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Digital Disruptor How Bitcoin is Driving Digital Innovation in Entertainment, Media and Communications (EMC)
January 27, 2014 PwC #DigitalDisruptor DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Three key points on Bitcoin
Bitcoin is a secure, U.S.-government approved digital currency, and it is gaining momentum via new and emerging companies while a handful of larger, established companies begin to experiment with it. While it’s one of 70 digital currencies available, Bitcoin is generating the most buzz and activity. So what should executives know about Bitcoin and its potential impact? Our point of view:
1. Bitcoin can be part of an innovation strategy for products, services and payment systems. Listening closely to early Bitcoin advocates is key. The entertainment sector is experimenting with letting consumers pay for new music downloads via Bitcoin. 2. Early adopters enjoy a public relations and marketing advantage. Being noted as a Bitcoin innovator can potentially generate favorable press and social media mentions. In 2014, social gaming company Zynga added Bitcoin to its most popular games and garnered thousands of media mentions. 3. The value of Bitcoin is frequently fluid and roller coaster-like. Dynamic pricing of products is needed with daily cash-outs and a trusted payment partner. In the tourism sector, CheapAir.com has partnered with Coinbase to leverage those features.
This PwC Consumer Intelligence Series report explores the emerging impact of Bitcoin on entertainment, media and communications companies. It is based on our analysis of the 3.4 million online mentions Bitcoin had in 2013 as well as a PwC-commissioned online consumer survey to gather awareness, attitudes and behaviors about Bitcoin.
Overall risks and benefits associated with Bitcoin
For companies For consumers
Benefits • Low transaction fees • No fees to send currency globally • Daily cash outs • Pseudo-anonymous transactions • No payment reversals • Fluctuations in value • Merchant tools exist to simplify • Financial institutions don’t control currency experience
Risks • Pseudo-anonymous transactions • No payment reversals • No central entity backing it • Complexity of buying Bitcoin • Not legal tender in some countries • Complexity of cashing out • Long-term deflationary bias • Niche adoption by major brands • Network security • Complexity of carrying a digital wallet • Volatile trading market • Dynamic pricing of products a must • Slow transaction processing time 1 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Bitcoin’s evolution into a brand
If it seemed like a lot of U.S. institution to initiate people were suddenly talking official analyst coverage of the about Bitcoin in 2013, that’s currency. 4 because they were. Bitcoin had Bitcoin’s growth has DATAPOINTS 3.4 million online mentions in spawned a rash of supporting 2013, according to our research, companies, including exchanges Bitcoin in social media equaling General Motors and all such as Mt. Gox, which allows of its brands during the year.1 users to exchange Bitcoin into Those conversations translated local currencies. There are 3,400,000 to media mentions, too; Bitcoin startups for buying Bitcoin, such Number of social mentions ‘Bitcoin’ was the subject of some 11,200 as CoinBase, which received generated in 2013. Mentions occurred traditional media stories in $25 million in venture capital in on social networks, microblogs, forums, mainstream news, images, videos and blogs. 2013.2 Just in November, it 2013.5 Companies are creating was featured in 14,179 online digital wallets to store and stories.3 That was when the use the currency at brick and U.S. Department of Justice mortar locations. 96% male Percentage of gender mentioning Bitcoin. declared Bitcoin “a legal means Bitcoin is not only a The majority of discussions happen in the of exchange.” brand, it’s a digital ecosystem United States and China, and participants With that governmental whose decentralized are typically ages 26-50. blessing, Bitcoin’s growth has architecture makes it ideal been swift: Two leading U.S. for entrepreneurship. History banks met to discuss Bitcoin; shows that when that happens, 21% one of them became the first disruption follows. Percentage of Bitcoin mentions about online gambling and video games.
Source: Online mention data via Sysomos MAP, 2013 2013: The year of Bitcoin
70% November 800k Ashton Kutcher tweets Bitcoin Black Friday/ CyberMonday. 400 retailers join Bitcoin Black Friday website. Bitcoin nears value of ounce of gold. 700k 60% Neutral
May 600k 50% Actor and investor Ashton
April mentions of Volume Chinese e-commerce Kutcher endorses Bitcoin. 500k market says it will accept Treasury crackdown on money 40% Bitcoin. laundering. Presidential candidate accepting Bitcoin Positive donations. 400k
Sentiment 30% March October 300k Speculation of new Silk Road controversy. Bitcoin unregulated virtual 20% ATMs in Canada. Exchange currency and value. launched in the United Kingdom. 200k
10% Negative 100k
0% 0 Dec ‘12 J F M A M J J A S O N D ‘13
Source: Online mention data via Sysomos MAP, 2013
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The open-source monetary system
BitCoin is quickly becoming Bitcoin has also seemingly part of the business vernacular. solved for issues around online But does this all-digital system security; each Bitcoin currency have what it takes for transaction is encrypted and DATAPOINTS enterprise-level success? all of its governing code is After all, Bitcoin is publicly accessible. Hundreds A brief history of Bitcoin another in a long line of digital of developers voluntarily currencies, such as Linden update the governing code, Dollars from Linden Labs, QQ contributing to the common 2008: coins from Chinese Telecom good of Bitcoin. Bitcoin.org is registered. Tencent or e-gold, which As a digital currency, have subsequently folded. Bitcoin is not backed by physical 2009: Since its release in 2009 as a commodities such as gold, The first transaction using Bitcoin occurs. response to the then-global or a centralized government financial crisis, Bitcoin has authority and its credit; 2010: differentiated itself by solving instead, it relies on peer-to-peer The tech news site Slashdot covers Bitcoin. for the nagging problem of distribution. Nearly frictionless double-spending, when one exchange of Bitcoins makes for a 2011: token is spent twice. The low-to-no fee payment system. One Bitcoin is valued at roughly $10. Bitcoin solution: a public ledger With more than 1,000 system, where all transactions brick-and-mortar businesses 2012: are checked for validity by all and 10,000-plus merchants The Bitcoin foundation is formed. the users in the system, which accepting Bitcoin, its early is thousands of accounts. influence is taking root.6 2012 First Bitcoin exchange licensed as a bank in EU.
