Bitcoin Gaining Foothold in Entertainment … Slowly28 Jan, 2014 By: Chris Tribbey, Erik Gruenwedel
Digital currency could prove margin catalyst to home entertainment
Bitcoin — the peer-to-peer payment system and digital currency — is slowly gaining acceptance among consumers of home entertainment, according to a new report.
A PricewaterhouseCoopers survey found that 38% of 1,000 respondents said they would be interested in using Bitcoin for downloading or streaming TV shows or movies, and 39% said they would be interested in using it for buying movie or sporting event tickets. Another 26% would use the currency for pay-TV services.
Entertainment companies are experimenting with content sales using digital currency. Social gaming company Zynga is accepting Bitcoin in some cases, and the NBA’s Sacramento Kings became the first pro sports team to accept the online currency.
Ben McConnell, managing director of PwC, said studios and distributors could familiarize themselves with Bitcoin as currency on specific releases — both at the theater or at retail.
“They should start thinking about experimenting using Bitcoin in different uses for specific shows, or events for point-of-sale applications,” McConnell said. “Companies could use Bitcoin and compare usage rates with traditional payment systems — especially shows [or products] that have a high technology-leaning audience.”
Shrinking the Cost of Buying a Movie
In 2012, there were 26.2 billion credit card transactions in the United States, spearheaded by Visa, which generated $6.9 trillion in sales volume, according to PwC. American Express charges the highest transaction fee (3.1%), followed by PayPal at 2.9%; Visa, Mastercard and Discover are at 2.7%, among others.
These “swipe” fees, among others, are attached to any packaged media, digital or theatrical transaction when using a credit card.
There were $140 billion in credit card fees (excluding interest) generated by banks and processing firms in 2012. Bitcoin could shrink those fees because it charges no transaction fee; opting instead for $30 monthly subscription fee.
More importantly, digital currency doesn’t require a buyer giving up personal information such as a pin, passcode or social security number to complete a transaction. A Bitcoin transaction entails using a Bitcoin address (which comprises a secret code and assigned mathematical formula) to prove it came from the buyer.
Since a Bitcoin address is anonymous, third parties cannot determine who it belongs to — only that the required funds exist to complete a transaction. All sales are final and there are no chargebacks to businesses.
McConnell said retailers and content holders could benefit using Bitcoin when selling high-volume unit products associated with a special release product or movie.
“Bitcoin could be beneficial to any company in the business of delivering content [over the Internet],” he said.
When Netflix rolled out service in Latin America, it quickly faced challenges from a consumer base unaccustomed to using credit cards over the Internet, among other issues. McConnell said digital currency could simplify the process across international borders.
“Any company that is interested in expanding its global footprint, Bitcoint can be a very natural way to test transaction payment systems in local currencies where credit cards transactions are challenged,” he said.
Steep Learning Curve
PwC points out that while some digital currencies have come and gone (Linden Dollars and QQ coins), Bitcoin has gotten bigger since its introduction in 2009, with the U.S. Department of Justice calling it a legal means of exchange in November.
There were 55,000 Bitcoin transactions per day in 2013, compared with 100 in 2009, according to the report. More than 1,000 brick-and-mortar stores are accepting it, along with 10,000-plus online merchants, including Overstock.com.
That said, the survey found that only 42% of respondents understood how Bitcoin actually works, and only 4% said they were “very interested” in using it. Nearly half said they had either no interest or little interest in using it.
“Despite its advantages, Bitcoin has several hurdles before it becomes mainstream, including an infrastructure of consumer-friendly services, faster transaction processing, on-board lawmakers and a more aware and trusting public,” PwC wrote in the report.