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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 mentions of Volume 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.
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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. tools offer recurring billing and to their current technologies, fees of 1% or less to cash out adjust fee structures, add Bitcoin daily (see column on services or new layers of right). specalists to monitor and 26.2 billion Total number of credit card transactions in Bitcoin enables companies understand governmental the U.S. in 2012. to skip the “middle man” of regulatory issues. U.S. Government viewpoints on Bitcoin 55,000 Government entity View on Bitcoin Average number of Bitcoin transactions every day in 2013. Daily average was less Securities and Exchange Considering options on Bitcoin as a security. than 100 in 2009. Commission
Commodities Future Trading Considering options on Bitcoin as a commodity, or a * Variable as set by the acquiror (bank). Commission “marketable good produced to satisfy wants or needs.” ** No fee for first $1 million in payment processing. After that, 1% charge. Internal Revenue Service Considering options on Bitcoin as a taxable currency. *** No transaction fee with $30 / month subscription.
Sources: Kimbia.com Interview, 2013. Treasury Companies deemed to exchange Bitcoin for traditional Congressional Research Service, “Bitcoin: Q+A fiat currencies and vice versa as a business must and Analysis of Legal Issues,” 2013. NerdWallet. register as money transfer businesses. com, 2011. BlockChain.info, 2013. CreditCards. com, 2013. Congress Considering the effect of Bitcoin on the Federal Reserve and weighing consumer protection options.
Source: Congressional Research Service, “Bitcoin: Q+A and Analysis of Legal Issues,” 2013.
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Bitcoin growth and trust issues
Successful traditional mainstream and more Bitcoins currencies typically have two are “mined,” its value will be success factors: They function based on actual transactions, as a medium of exchange and not market speculation. That DATAPOINTS maintain their value over time. said, the same market forces To maintain value, a causing fluctuations in value PwC survey results currency must be trusted by are also what’s driving the those using it. A medium of popularity, and trust, in the % of all respondents understand exchange means a currency brand of Bitcoin. 42 the concept of Bitcoin. has to be divisible, easily Another advantage of transferable and valued. Bitcoin over traditional currency % of all respondents are “very interested” in using Bitcoin. While Bitcoin is divisible is the aforementioned public 4 and has an increasing number ledger. Called the “block chain,” % of all respondents are “not at of way to spend it, including it tracks every transaction in the 49 all” or “not very interested” in acceptance at online retailers Bitcoin network. Transactions using Bitcoin. such as Overstock.com, its value are semi-anonymous and 7 swung wildly in 2013. The value ultimately traceable. % of the previous group cite of one Bitcoin was relatively Bitcoin has many hurdles 27 Bitcoin’s lack of trust, security and stable in 2011-12, averaging before it becomes mainstream, regulation as why they are not interested. $5.44 and $8.29, respectively; including an infrastructure of 2013 was a rocket ship ride, consumer-friendly services, % of respondents say “nothing” reaching a high at one point of regulatory hurdles, licensing 22 would increase their interest in $1,147; it ended the year at $757 regimes, governmental Bitcoin. (all prices are in US dollars).8 classification of the asset Much like its fiat (commodity, security, asset or % of total respondents would be counterparts, Bitcoin’s value currency), as well as taxation, 49 more likely to trust Bitcoin if it fluctuates on the market forces measurement and valuation. were distributed by a well-known third party. of supply and demand. However, Those are some of its key as the currency becomes more challenges ahead. Key points Consumer trust in banks 1.2 trillion The number of U.S. dollars in circulation in 80% July 2013. US consumer trust 60% 11.3 million The number of Bitcoins in circulation in July 40% UK consumer trust 2013.
20% Sources: Survey data based on a December 2013 PwC survey of 1,000 geographically-diverse respondents. Sample size was 55% female and 45% male. Other: BlockChain.info, 2013. Board of 0% Governors of the Federal Reserve System, “Money Stock Measures (H.6),” 2013. 2007 2008 2009 2010 2011 2012
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 or CoinDL, movies with Bitcoin drove which are audio platforms that awareness and positive online enable performers to upload DATAPOINTS sentiment for the digital and promote songs. Filmmakers currency in the entertainment and other content producers Bitcoin in social media sector. are petitioning Indiegogo and Although no leading online Kickstarter to use Bitcoin for % of all 2013 online Bitcoin music or movie platforms have crowdsourcing-based funding.9 2 mentions involved entertainment. announced Bitcoin acceptance, Larger content companies several alternative sites, such and their partners may find % favorable as CoinDL.com and Beatcoin. value in experimenting with 91 mention sentiment. org, have been launched to allow Bitcoin as a payment system Bitcoin-based purchases for for specific songs, albums or PwC survey results downloads and streaming of campaigns, especially with % of all respondents are “very music. artists who have global, tech- 17 interested” or “interested” in using As a payment platform, savvy followings. It’s also an Bitcoin for internet transactions. Bitcoin presents an opportunity opportunity to partner with or for filmmakers, musicians, acquire entertainment startups Key points artists, authors, and other that build momentum with content creators to more easily Bitcoin. $479 billion sell their work directly to fans As with any new 2012 revenue generated by the United worldwide, bypassing a maze innovation, especially a digital States’ entertainment and media industry. of country-based currencies, one, there are gray markets. payment networks, gateways Modern content creators and distribution platforms. are constantly concerned $632 billion Given its no-chargeback model, with piracy; while a Bitcoin Predicted 2017 revenue generated by the Bitcoin makes global direct transaction is semi-anonymous, United States’ entertainment and media selling more attractive as a its public ledger system allows industry. hedge against credit card fraud. sophisticated law enforcement Entertainment companies agencies to track transactions to Early innovators or studios could partner with IP addresses.10 Artist (and Spice Girl) Mel B made her single “For Once in My Life” available to purchase for 0.0012 Bitcoin as of Dec 2013.