2013 The value of Bitcoin vs. gold Dept of Justice says Bitcoin’s “legal means of exchange.”
$1,800 December 11, 2013 2013: Gold $ / (values in USD): Canada and Slovakia introduce $1,600 Gold: $1,266.25 Bitcoin ATMs. Bitcoin: $1,237.95 $1,400 2014: Overstock.com has 840 orders $1,200 on first day of taking Bitcoin. The
Avg. Gold $ / oz. company estimates $500,000 $1,000 worth of Bitcoin business since January 9. $800 2014: $600 Kings become first NBA team to announce Bitcoin acceptance. $400 2014: $200 Canada and the Bank of France
Avg. Bitcoin $ Bitcoin say Bitcoin isn’t legal tender. 0%
J 2013 F M A M J J A S O N D Source: PwC Research, 2014.
Source: The Wall Street Journal, “Bitcoin Vs Gold: A Tale Of Two Manias,” 2013.
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Bitcoin: Digital payment disruptor
Bitcoin’s value proposition to skip the “middle man” of includes global, peer-to- central financial institutions peer money transfers, nearly and their fees, not unlike anonymous payments, low how peer-to-peer file sharing DATAPOINTS transfer fees and higher-level of music enabled today’s security protocols based on consumers to deal with artists Bitcoin fees vs. other fees open standards. directly. Bitcoin is a bit like Four organizations face the 1999-era of Napster in that Payment method transaction fees, from increased challenges if Bitcoin way, but this future scenario highest to lowest: continues as a brand and involves consumers sending 3.1% American Express becomes a global currency: currency directly to other users, 2.7%* Visa, MasterCard, Banks, governments, payment or companies with goods and Discover processors and payment services to sell, all with minimal 2.9% PayPal gateways. fees and no float time. 2.75% Square Coinbase is a payment Added to this proposition Free ** gateway for Bitcoin usage, and is that consumers who use a Coinbase it’s creating merchant tools that decentralized, peer-to-peer Free *** BitPay enable online businesses to currency can be shielded from accept Bitcoin on hosted check- fluctuations caused by local % of all point-of-sales transactions that are done with credit, debit, or out pages, shopping carts and government politics and their 66 gift cards. point of sale systems for brick influence on central banks. In and mortar stores. The upshot: this potential scenario, Bitcoin Bitcoin transaction fees are the has the potential to truly disrupt $6.9 trillion lowest around. Other Bitcoin fiat currency models and force VISA 2013 users’ total dollar volume. Visa merchant tools offer recurring financial institutions to adapt had the largest marketshare of all credit cards. billing and fees of 1% or less to their current technology, cash out Bitcoin on a daily basis fee structures and work (See column on right). with government officials to Bitcoin enables companies understand regulation issues. 26.2 billion Total number of credit card transactions in the U.S. in 2012. U.S. Government viewpoints on Bitcoin
Government entity View on Bitcoin 55,000 Average number of Bitcoin transactions Securities and Exchange Considering options on Bitcoin as a security. every day in 2013. Daily average was less Commission than 100 in 2009.
Commodities Future Trading Considering options on Bitcoin as a commodity, or a Commission “marketable good produced to satisfy wants or needs.” * Variable as set by the acquiror (bank). ** No fee for first $1 million in payment processing. Internal Revenue Service Considering options on Bitcoin as a taxable currency. After that, 1% charge. *** No transaction fee with $30 / month subscription.
Treasury Bitcoin companies must register as money transfer Sources: Kimbia.com Interview, 2013. businesses. Congressional Research Service, “Bitcoin: Q+A and Analysis of Legal Issues,” 2013. NerdWallet. Congress Considering the effect of Bitcoin on the Federal Reserve com, 2011. BlockChain.info, 2013. CreditCards. and weighing consumer protection options. com, 2013.
Source: Congressional Research Service, “Bitcoin: Q+A and Analysis of Legal Issues,” 2013.
