Born In Academia, Custos’ Novel Blockchain Application Fights Movie Piracy

Custos Media Technologies, a Stellenbosch, South Africa-based company that uses the blockchain to fight media piracy, marks one of the more unusual but interesting commercial applications of bitcoin. A pair of academics, G-J van Rooyen and Dr. Herman Engelbrecht, came up with the idea after working in “pre-commercial” research for the better part of the last decade focusing on real-world applications of cutting edge technology.

G-J van Rooyen

Engelbrecht and van Rooyen co-founded the Media Lab at Stellenbosch University that was specifically created for this type of research.

“We spent several years working on media distribution and content protection along with the Lab’s founding sponsor, Naspers,” van Rooyen told Naspers is a large multinational media corporation focused mostly on developing markets. “This gave us a very good understanding of how the world of digital media operates.”

2013: A Watershed Year

The pair followed bitcoin from its inception, but 2013 was a watershed year for the cryptocurrency. “It suddenly became very obvious that bitcoin has broken out of the ‘very interesting idea’ phase and has achieved traction as a ‘real-world’ technology,” van Rooyen said. “Also, the potential of colored coins, smart contracts and micropayment streams were just being realized. We decided to actively look at potential bitcoin applications, and especially at the ways it intersects with the Media Lab’s core research areas.”

In academia, you quickly learn that the romantic notion of sudden research breakthroughs and flashes of insight are mostly movie stuff, van Rooyen said. “Mostly, research is slowly pushing at the edge of knowledge, and making incremental contributions. You don’t have a chat with clever colleagues and suddenly ‘invent something.’”

But in van Rooyen’s and Engelbrecht’s case, that’s exactly what happened.

An Epiphany Arrives

Engelbrecht was struck with the idea that the blockchain could be used to track ownership in some way (much like does today). His colleague wasn’t far behind.

“I recalled an experience I had several years before, where I purchased an ebook that had my credit card details embedded as a visible footnote in each page, and wondered aloud whether we can’t use bitcoin to impose a similar ‘owner responsibility’ on digital media recipients. We pulled in Fred Lutz, who was then doing his master’s in economics in the Media Lab (and was a huge bitcoin enthusiast), and threw some more ideas around.”

“By that afternoon, we had the invention written up and at our patent office.”

A Company Is Born

van Rooyen has since resigned his position as associate professor at Stellenbosch University to spend all of his time with Custos as CEO. Lutz finished his master’s thesis on the economy of digital piracy and joined Custos full-time as COO. Engelbrecht remains at the university and has a part-time involvement in the company.

Custos uses technology that watermarks bitcoin into a piece of media that it tracks in the blockchain to identify infringements. The system uses crowdsourcing to provide a bounty to downloaders who identify pirates. Content creators and distributors can embed an identifying code into each piece of content that they provide to a particular user.

The code embedded in each piece of content can be used to access a deposit in the form of cryptocurrency – a “finder’s fee.” If the content is leaked or shared and a third party gets ahold of the content, they can cash the code in for the finder’s fee.

Custos Has Customers

This bounty has already been imbedded in media content, van Rooyen said.

“Most of our current content are feature films created by independent film studios, through our online service,” he noted.

Custos’ “Screener Copy” website indicates there is a beta test that is closed. Van Rooyen said this is a bit ambiguous since the service is already in use. “Closed beta” in software projects means that clients can use it on an invitation-only basis, he explained. “This allows us to carefully test the offering and grow the bounty hunting community in a controlled way. It is actively being used, with very positive beta client feedback.”

He compared it to the way Facebook originally only did a very controlled rollout to individual campuses before opening up to everyone. “It’s a responsible, managed way of testing and proving a complex technology.”

Media Piracy On The Rise

How extensive is media piracy? “Firstly, it depends on who you ask,” he said. “Occasionally, you hear the opinion that piracy is a net positive to the media industry because it is actually a form of marketing. However, this assumes that only a small percentage of consumers engage in piracy.

“Today, we find ourselves in a media distribution market where an ever-shrinking percentage of users pay ever-rising prices for legitimate content, and an ever-growing percentage of users are getting the same content for free. Clearly, this is not sustainable – content creators must have some sustainable business model to recoup expenses and create new content.”

The middle-of-the-road estimate is that content piracy creates losses of about $22 billion to the industry. This is revenue that could have gone into creating more high-quality, diverse content.

Piracy’s Bigger Cost

A common fallacy is that piracy is an all-or-nothing thing. “For example, movie studios still have great box office successes – clearly piracy isn’t killing the movie industry? The problem is that revenue losses don’t cause the industry to collapse: like any business, the movie industry tries to reduce revenue risk. This is done by creating more content that has a high chance of box-office revenue despite some piracy; typically superhero flicks, action movies, and romcoms. Over the past decade, we’ve seen a steady decline in the production of riskier, more ‘interesting’ movies, and a very strong focus on the sure hits. In the short term, this is throttling the art form. In the longer term, the AAA movie title in itself may become commercially unsustainable unless the distribution model is re-invented.”

Custos has met with three of the “Big 6” studios, as well as with the “mini-majors.” The reaction has been positive regarding the potential of the technology. Further meetings are planned.

Also read: Block chain anti-piracy provider Custos gains seed funding

Book Publishers At Risk

Movie producers aren’t the only content producers experiencing piracy. Book publishers may be suffering a greater threat than the movie industry, van Rooyen said. “Big-hit movies at least have the opening weekend to recoup expenses; but unless you’re J.K. Rowling or Dan Brown, books don’t have anything similar. E-book piracy is rampant, difficult to avoid, and consumers resent traditional forms of ebook DRM.”

College textbooks are hit particularly badly. They are very expensive to produce, and have limited circulation. “It’s often a grudge purchase for the student, and this again causes the bad feedback: the more students pirate electronic copies of textbooks, the more expensive it becomes for the honest ones – which exacerbates the piracy problem.”

Custos is currently doing an ebook protection trial with a partner (Erudition Digital) in the U.K., and has just been featured at the London Book Fair.

Many small, independent producers are experimenting with ways of taking content direct to consumers, and breaking out of the 20th-century model of a movie studio, van Rooyen said.

Platforms such as Alexandria and LBRY are providing very compelling new ways for creators to bring content directly to their audiences, monetize it without a middleman, and creating  decentralized content distribution networks.

“Of course, bitcoin itself is ideally suited to media distribution. Licensed digital content leans itself very well to frictionless global payment.”

Images from Shutterstock and LinkedIn.

Last modified: July 13, 2020 3:16 AM UTC

April 23, 2016 12:30 PM UTC
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Lester Coleman

Lester Coleman is a media relations consultant for the payments and automated retailing industries.