How digital wallets work with Bitcoin: Buying movie tickets BitTorrent, in its new business model as a legitimate content provider, is integrating Bitcoin into its system, encouraging content creators to share music with fans in exchange for Bitcoin. It may also integrate Bitcoin metadata into its code, Customer has a smartphone To buy a ticket, customer The Bitcoin network sends potentially open-sourcing innovation among with a digital wallet app uses phone to scan a Bitcoin money from the customer’s the two protocols. BitTorrent’s protocols installed, and goes to a movie QR code on the point of sale online Bitcoin tally to the generate roughly 40% of the world’s internet theatre that supports Bitcoin machine that matches the theatre’s account. On average, traffic each day. transactions. price of the ticket. this takes ten minutes or less.
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
In 2013, media companies Bitcoin could make it possible began to experiment with to charge the equivalent of Bitcoin. Paywall technology pennies, or nickels, for a la was a logical first choice. The carte content. Bitcoin reduces DATAPOINTS ability to wall off certain content multiple currency exchange for those willing to pay for it is needs with global audiences Bitcoin in social media enhanced by the digital nature and out-of-country fees of Bitcoin and its divisibility. 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 consumer’s home country. % favorable 95 conversation sentiment. % of respondents who were Has Bitcoin usage spread 15 “not interested” in Bitcoin said sufficiently to make paywalls they would “need to know more and micropayments viable for PwC survey results about Bitcoin” before they would media companies? The Chicago consider using it. % of consumers aged 18-34 Sun-Times, the ninth largest 44.5 are aware of Bitcoin. newspaper in the United States, Micropayments has been a will test that theory with its Key points long-imagined and researched paywall in early 2014.11 In the future for companies that wish meantime, PwC survey results % of people who correctly to offer content a la carte, but show that nearly half of the 42 identified Bitcoin as a virtual currency during a 2013 transaction fees have hindered U.S. public is aware of Bitcoin, Bloomberg survey. deployment for anything sold but have yet to understand its
for less than $1. In lieu of daily technical aspects, which hinders % of people from Bloomberg or monthly subscriptions, trust. (See column at right). 6 survey who incorrectly identified Bitcoin as an Xbox video game. 2013: Bitcoin mentions in U.S. mass media % of people skip pre-roll 94 advertisements when browsing 3,000 the internet.
2,400 Early innovators
IAC, the parent company of OKCupid.com, accept Bitcoin for 1,800 subscriptions and premium features.
TheDishDaily accept Bitcoin for various 1,200 levels of access and subscriptions.