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Bitcoin growth and trust issues
A successful traditional as the currency becomes more currency must both be a mainstream its value will be medium of exchange and based on actual transactions, maintain its value over time. not speculation in the market. DATAPOINTS To maintain value, an item That said, the same market must be trusted by those using forces that are causing PwC survey results it. A solid medium of exchange fluctuations in value are also means a currency has to be what’s driving the popularity, % of all respondents understand divisible, easily transferable and and trust, in the brand of 42 the concept of Bitcoin. valued. Bitcoin. While Bitcoin is divisible Another advantage % of all respondents are “very interested” in using Bitcoin. and has a solid means of of Bitcoin over traditional 4 exchange, including acceptance currency is the public ledger % of all respondents are “not at at online retailers such as system. Called the “blockchain,” 49 all” or “not very interested” in Overstock.com, its value swung it tracks every transaction using Bitcoin. wildly in 2013.7 The value of one ever conducted in the Bitcoin Bitcoin was relatively stable in network. % of the previous group cite 2011-12, averaging $5.44 and Despite its advantages, 27 Bitcoin’s lack of trust, security and $8.29, respectively; 2013 was Bitcoin has several hurdles regulation as why they are not interested. a rocket ship ride, reaching a before it becomes mainstream, high at one point of $1,200 then including an infrastructure of % of respondents say “nothing” dropping to $550 (all prices are consumer-friendly services, would increase their interest in 8 22 in US dollars). faster transaction processing, Bitcoin. Much like its fiat on-board lawmakers and a counterparts, Bitcoin’s value more aware and trusting public. % of total respondents would be fluctuates on market forces of Those are its key challenges 49 more likely to trust Bitcoin if it supply and demand. However, ahead. were distributed by a well-known third party.
Dollars vs. Bitcoins Consumer trust in banks In July 2013, the number of U.S. dollars in circulation was almost 80% 100x the number of Bitcoins.
US consumer trust TRILLION 60% 1.2 US DOLLARS
UK consumer trust 40% MILLION 11.3 BITCOINS
20% Sources: Survey data based on a December 2013 PwC survey of 1,000 geographically-diverse respondents. Sample size was 55% female and 0% 45% male. Other: BlockChain.info, 2013. Board of Governors of the Federal Reserve System, “Money 2007 2008 2009 2010 2011 2012 Stock Measures (H.6),” 2013. Source: Edelman Trust Barometer, 2012.
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Bitcoin & EMC: Entertainment sector Bitcoin for direct and global selling
In 2013, the prospect of Bitcoin-accepting services paying for albums, music and such as Soundcloud.com, an movies with Bitcoin drove audio platform that enables awareness and positive online performers, to upload and DATAPOINTS sentiment for the currency in promote songs. Filmmakers the entertainment sector. and other content producers Bitcoin in social media Although none of the are petitioning Indiegogo and leading online music or movie Kickstarter to use Bitcoin for % of all 2013 online Bitcoin platforms have announced crowdsourcing-based funding.9 2 mentions involved entertainment. acceptance of Bitcoin, several For larger content alternative sites, such as companies and their partners, % favorable CoinDL.com and Beatcoin.org, it’s an opportunity to 91 mention sentiment. have been launched to allow experiment with Bitcoin as a Bitcoin-based purchases for payment system for specific PwC survey results downloads and streaming of songs, albums or campaigns, % of all respondents are “very music. especially with artists with 17 interested” or “interested” in using Bitcoin presents an global, tech-savvy followings. Bitcoin for internet transactions. opportunity for filmmakers, It’s also an opportunity to musicians, artists, authors, partner with or acquire Key points and other content creators entertainment startups that to more easily sell their work build momentum with Bitcoin. $479 billion directly to fans worldwide, As with any new currency, 2012 revenue generated by the United bypassing a byzantine maze especially a digital one, there States’ entertainment and media industry. of country-based currencies, are grey markets. Modern payment networks, gateways content creators are constantly and distribution platforms. concerned with piracy; while $632 billion Given its no-chargeback model, Bitcoin is pseudo-anonymous, Predicted 2017 revenue generated by the Bitcoin makes global direct its public ledger system allows United States’ entertainment and media selling more attractive as a sophisticated law enforcement industry. hedge against credit card fraud. agencies and even artists to Entertainment companies track transactions.10 Early innovators or studios could partner with CoinDL.com sells songs, audio books and eBooks using Bitcoin as payment.
Artist (and Spice Girl) Mel B made her How digital wallets work with Bitcoin: Buying movie tickets single “For Once in My Life” available to purchase for 0.0012 Bitcoin as of Dec 2013.
BitTorrent is integrating Bitcoin into its system, encouraging content creators to share music with fans in exchange Customer has a smartphone To buy a ticket, customer The Bitcoin network sends for Bitcoin. It may also integrate Bitcoin with a digital wallet app uses phone to scan a Bitcoin money from the customer’s metadata into its code, potentially open- installed, and goes to a movie QR code on the point of sale online Bitcoin tally to the sourcing innovation among the two theatre that supports Bitcoin machine that matches the theatre’s account. On average, protocols. BitTorrent’s protocols generate transactions. price of the ticket. this takes ten minutes or less. roughly 40% of the world’s internet traffic each day.
