Digital Disruptor How Bitcoin Is Driving Digital Innovation in Entertainment, Media and Communications (EMC)
Total Page:16
File Type:pdf, Size:1020Kb
Consumer Intelligence Series www.pwc.com/us/communications www.pwc.com/us/em Digital Disruptor How Bitcoin is Driving Digital Innovation in Entertainment, Media and Communications (EMC) Feb. 7, 2014 PwC #DigitalDisruptor DIGITAL DISRUPTOR: HOW BitCOIN IS DRIVING INNOVatiON IN EMC 4 key points on Bitcoin A Bitcoin is a peer-to-peer currency that is gaining Risks and benefits for momentum in multiple marketplaces. New and emerging companies, consumers companies are Bitcoin-centric and a handful of larger, established companies are experimenting with it. While it’s Benefits for companies one of 70 digital currencies available, Bitcoin is generating • Low transaction fees • Daily cash outs considerable buzz and activity, even though it is not a • No payment reversals government-backed currency or legal tender in the United • Merchant tools exist to simplify States. So what should executives know about Bitcoin and its experience potential impact? Our point of view: 1. Bitcoin can be part of an innovation strategy for Risks for companies • Pseudo-anonymous transactions products, services and payment systems. Some • No central entity backing it entertainment companies are experimenting using • Not legal tender in some countries Bitcoin for new music downloads. • Uncertain and evolving 2. Early adopters enjoy a public relations and marketing perspectives of regulators advantage. Being noted as a Bitcoin innovator can • Network security • Volatile trading market potentially generate favorable press and social media • Dynamic product pricing a must mentions. In 2014, social gaming company Zynga • Slow transaction processing time added Bitcoin to its most popular games and garnered thousands of media mentions. Benefits for consumers 3. The value of Bitcoin is frequently fluid and roller • Typically no fees to send Bitcoin coaster-like. Dynamic pricing of products is needed globally with daily cash-outs and a trusted payment partner. In • Pseudo-anonymous transactions • Value fluctuations (when rising) the tourism sector, CheapAir.com has partnered with • Financial institutions don’t control Bitcoin merchants to leverage those features. currency 4. Like other consumer-facing technologies, companies experimenting with Bitcoin should monitor the evolving Risks for consumers regulatory landscape and execute due diligence to • No payment reversals mitigate potential exposure to illicit activities. • Complexity of buying Bitcoin • Complexity of cashing out This PwC Consumer Intelligence Series report explores • Niche adoption by major brands the emerging impact of Bitcoin on entertainment, media and • Complexity of carrying a digital communications companies. It is based on our analysis of wallet Bitcoin’s 3.4 million online mentions in 2013 plus a PwC- • Uncertain and evolving perspectives of regulators commissioned online consumer survey to gather awareness, attitudes and behaviors about Bitcoin. 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 Bitcoin’s growth has people were suddenly talking spawned a rash of supporting about Bitcoin in 2013, that’s companies, including exchanges because they were. Bitcoin had such as Mt. Gox and Cryptsy, DATAPOINTS 3.4 million online mentions in which allow users to exchange 2013, according to our research, Bitcoin into local currencies. Bitcoin in social media equaling General Motors and all There are startups for buying of its brands during the year.1 Bitcoin, such as CoinBase, Those conversations translated which received $25 million in 3,400,000 5 to media mentions, too; Bitcoin venture capital in 2013, as well Number of social mentions ‘Bitcoin’ was the subject of some 11,200 as Coinmkt and Campbx. Other generated in 2013. Mentions occurred traditional media stories in companies are creating digital on social networks, microblogs, forums, mainstream news, images, videos and blogs. 2013.2 In November alone, it wallets to store and use Bitcoin was featured in 14,179 online at brick and mortar locations. stories.3 All of this growth signals 96% male Bitcoin’s growth has been that Bitcoin has grown into Percentage of gender mentioning Bitcoin. swift: Two leading U.S. banks a brand, a decentralized one The majority of discussions happen in the have met to discuss Bitcoin; one at that, supported by a digital United States and China, and participants are typically ages 26-50. of them became the first U.S. ecosystem of entrepreneurship. institution to initiate official The history of digital shows that analyst coverage of the digital when that ecosystems form, 21% 4 currency. disruption follows. Percentage of Bitcoin mentions about online gambling and video games. 