Reddit Gold customers can pay with Bitcoin 600 to access extra features and gift “gold” to 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 game engines. DATAPOINTS video game companies have Specialized video games that good potential for benefiting use Bitcoin as a theme could Bitcoin in social media from integrating Bitcoin into be devised, given that Bitcoin their product and payment awareness and understanding % of 2013 online Bitcoin mentions strategies. remain 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 theoretically cash out existing lower than other industries in the and Ouya by using Bitcoin as in-game currency for Bitcoin, or report, which average at 93.5% payment for special game or vice versa. While most virtual, favorability. console offerings (see column in-game currencies can’t be PwC survey results at right). Companies in this cashed out for real-world space have the advantage of currency, Bitcoins can be traded % of consumers concerned with measuring purchase and loyalty for dollars.12 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 Bitcoin as part of their payment and decentralized digital systems, whether for in-room infrastructure is not tied to services, tours or in conjunction country-specific currencies, with mobile devices and special DATAPOINTS travel and tourism companies attractions. For companies could experiment with Bitcoin wanting to attract technology- Bitcoin in social media on multiple fronts. savvy consumers, being Bitcoin- Tourism and vacation friendly could enhance loyalty % of 2013 online Bitcoin companies could use Bitcoin to numbers. Few large companies 1 mentions involved travel and tourism. supplement traditional payment in the sector have publicly systems, making it easier for revealed Bitcoin plans, so early out-of-country tourists to make innovators are likely to attract % favorable conversation sentiment. reservations. Airlines could traditional and social media 100 accept the digital currency for buzz. PwC survey results domestic flight purchases in The travel and tourism the United States (or low space industry is poised to face % of consumers are “not orbit; see column at right). They an onslaught of wearable 49 interested” in using bitcoin for could also integrate QR code- technology that helps users purchases online. based Bitcoin accounts into better understand location and mobile apps, experimenting context, or personal telemetric Key points with in-flight payments, data associated with tourism. hospitality lounges or selling That means travelers will be $129 billion frequent flyer 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-edge services associated with travel 60 million resorts could experiment with 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.14 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 in a gray area regarding strategy to attract younger 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 is likely to included in ongoing located on the Las Vegas strip, in U.S. customers.13 Bitcoin-related education efforts casinos have dollars. innovation thus far has focused with regulators.15 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 a significant most immediate impact with impact on Bitcoin’s valuation in DATAPOINTS Bitcoin, primarily as a banking 2013 (see box below), but some substitute. In Kenya, billing decisions have made China’s Bitcoin in social media providers teamed up with acceptance of Bitcoin uncertain. telecom M-Pesa to develop a For telecom companies, % of 2013 online Bitcoin mentions Bitcoin platform for money incorporating Bitcoin into 1 involved internet and telecom. transfers.16 Called Kipochi, it’s existing VOIP services (or new considered a lightweight version ones) may make sense for early % favorable of a Bitcoin digital wallet. experimentation. HushVoice, 100 conversation sentiment. In Belgium, telecom a U.S.-based VOIP service, operator Mobile Vikings is promises global calls with PwC survey results accepting Bitcoin for credits on bank-level encryption when it accounts or to purchase new launches in 2014.18 Bitcoin will % of consumers ranked security SIM cards and giftcards.17 The be its payment engine. 41 as a top benefit to Bitcoin. payment choice was driven by Systemwide, a peer-to-peer subscriber requests. “We try digital currency like Bitcoin Key points to listen to our community as will likely require updates to much as possible, so that’s why telecom payment infrastructure we decided to implement it,” and mobile carrier technology, $2.2 trillion Predicted 2013 revenue for global said chief marketing officer along with navigating multiple telecommunications industry. Dorien Aerts in an interview regulatory issues. with Coinbase.com. 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 customers to direct Bitcoin transfers to Chinese search engine Baidu announces inaccurately reports parent company mobile phone numbers. It moved operations Baidu accepts Bitcoin for it will no longer “China Telecom” is accepting Bitcoin. to Panama to focus on non-U.S. customers. its security service. accept Bitcoin. BahtCoin is a fixed-rate Bitcoin exchange BTC China becomes China’s central bank bans based in Thailand. With BahtCoin, Bitcoins world’s largest Bitcoin financial institutions from can be used to purchase mobile phone exchange. handling Bitcoin. prepaid cards.
Oct Nov Dec
Jiangsu Sources: Online mention data via Sysomos MAP, People’s Bank of China Telecom 2013. Insight Research Corporation, “The 2013 makes initial negative Bitcoin value removes all Telecommunications Industry Review,” 2013. SearchEngineLand, “B2B Marketer’s Guide to comments on Bitcoin. references to drops $300 Baidu SEO,” 2014. BahtCoin.com, 2014. USD in one day. Bitcoin.
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)
12 Consumer intelligence series DIGITAL Disruptor: How Bitcoin is driving innovation in EMC
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. Business Insider, “The Ninth-Largest Newspaper In The Country 2. BBC, “Bitcoin: Price v hype,” 2013. Is Trying Out A Bitcoin Paywall,” 2014. 3. BBC, “Bitcoin: Price v hype,” 2013. 12. The New York Times, “In China, New Limits on Virtual Currency,” 4. Forbes, “Bitcoin valued at $1300 by Bank of America analysts,” 2009. 2013. 13. American Gaming Association, Online Gaming, 2014. 5. The New York Times, “$25 Million in Financing for Coinbase,” 14. Forbes, “Bitcoin Casinos Release 2012 Earnings,” 2013. 2013. 15. CBS, “Nevada legalizes online gambling,” 2013. 6. Bloomberg, “Bitcoin: Making Online Gambling Legal in the 16. Computer World, “In Kenya, Bitcoin linked to popular mobile U.S.?,” 2013. payment system,” 2013. 7. Wired, “The Grand Experiment Goes Live: Overstock.com Is 17. CoinDesk, “Mobile Vikings: the First Cellular Network to Accept Now Accepting Bitcoins,” 2014. Bitcoin,” 2013. 8. CoinDesk, Bitcoin Price Index, 2014. 18. HushVoice Website, 2014. 9. Reddit, “Petition Kickstarter to take Bitcoins,” 2013. 10. S. Meiklejohn and M. Pomarole. “A Fistful of Bitcoins: 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 2014. Please contact for creative common licensing.
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