Source: PwC Research, 2013. Sources: Online mention data via Sysomos MAP, 2013. PwC’s “2013-2017 Global Entertainment and Media Outlook,” 2013. 6 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Bitcoin & EMC: Media sector Going beyond the paywall
After the U.S. Department or monthly subscriptions, of Justice termed Bitcoin “a Bitcoin may make it possible legal means of exchange,” in to charge pennies, or nickels, 2013, media companies began for a la carte content. Bitcoin DATAPOINTS to experiment with it.11 also reduces currency exchange Paywall technology is a hassles with global audiences Bitcoin in social media logical first choice. The ability and out-of-country fees to wall off certain content for often charged by credit card % of 2013 online Bitcoin mentions companies for purchasing 3 involved media companies. goods and services beyond the PwC survey results consumers home country. % favorable 95 conversation sentiment. % of respondents who were Has Bitcoin usage 15 “not interested” in Bitcoin said spread sufficiently to the they would “need to know more masses to make paywalls and PwC survey results about Bitcoin” before they would micropayments viable for consider using it. % of consumers aged 18-34 media companies? The Chicago 44.5 are aware of Bitcoin. Sun-Times, the ninth largest those willing to pay for it is newspaper in the United States, Key points enhanced by the digital nature will test that theory with its of Bitcoin and its divisibility. paywall in early 2014.12 In the % of people who correctly Micropayments has been a meantime, PwC survey results 42 identified Bitcoin as a virtual currency during a 2013 long-imagined and researched show that nearly half of the Bloomberg survey. future for companies that wish U.S. public is aware of Bitcoin,
to offer content a la carte, but but have yet to understand its % of people from Bloomberg transaction fees have hindered technical aspects, which hinders 6 survey who incorrectly identified deployment for anything sold trust. (See column at right). Bitcoin as an Xbox video game. for less than $1. In lieu of daily % of people skip pre-roll 94 advertisements when browsing 2013: Bitcoin mentions in U.S. mass media the internet.
3,000 Early innovators
2,400 IAC, the parent company of OKCupid.com, accept Bitcoin for subscriptions and premium features. 1,800 TheDishDaily accept Bitcoin for various levels of access and subscriptions. 1,200 Reddit Gold customers can pay with Bitcoin to access extra features and gift “gold” to 600 other users.
0 Sources: Online mention data via Sysomos MAP, 2013. PwC Survey, 2013. Bloomberg, “Most J F M A M J J A S O N Americans Don’t know Bitcoin While some Guess Xbox,” 2013. eConsultancy, “Pre-roll video ads: is it Source: BBC News Magazine, “Bitcoin: Price v hype,” 2013. any wonder why we hate them?,” 2013.
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Bitcoin & EMC: Video game sector Bitcoin driving digital downloads
Our research finds that Larger video game Bitcoin awareness and usage is companies could incorporate healthy among men aged 25-40. in-game Bitcoin micropayments Given those demographics, into their engines. Specialized DATAPOINTS video game companies have video games that use Bitcoin as good potential for benefiting a theme could be devised, given Bitcoin in social media from integrating Bitcoin into that Bitcoin global awareness their product and payment and understanding remain % of 2013 online Bitcoin mentions strategies. relatively low. 9 involved video games. Some niche video gaming Bitcoin seems to make companies are experimenting sense for existing online video % favorable in the space, such as Hundle game economies, where players 83 conversation sentiment. This sentiment level is noticeably Bundle, PC Game Supply and theoretically cash out existing lower than other industries in the Ouya (see column at right) in-game currency for Bitcoin, report, which average at 93.5% by using Bitcoin as payment or vice versa. While historically favorability. for special game or console in-game currencies can’t be PwC survey results offerings. Companies in this cashed out for real-world space have the advantage of currency, Bitcoin can be traded % of consumers concerned with measuring purchase and loyalty for dollars.13 82 fluctuation in the Bitcoin market. rates of users who pay with Video game companies Key points Bitcoin vs. traditional payment could build their own, game-
systems. Mobile gaming based exchange markets or Average number of hours people companies are well-suited to partner with companies for 13 in the U.S. play video games per accept and integrate Bitcoin into exchange markets that create week. their offerings, given their lack virtual tools, add-ons, avatars of brick-and-mortar sales. and themes. $112 billion Projected 2015 revenue for the global video game industry. It was $74 billion in 2011.
