Global tech Juggernaut Microsoft and multinational financial services firm Ernst & Young joined forces to launch a new blockchain initiative that will bring digital rights and royalties management onto a distributed ledger network. The new platform will deploy within the Microsoft Xbox gaming ecosystem and across game publisher partners, disrupting a significant portion of the gaming industry.

The new blockchain solution, created in tandem between Microsoft and EY, can be used in any industry in which intellectual property or assets are licensed. The current infrastructure used to manage the distribution of royalties generated via licensing handles millions of transactions daily, which equates to the remittance of billions of dollars in royalties every month.

Microsoft and EY’s new platform intends to do for licensing and royalty remittance what Ripple did for cross-border inter-bank remittance– reducing operational efficiencies and streamlining costly manual reconciliation process present within the current gaming industry.

Gaming Industry Licensing is Slow, Unwieldy

The speed Microsoft is able to distribute digital content or intellectual property to consumers may be extremely rapid, with most users experiencing instant order fulfillment for digital purchases, but the technology driving software delivery is far from efficient.

The current gaming industry digital rights and royalties management architecture is home to thousands of different publishing houses and software vendors, each of which manages thousands of titles. As all of these market participants operate across multiple international jurisdictions — each with different tax systems and payment agreement regulations — transaction costs for publishers and distributors can inflate rapidly.

The new solution devised by Microsoft and EY proposes a distributed ledger based platform that allows market participants to create and agree on business terms in a peer-to-peer manner, with all agreements executed via smart contracts on the blockchain.

Paul Brody, Global Innovation Leader for Blockchain at Ernst & Young, commented on the highly efficient manner in which distributed ledger technology can manage relationships between market participants:

“The scale, complexity, and volume of digital rights and royalties transactions makes this a perfect application for blockchains. A blockchain can handle the unique nature of each contract between digital rights owners and licensors can be handled in a scalable, efficient manner.”

Microsoft General Manager of Finance Operations Grace Lao highlighted the adaptive nature of smart contracts when dealing with large-scale business operations within the context of the gaming industry:

“Smart contract technology is far more flexible and scalable than any prior solution for managing business agreements. We look forward to deploying this solution across our gaming ecosystem and exploring additional blockchain applications for other finance processes at Microsoft.”

Content Distributors Eye Blockchain Solutions

Microsoft isn’t the only content distributor considering blockchain as a solution to the issue of digital rights management. Sony filed a patent in April 2016 for a blockchain-powered digital rights DRM that leverages the immutable nature of distributed ledger networks to ensure that only users who purchased content can view it.

In addition to working with Microsoft to optimize the digital rights and royalties ecosystem, Ernst & Young is also working with IBM alongside industry giants such as Accenture, Cloudsoft, and JPMorgan Chase to bring real-world assets onto the blockchain with distributed ledger based supply chain solutions via the Hyperledger project.

Ernst & Young analyst Rahul Gautam outlined the importance of blockchain technology to the digital rights and royalties industry in an interview with UKTN, emphasizing the aging infrastructure upon which the ecosystem currently operates:

“Today’s rights management capabilities were broadly created for a business model that was relevant 20 years ago … The prospect of being able to manage who has the ability to access that content, how much that content should cost, and where that money should go at the end of the transaction is extremely daunting for existing technologies.”

IBM is aware of the growing amount of capital lost to piracy and inefficient rights management within the world of digital content, which currently costs US-based entertainment companies over $20 billion dollars annually. Sloane Brakeville of IBM Blockchain Labs posits a scalable security model that leverages blockchain technology to bring content management into the future:

“The distributed ledger can house the access rights to content of an individual, device or any other identifiable measure. This would be instant, or near instant, as access rights received and recorded in the blockchain will propagate throughout the network immediately”

The integration of blockchain technology into all industries, notes Brakeville, is inevitable:

“The world is going digital, and it’s time for the analog worlds of the past to catch up, or be left behind.”