2013: The year of Bitcoin Source: Online mention data via Sysomos MAP, 2013 70% November 800k Bitcoin Black Friday/CyberMonday: 400 retailers join Bitcoin Black Friday website. Bitcoin nears value of 700k 60% ounce of gold. Neutral May 600k 50% Treasury crackdown on money April Volume of mentions Chinese e-commerce laundering. Presidential 500k market says it will accept candidate accepting Bitcoin 40% Bitcoin. donations. Positive 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. Note: While regulators have publicly stated they do not wish to stifle innovation, federal agencies continue to advance their own understanding of Bitcoin and its technology. It is likely that the regulatory environment for users, miners and exchangers will evolve over time. Companies considering Bitcoin should monitor regulatory developments and how they shape the market in coming years. 2 CONSUmeR INtelligeNCE SERIES DIGITAL DISRUPTOR: HOW BitCOIN IS DRIVING INNOVatiON IN EMC The open-source monetary system While Bitcoin quickly developers voluntarily update becomes part of the business and monitor the open-source vernacular, does it have what code, contributing to its it takes for enterprise-level common good. DATAPOINTS security? As a digital currency, Since its release in 2009, Bitcoin is not backed by physical A brief history of Bitcoin Bitcoin has differentiated itself commodities such as gold, by solving for the nagging or a centralized government problem of double-spending, authority and its credit; 2008: when one token is spent instead, it relies on peer-to- Bitcoin.org is registered. twice. The solution: A public peer distribution and trust in ledger that logs every Bitcoin that network, which is nearly 2009: transaction, allowing users to frictionless. That makes for a The first transaction using Bitcoin occurs. agree on who owns how many low-to-no fee system. Bitcoins at any time. Bitcoin With 1,000 brick-and- 2010: has also seemingly solved for mortar businesses and 10,000- The tech news site Slashdot covers Bitcoin. issues around online system plus online merchants accepting security, too; each transaction Bitcoin, early adopters are 2011: is encrypted while all of its creating roadmaps for the One Bitcoin is valued at roughly $10. governing code is publicly enterprise to understand and accessible. Hundreds of adopt the digital currency.6 2012: The Bitcoin Foundation is formed. The value of Bitcoin vs. gold 2012 First Bitcoin exchange licensed as a bank in EU. $1,800 December 11, 2013 2013 Gold $ / Oz. high (values in USD): At U.S. Senate hearings, $1,600 Gold: $1,266.25 Department of Justice calls Bitcoin Bitcoin: $1,237.95 a “legal means of exchange.” $1,400 2013: Canada and Slovakia introduce $1,200 Bitcoin ATMs. Avg. Gold $ / oz. $1,000 2014: Overstock.com has 840 orders $800 on first day of taking Bitcoin. The company estimates $500,000 $600 worth of Bitcoin business since January 9. $400 2014: $200 Kings become first NBA team to Avg. Bitcoin $ announce Bitcoin acceptance. Bitcoin $ High 0% 2014: Canada and the Bank of France J 2013 F M A M J J A S O N D say Bitcoin isn’t legal tender. Source: The Wall Street Journal, “Bitcoin Vs Gold: A Tale Of Two Manias,” 2013. Source: PwC Research, 2014. 3 CONSUmeR INtelligeNCE SERIES DIGITAL DISRUPTOR: HOW BitCOIN IS DRIVING INNOVatiON IN EMC Bitcoin: Digital payment disruptor Bitcoin’s value proposition central financial institutions includes global, peer-to- and their fees, not unlike peer money transfers, nearly how peer-to-peer file sharing anonymous payments, low of music enabled today’s DATAPOINTS transfer fees and higher-level consumers to download music security protocols based on from artists directly. Bitcoin is a Bitcoin fees vs. other fees open standards. bit like the 1999-era of Napster Four types of organizations in that way, but today’s scenario Payment method transaction fees, from face increased challenges if involves consumers sending highest to lowest: Bitcoin continues its growth digital payments directly to 3.1% American Express pattern as a digital currency: other users, or companies with 2.7%* Visa, MasterCard, Banks, governments, payment goods and services to sell, with Discover processors and payment minimal fees and no float time. 2.9% PayPal gateways. Added to this proposition 2.75% Square BitPay and BIPS are is that consumers who use a Free ** payment gateways for Bitcoin decentralized, peer-to-peer Coinbase transactions, and they are payment system can be shielded Free *** BitPay creating merchant tools that from fluctuations caused by enable online businesses to local government politics and % of all point-of-sales transactions that are done with credit, debit, or accept Bitcoin on hosted check- their influence on central banks. 66 gift cards. out pages, shopping carts and In this potential scenario, point of sale systems for brick Bitcoin has the potential to and mortar stores. The upshot: disrupt currency models. $6.9 trillion transaction fees are typically Bitcoin may cause financial VISA 2013 users’ total dollar volume. Visa low. Some Bitcoin merchant institutions to update or add had the largest marketshare of all credit cards.