Case study: Zynga Early innovators
Zynga is an online social gaming company that has faced increased competition, loss of players on Humble Bundle accepts Bitcoin for video social networks and challenges porting its games to mobile devices. Zynga’s active daily users went game packages under a name-your-own from a high of 72 million in 2012 to 30 million in 2013. In January 2014, it announced Bitcoin global pricing model. It splits the profits with acceptance in their games FarmVille 2, CastleVille, ChefVille, CoasterVille, Hidden Chronicles, developers and nonprofits. Hidden Shadows and CityVille. PC Game Supply accepts Bitcoin for digital Potential benefits: delivery and for game bundles under a Improved profitability due to lower transaction costs for in-game purchases of virtual goods, publicity name-your-own price model. and social media word-of-mouth exposure, closer alignment with core Bitcoin demographics. The State of New Jersey settled with a Potential challenges: online video game company for $1 million Extending Bitcoin to mobile devices could prove challenging since Bitcoin wallet apps have been amid accusations of the company stealing rejected from several leading app stores. Bitcoin from video game players using malware.
Source: TechCrunch, “Zynga Links Up With BitPay For A Bitcoin Payment Test,” 2014. Zynga Game Network, Sources: Online mention data via Sysomos MAP, 2013. Inside Network Survey, 2013. 2013. GameSpot, “Time spent gaming on the rise,” 2010. Gartner, “Forecast: Video Game Ecosystem, Worldwide, 4Q13,” 2013. ZDNet, “Video game firm settles Bitcoin mining dispute for $1 million,” 2013.
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Bitcoin & EMC: Travel and tourism sector Bitcoin as a loyalty driver
Since Bitcoin’s global with Bitcoin as part of their and decentralized digital payment systems, whether for infrastructure is not tied to in-room services, tours or in country-specific currencies, conjunction with mobile devices DATAPOINTS travel and tourism companies and special attractions. For could experiment with Bitcoin companies wanting to attract Bitcoin in social media on multiple fronts. technology-savvy consumers, Tourism and vacation being Bitcoin-friendly could % of 2013 online Bitcoin companies could use Bitcoin to kick loyalty numbers up. Few 1 mentions involved travel and tourism. supplement traditional payment large companies in the sector systems, making it easier for have publicly revealed Bitcoin out-of-country tourists to make plans, so early innovators are % favorable conversation sentiment. reservations. Airlines could likely to attract traditional and 100 accept the currency for domestic social media buzz. PwC survey results flight purchases in the United The travel and tourism States (or low space orbit; see industry is poised to face % of consumers are “not column at right). They could an onslaught of wearable 49 interested” in using bitcoin for also integrate QR code-based technology that helps users purchases online. Bitcoin accounts into mobile better understand location and apps, experimenting with context, or personal telemetric Key points in-flight payments, hospitality data associated with tourism. lounges or selling frequent flyer That means travelers will be $129 billion miles or points. more digitally-savvy, presenting Travel-generated tax revenue to all Bitcoin could be offered as opportunities for companies governments. an enhancement to traditional to use Bitcoin to offer real or loyalty programs such as miles virtual products, tools and or reward points. Leading- services associated with travel 60 million edge resorts could experiment experiences. Number of new travelers entering the world travel market between 2000 and 2010. Have Bitcoin, will attempt to travel $1.4 trillion A Utah couple completed a 101-day trip across three continents using only Bitcoin. The couple Value of global tourism industry in 2013. described the experiment as “frustrating, but never impossible.” They used Bitcoin to pay for rent, Revenue grew an annualized 2.5% over past groceries, pizza, rental cars 5 years. and booking flights with a German travel agency. The couple traveled to: Early innovators Provo, US Chicago, US Virgin Galactic to accept Bitcoin for Kansas City, US suborbital spaceflights in 2014. Virgin Pittsburgh, US Airlines may accept the currency afterward. New York, US Berlin, DE CheapAir.com accepting Bitcoin for flights. Stockholm, SE SimplyTravelOnline.com allows booking hotels, rental cars and flights with Bitcoin.
Source: The Wall Street Journal, “Bitcoin Couple Travels the World Using Virtual Cash,” 2013. Sources: Online mention data via Sysomos MAP, 2013. U.S. Travel Association, 2013. IBISWorld, 2013. PwC Research, 2013. PwC, “PwC Hospitality Directions: Q3 2013,” 2013. 9 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Bitcoin & EMC: Casino gaming sector Blackjack, roulette and Bitcoin
Bitcoin as the ideal casino earnings were 10,137 BTC. In chip? Possibly. It provides 2012, bitZino players made a high level of user privacy, 3.2 million bets.15 A Bitcoin- immediate access to funds and only poker site, Seals With DATAPOINTS irreversibility — to the casino’s Clubs, allows players to remain and player’s benefit. completely anonymous. Cash- Bitcoin in social media Online casino startups are ins and cash-outs are completed embracing Bitcoin, primarily with Bitcoin. Players need not % of 2013 online “Bitcoin” for its ease of crossing national share bank account information 12 mentions involved casinos. borders, absence of multiple or even an email address. Given currency conversions and lack the acquisition activity and % favorable of restrictions that banks or demand for online gaming, 92 conversation sentiment. credit card companies may expect more Bitcoin-based place on users for online games startups. Key points of chance. What’s more, online Larger, established gaming Bitcoin casinos typically do not companies could potentially $45 billion use third-party processors to consider Bitcoin and social The market revenue for casino gaming in the handle transactions, therefore gaming part of a unified province of Macau. they are jurisdiction-less strategy to attract younger regarding legal issues. For now. demographics. With online With a market estimated gaming laws approved in $6.2 billion to be worth $4-6 billion, online Nevada and New Jersey, Bitcoin Revenue generated in 2012 by casinos casinos have ready and willing should be part of education located on the Las Vegas strip, in U.S. customers.14 Bitcoin-related efforts casinos have with dollars. innovation thus far has focused regulators.16 on Bitcoin-only games and Bitcoin-based programs online casinos currently accept Bitcoin. companies, such as SatoshiDice, might also prove attractive for 44+ named after the mysterious casinos’ “whales,” big-spending creator of Bitcoin, and bitZino, customers whose money may Early innovators
whose 2012 reported year-end arrive from other countries. BitZino, a Bitcoin-only gaming company, offers blackjack, roulette and video poker. Global interactive gambling gross wins During its first year of business, 3.2 million bets were placed, totaling more 60 than 664,000+ BTC.
