike cumbersome payment systems, bitcoin can be effectively employed as a microtransaction platform, and this is where PwC sees potential.
Cryptocurrency can be used to monetize all sorts of content, from blog posts to multimillion dollar films. PwC notes that the time is ripe for bitcoin-monetized content, in addition to traditionally distributed content which can be paid for in bitcoin:
"Bitcoin presents an opportunity for filmmakers, musicians, artists, authors, and other content creators to more easily sell their work directly to fans worldwide, bypassing a byzantine maze of country-based currencies, payment networks, gateways and distribution platforms. Given its no-chargeback model, bitcoin makes global direct selling more attractive as a hedge against credit card fraud."
Paywalls also get a mention as the "logical first choice" for bitcoin deployment. Using microtransactions it is possible to devise intricate paywall systems that would allow users to purchase the content they need without a costly subscription fee.
"Transaction fees have hindered deployment for anything sold for less than $1. In lieu of daily or monthly subscriptions, bitcoin may make it possible to charge pennies, or nickels, for a la carte content," the report points out.
Curated content is a growing trend, and the driving force behind many wildly popular mobile apps. Yet, bitcoin microtransactions could take it to the next level, by allowing content creators to monetize their work on just about any platform.
Downloads, gaming and gambling
The report also discusses downloads as an interesting niche for bitcoin. Digital distribution is already killing off retail sales. Video games, music and video content have already gone online and some small video gaming companies are already experimenting with bitcoin payments.
Another interesting benefit could be the use of bitcoin micropayments for in-app purchases. This would be relatively easy to incorporate into existing games and new games could be devised around bitcoin themes.
Virtual goods in RPG games or chips in poker games could easily be cashed out, or purchased. Of course, the report brings up Zynga, stating that bitcoin could improve profitability due to lower transaction costs for in-app purchases.
Casino gaming is another industry that may embrace bitcoin sooner rather than later. PwC notes that online casino startups are already accepting bitcoin, but it points out that the online casino market is estimated at $4bn to $6bn.
In addition to cheap microtransactions, bitcoin has a few other features online gamblers may find interesting - it offers a high level of user privacy and the risk of theft is relatively low, as there is no need to share credit card data with suspicious gambling sites.
Other potential uses include telecoms or mobile virtual network operators (MVNOs), as bitcoin could be used to simply pay for services, or to use the telecom network as a substitute payment system, which is already being done in Africa.
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