The End of Platforms ?

First published in French in October 2019 in Forbes

Last month, one fundraiser in particular made headlines: $ 11 million raised by Canadian Dapper Labs. However, the breeding game of “cryptokitties” (virtual cats that can be reproduced, exchanged, collected, customized - sorry, breed, etc.) that the latter publishes did not show an enthusiasm overflowing with its fans, spent the first weeks of launch.

There are indeed around a thousand daily transactions of these virtual cats since the beginning of 2019, and a turnover of $ 75,000 in August, not enough to wake up an investor. Especially since with $ 3 million in sales made on December 9, 2017, 15 days after its launch, we could have expected better scores. Alas, this famous record has never been equaled since, or even approached.

Dapper Labs nevertheless innovated from the start, which earned it the buzz in the absence of success: its game CryptoKitties claims to be the first game based on a BlockChain, hence the name of the company, for Distributed Apps, Distributed Applications.

All player transactions are therefore recorded on Ethereum, which also serves as currency. Good news, virtual cats will survive their publisher even if it disappears, making it a real differentiator compared to other online games where the user spends a lot on accessories for limited use. This functionality also illustrates a new emerging paradigm: the end of closed ecosystems. What the customer buys in a given ecosystem can be used without this ecosystem.

However, blockchains do not support scaling up very well, that is to say the multiplication of transactions or "contracts". The reason is the very essence of blockchains, the fact that they are distributed across a large number of servers (nodes). If this architecture ensures inviolability and permanence (the same contract is copied on a very large number of nodes), it does however have a certain cost in reaction time: Bitcoin executes on average 4.6 transactions per second, which is the time necessary for them to be registered on the 10,000 nodes of its network, when Visa executes 1,700 in the same second.

This relative slowness had a practical consequence: the game Cryptokitties by Dapper Labs created a huge traffic jam awaiting validation on the Ethereum blockchain in the heyday of its launch in late 2017.

The technological buzz thus does not always meet the needs of customers: if we worship scarcity, waiting time and exclusivity in the media, it is obviously to access content. On the contrary, the experience they provide must be completely fluid, even if it gives rise to frequent interactions with spectators, users or players. In fact, these interactions are the best guarantee of a solid audience.

In front of this wall, the blockchain user DapperLabs has turned into a technological innovator, and has been able in two years to develop a new blockchain much more efficient in processing time. Dapper Labs team has proudly announced FLOW: the blockchain potentially best suited for recording very large numbers of transactions linked to an audience, and not only that of virtual cat breeders : Flow is open to all "dapps", decentralized applications. This new project, radically different from the initial project, was the reason of the last fundraising.

And in fact, the round table brings in newcomers, among whom we find Warner Music.

With this investment, the goal of Warner Music is much broader than that of Sony Music when it had filed a patent in October 2018 to manage digital rights with a blockchain. Because the stakes are high.

Since the mid-2000s, the digital revolution has destroyed the traditional physical activity of selling records of the music industry.

If they have started to recover in the last 5 years with the advent of streaming (which became the main source of income for Warner Music in 2017), it is likely that the story does not end there, and that attention must be paid to the growing risk of disintermediation, when the best artists choose to work without the Majors.

Hadn't Madonna smashed Warner in 2007 by contracting with Live Nation, an event organizer who also records her albums?

With this "transfer", Madonna had shown the change in the value of music: collecting CDs no longer thrills many people, while going to a concert is always as exciting for the spectator ... and much more rewarding for the artist, both in interaction with the public and in money that comes to him. By giving more room for communication to artists, by facilitating the listening of their works, by allowing them to establish permanent direct links with their public, digital technologies have "disrupted" the music sector then predominantly made up of physical sales of records. They have given back all its value to the direct relationship between the artist and his fans, whose concert is the apotheosis and digital listening his promotion.

Madonna is famous, as was her forerunner in relationship management with the Majors: David Bowie who in 1996 released his first single on the Internet, and released all of his albums after 2002 with his independent label Iso Records. But what would happen if all artists, fortified by their 15 minutes of celebrity in the 21st century (if one believes Andy Warhol), showed inclinations for independence?

How to position yourself in this new world where the artist - major relationship can no longer be reduced to a classic relationship between supplier and distributor? Perhaps we need to look for answers in the other segment of Warner’s sales that has grown in the past 5 years: artist management and merchandising.

(source Music Business Research)

The Majors thus express their new positioning: being the artists' partners to help them in their relations with their fans. In an increasingly decentralized world, they can no longer claim the role of intermediary that was theirs throughout the 20th century. But they can provide tools to help artists in their exchanges with the public, including remunerative exchanges such as merchandising. The BlockChain Flow thus appears to be the ideal tool for tracing and maintaining a community of active fans, also direct customers of their favorite stars. Whatever their label is.

In the digital world, the new Grail for the Majors will probably no longer be the size of the catalog or the number of gold discs, but rather the identification of the puzzle piece which makes it possible to play "winner takes all". Even if in the process their suppliers become their customers, transforming them from platforms to facilitators.