50 Seals with Clubs, a Bitcoin-only poker site, paid out 110,000 BTC over nearly 40 8,000 transactions since opening.
30 SatoshiDice, named after the creator of Bitcoin, was sold in 2013 for $11.5 million USD. 20
10 Sources: Online mention data via Sysomos MAP,
Gross Wins (in billion U.S. dollars) 2013. Statistic Brain, “Casino Market & Revenue Statistics,” 2013. Forbes, “Bitcoin Casinos Release 0 2012 Earnings,” 2013. PwC Research, 2014. 2003 2005 2007 2009 2011 2013* * 2015* * 2017* * American Gaming Association, “Backgrounder on Source: H2 Gambling Capital (www.h2gc.com), 2014. Online Gambling,” 2012. * 2013 value based on quarter-end reports and Q4 forecasts. 2014 - 2018 values projected.
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Bitcoin & EMC: Telecom and Internet sector Opportunity for early innovators
Telecoms in markets where China’s government bank accounts are sparse or and several Chinese telecom underserved could have the companies had huge impact on most immediate impact with Bitcoin’s valuation in 2013 (see DATAPOINTS Bitcoin, primarily as a banking box below), but internal power substitute. In Kenya, billing struggles have made China’s Bitcoin in social media providers teamed up with allowance of Bitcoin uncertain. telecom M-Pesa to develop a Telecoms in the United % of 2013 online Bitcoin mentions Bitcoin platform for money States have shown little interest 1 involved internet and telecom. transfers.17 Called Kipochi, it’s in Bitcoin. A peer-to-peer digital considered a lightweight version currency would likely require % favorable of a Bitcoin digital wallet. significant changes to payment 100 conversation sentiment. In Belgium, telecom infrastructure and mobile operator Mobile Vikings is carrier technology, along with PwC survey results accepting Bitcoin for credits on wading through a river of legal accounts or to purchase new issues. Incorporating Bitcoin % of consumers ranked security SIM cards and giftcards.18 The into existing VOIP services (or 41 as a top benefit to Bitcoin. payment choice was driven new ones) may make the most by subscriber requests. “We immediate sense. HushVoice, Key points try to listen to our community a U.S.-based VOIP service, as much as possible, so that’s promises global calls with why we decided to implement bank-level encryption when it $2.2 trillion 19 Predicted 2013 revenue for global it,” said Mobile Vikings’ chief launches in 2014. Bitcoin will telecommunications industry. marketing officer Dorien Aerts. be its payment engine. 63% Bitcoin fluctuations via news in China The search engine marketshare held by China’s Baidu in 2012. Bitcoin had wild fluctuations in its value in throughout 2013, driven by speculation on Chinese markets, the news media and the People’s Bank of China declaring it illegal for banks to use. When that happened in November, Bitcoin fell $300 USD soon after. Early innovators
Jiangsu Telecom accepts Bitcoin as Coinapult is a company that allows a part of a promotional effort. News Chinese search engine Baidu announces customers to direct Bitcoin transfers inaccurately reports parent company Baidu accepts Bitcoin for it will no longer to mobile phone numbers. It moved “China Telecom” is accepting Bitcoin. its security service. accept Bitcoin. operations to Panama to focus on non- U.S. customers and avoid U.S. regulation requirements. BTC China becomes China’s central bank bans world’s largest Bitcoin financial institutions from BahtCoin is a fixed-rate Bitcoin exchange handling Bitcoin. exchange. based in Thailand. With BahtCoin, Bitcoins can be used to purchase mobile phone Oct Nov Dec prepaid cards. Jiangsu People’s Bank of China Telecom Sources: Online mention data via Sysomos MAP, 2013. Insight Research Corporation, “The 2013 makes initial negative Bitcoin value removes all Telecommunications Industry Review,” 2013. comments on Bitcoin. drops $300 USD references to SearchEngineLand, “B2B Marketer’s Guide to in one day. Bitcoin. Baidu SEO,” 2014. BahtCoin.com, 2014.
Source: Bloomberg, “China Bans Financial Companies From Bitcoin Transactions,” 2013. CNBC, “Baidu division now accepting bitcoins,” 2013. Mashable, “Bitcoin Prices Plunge...,” 2013. PwC Research, 2014.
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Appendix: Data from PwC survey on Bitcoin
Familiarity with Bitcoin What best reflects your knowledge of Bitcoin? (Breakdown by age group) (Know what it is and have used it at least once)
Know what it is and have Know what it is but Heard something Never heard about it used it at least once have not used it about it
Base: Total Respondents (1000); 18-24 (195); 25-34 (310); Base: Total Respondents (1000); 18-24 (195); 25-34 (310); 35-49 (388); 50-59 (107) 35-49 (388); 50-59 (107)
How interested are you in using Bitcoin for: How interested are you in using Bitcoin for Internet (Somewhat - Very Interested) purchases with your phone, tablet, or laptop?
VeryVeryVery InterestedInterestedInterested SomewhatSomewhatSomewhat NotNotNot very very very NotNotNot at at all atall all
Base: Total Respondents (1000) Base: Total Respondents (1000); 18-24 (195); 25-34 (310); 35-49 (388); 50-59 (107)
What do you see as the top five benefits of using How willing are you to actually use Bitcoin to conduct Bitcoin for your purchase / sale transactions? Internet purchase / sales transactions?
Helps protect identity while making payments 15% VeryVeryVery InterestedInterestedInterested SomewhatSomewhatSomewhat NotNotNot very very very NotNotNot at at all atall all
Easily conduct worldwide transactions 12%
Instant peer-to-peer transactions; no central 11% authority or bank involvement
Fast transactions 10%
Control over money & fraud protection 7%
No one can charge or pay on your behalf 5%
Base: Total Respondents (1000) Base: Total Respondents (1000); 18-24 (195); 25-34 (310); 35-49 (388); 50-59 (107)
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Appendix: Data from PwC survey on Bitcoin
Why are you not very/not at all interested in using Bitcoin for Internet purchase/sale transactions?
All 18-24 25-34 35-49 50-59
Prefer other methods of payment 17% 28% 14% 16% 10%
Need more information / don’t know much about it 16% 15% 14% 18% 10%
No need for it / not useful 11% 12% 11% 10% 12%
Not secure / doesn’t seem secure 8% 6% 9% 8% 12%
Shady / fraudulent / sounds illegal 8% 6% 9% 9% 6%
Value fluctuates / value is speculative 8% 11% 7% 6% 10%
No protections / regulations 7% 4% 10% 8% 4%
Untrustworthy / don’t trust it 7% 2% 4% 10% 10%
Risky / can’t be tracked 6% 2% 6% 7% 10%
No intrinsic value / nothing backing it 6% 6% 5% 6% 4%
Not safe / doesn’t seem safe / unsafe 5% 7% 8% 3% 6%
New / unproven / not enough experience / not around a long time 5% 1% 6% 4% 10%
Base: Not Interested in Bitcoin Total (491); 18-24 (91); 25-34 (141); 35-49 (207); 50-59 (52)
What other feature(s) would make you interested in using Bitcoin for purchase/ sale transactions?
All 18-24 25-34 35-49 50-59
Better security / fraud protection / credits not stolen 14% 13% 13% 14% 13%
Want / need more information / how it works 8% 5% 7% 10% 11%
Provide examples of how to use 5% 3% 6% 4% 8%
Not interested in Bitcoin 4% 3% 5% 4% 6%
Widely used / accepted by banks / governments 4% 3% 5% 4% 5%
Constant / stable value 4% 4% 4% 4% 2%
Don’t know 8% 8% 6% 9% 8%
Nothing 22% 21% 19% 24% 25%
Base: Total Respondents (1000); 18-24 (195); 25-34 (310); 35-49 (388); 50-59 (107)
13 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Appendix: Data from PwC survey on Bitcoin
What would be the top five benefits to using Bitcoin for your purchase / sale transactions?
Helps protect your identity while making payments / purchases
Easily conduct worldwide transactions / payments
Instant peer-to-peer transactions - no central authority or banks
Fast transactions - funds received are available for spending within minutes
Bitcoin cancan givegive youyou controlcontrol overover youryour moneymoney andand aa strong level of protection against many types of fraud
No one can charge you money or make a payment on your behalf
Mobile transactions are a simple two step scan-and- pay process
Bitcoins areare sentsent easilyeasily throughthrough thethe Internet,Internet, withoutwithout needing to trust any third party
Allows exciting uses that could not be covered by any existing payment system
How interested are you in using Bitcoin for:
Base: Total Respondents (1000); 18-24 (195); 25-34 (310); 35-49 (388); 50-59 (107)
14 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Appendix: Data from PwC survey on Bitcoin
What potential barriers do you see using Bitcoin to conduct purchase/sale transactions?
% Highly / Somewhat Concerned
Indicate your level of concern to the following statements reflecting potential barriers / concerns to using Bitcoins to conduct purchase / sale transactions.
% Highly / Somewhat Concerned
The price of a Bitcoin can unpredictably increase or 83% decrease over a short period of time.
Bitcoin is an experimental new currency that is in active development, and therefore is unpredictable. 80%
Any transaction issues with Bitcoin cannot be reversed, they 76% can only be refunded by the person receiving the funds.
Bitcoin is not an official currency. Most jurisdictions still require you to pay income, sales, payroll and capital gains taxes on 72% anything that has value - including Bitcoin.
All Bitcoin transactions are stored publicly and permanently on the Bitcoin network, which means anyone can see the balance and 66% transactions of any Bitcoin address.
Would be more likely to trust Bitcoin if it were distributed 50% by a well-known third party.
Base: Total Respondents (1000)
15 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Appendix: Data from PwC survey on Bitcoin
What devices do you own and use regularly? (Breakdown by age)
Base: Total Respondents (1000)
When did you last make a purchase or sale online using your laptop or your mobile device? (Overall breakdown)
(Made Purchase) 2 (Made Sale) Past 3 weeks month 4% s Past 8% Week Month month 9% 4% 3 0% month s Past 2 3+ 6% weeks None month 23% 62% s 15% Past week 69%
Base: Total Respondents (1000)
When did you last make a purchase or sale online using your laptop or your mobile device? (Breakdown by age)
(Made Purchase) (Made Sale)
Base: Total Respondents (1000)
Base: Total Respondents (1000) 16 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
Appendix: Data from PwC survey on Bitcoin
Use the scale to indicate how interested you are in using Bitcoins for your Survey demographic breakdown: Internet purchase transactions made using your phone, tablet, or laptop.
Gender:
Male 45% Female 55%
Age Range: 50-59 11% Based on the description, benefits and concerns addressed, how willing would you be to actually use Bitcoins to conduct Internet purchase / sales 18-24 transactions? 20%
35-49 38% 25-34 31%
1,000 Respondents Geographically Diverse/U.S.
Appendix: Sources
1. PwC Social Listening, Sysomos MAP, 2013. 11. Bloomberg, “US Agencies say Bitcoins provide legitimate use,” 2. BBC, “Bitcoin: Price v hype,” 2013. 2013. 3. BBC, “Bitcoin: Price v hype,” 2013. 12. Business Insider, “The Ninth-Largest Newspaper In The Country 4. Forbes, “Bitcoin valued at $1300 by Bank of America analysts,” Is Trying Out A Bitcoin Paywall,” 2014. 2013. 13. The New York Times, “In China, New Limits on Virtual Currency,” 5. The New York Times, “$25 Million in Financing for Coinbase,” 2009. 2013. 14. American Gaming Association, Online Gaming, 2014. 6. Bloomberg, “Bitcoin: Making Online Gambling Legal in the 15. Forbes, “Bitcoin Casinos Release 2012 Earnings,” 2013. U.S.?,” 2013. 16. CBS, “Nevada legalizes online gambling,” 2013. 7. Wired, “The Grand Experiment Goes Live: Overstock.com Is 17. Computer World, “In Kenya, Bitcoin linked to popular mobile Now Accepting Bitcoins,” 2014. payment system,” 2013. 8. CoinDesk, Bitcoin Price Index, 2014. 18. CoinDesk, “Mobile Vikings: the First Cellular Network to Accept 9. Reddit, “Petition Kickstarter to take Bitcoins,” 2013. Bitcoin,” 2013. 10. S. Meiklejohn and M. Pomarole. “A Fistful of Bitcoins: 19. HushVoice Website, 2014 Characterizing Payments Among Men with No Names,” In IMC, 2013.
17 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
About PwC
PwC’s Entertainment, Media and Communications practice For questions and comments, PwC’s practice works with businesses to address the challenges and contact: opportunities presented by digital transformation, assisting them shift from Deborah Bothun traditional business models to businesses, brands and revenue streams that Principal leverage digital content and platforms. We work with clients across a wide U.S. Advisory – Entertainment, Media range of key industry sectors including: television, film, music, Internet, and Communications Leader [email protected] video games, advertising, publishing, radio, out of home advertising, sports, business information, casino gaming, and more. Ben McConnell PwC’s Digital / Social practice Managing Director U.S. Advisory – Digital / Social Practice PwC’s practice helps organizations capitalize on the social, mobile and [email protected] other digital technologies that are transforming the way business gets done, @benmcconnell from customer value to revenue growth. With a strong, customer-centric focus, PwC’s social and digital practice employs a range of solutions, from operating models, to technology models, to technology solutions, to customer Matthew Lieberman U.S. Entertainment, Media and data to global social and digital strategies. Communications Marketing Leader [email protected] Analyst David J. Neff, PwC Digital / Social Strategy
Design Eleanor Bartosh, PwC Digital / Social Strategy
Social Listening Data Christine Stout, PwC Digital / Social Strategy
About the Cover Photograph by Eleanor Bartosh, Copyright PwC 2013. Please contact for creative common licensing.
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