Custos' innovative custody blockchain technology is used in pirated movies

Custos media technologies, a company based in Stellenbosch, South Africa, that is using blockchain to fight media piracy, is an unusual and interesting commercial application of Bitcoin. The idea was conceived by GJ van Rooyen and Dr. Herman Engelbrecht after participating in “pre-commercial” research, which specializes in practical applications of cutting-edge technologies over the past decade.

GJ van Rooyen

Engelbrecht and van Rooyen co-founded the Stellenbosch University Media Lab, which was created specifically for this type of research.

“We have spent several years working on media distribution and content protection with Naspers, the lab’s founding sponsor.”

van Rooyen told CCN. Naspers is a large multinational media company that focuses mainly on developing countries.

“It gives us a really good understanding of how the digital media world works.”

2013 is a watershed year

The two have been studying Bitcoin since its inception, but 2013 was a watershed moment for Bitcoin as a cryptocurrency. “It suddenly became very hot, Bitcoin had broken the ‘very interesting idea’ stage and had achieved ‘real world’ technical traction,” van Rooyen said.

“In addition, it has the potential for colored coins, smart contracts, and micropayment streaming, which has just been realized. We decided to actively explore potential applications of Bitcoin, especially in areas where it intersects with the core research of the Media Lab.”

In academia, you quickly learn that the best-intentioned things like research breakthroughs and eureka moments are mostly movie plots, van Rooyen said:

“Most of the time, research is a slow process of incremental change. You don’t have to chat with smart colleagues to suddenly invent something new.”

This is how new ideas were discovered in the case of van Rooyen and Engelbrecht.

A flash of inspiration

Engelbrecht had the idea that blockchain could be used to track ownership in some sense. His colleagues weren’t far behind.

“I was reminded of an experience I had a few years ago when I purchased an e-book and my credit card details were embedded in the footer of each page, and I wondered if Bitcoin could be used to impose a similar “owner liability” on “recipients of digital media.”

We pulled in Fred Lutz, who was then a master’s student in economics at the Multimedia Lab and a Bitcoin enthusiast, to chat about some better ideas.

That afternoon, we had invented and written our patent.

The birth of a company

Since van Rooyen resigned from his position as an associate professor at Stellenbosch University, he has been spending all his time at Custos as its CEO. Lutz joined Custos as full-time COO after completing his economic master's thesis on digital piracy. Engelbrecht remains at the university, but works part-time at the company.

Custody technology involves watermarking a piece of media with bitcoins, which is tracked in the blockchain and identifies infringements. The system uses crowdsourcing, offering bounties to those who identify pirated downloaders. Content creators and distributors can embed an identification code into the media they provide to a specific user.

The code embedded in each piece of content can access a deposit in the form of cryptocurrency - a "middleman's commission". If the content is leaked or shared, the third party can obtain the content and cash out the "middleman's commission" in the code.

Custos has business

Van Rooyen said bounties are already being embedded into media content.

"Most of our current content is feature films created by independent film studios and can be viewed on our online service at http://screenercopy.com"

He added.

Custos' "plagiarism screening" website says it had a closed public beta. Van Rooyen said the beta was ambiguous because the service had already been available. "Private beta" in software projects means that customers can use it on an invitation-only basis, he explained.

“This allows us to carefully test the product and grow the bounty hunting community in a controlled way. It’s used extensively and actively tested client feedback.”

He likened Custos to the Facebook model, which was originally a very strict rollout to individual campuses before being opened up to everyone.

“This was a responsible, manageable test and demonstrated a complex technology.”

Media piracy on the rise

How did media piracy develop?

“First, it depends on who you ask,” he said. “Sometimes you hear the argument that piracy is a positive for the media industry because it’s actually a form of marketing. However, that idea assumes that very few consumers engage in piracy.”

Today, we find ourselves in a media distribution market where a shrinking percentage of users are willing to pay ever-increasing prices for legal content, while more users are getting the same content for free. Clearly, this is unsustainable - content creators must have some sustainable business model to recover costs and create new content.

An unbiased estimate: Content piracy costs the industry an estimated $22 billion. This is money that could have been spent on creating more high-quality, diverse original content.

Huge cost of piracy

A common fallacy is that piracy is a black and white thing. Take, for example, the fact that movie studios still have great box office results – surely piracy can’t destroy the movie industry? The thing is, lost revenue won’t cause the industry to collapse: like any business, it tries to reduce revenue risk. The movie industry has done this by creating more content that still makes big money despite some piracy – the typical superhero genre, action movies and romantic comedies. Over the past decade, we’ve seen a steady decline in higher production risk, more “funny” movies and an intense focus on results. In the short term, it’s an art form of thriftiness. In the long term, unless the movie distribution model is reinvented, AAA movie titles may struggle to continue to be commercially viable.

Custos has met with three of the "big 6" studios as well as the "small majors". Their responses to the potential of custodial media technology have all been positive. Further meetings are being planned.

Book publishers at risk

Film productions aren't the only content producers that are being pirated. Book publishers are probably more at risk than the film industry, van Rooyen said.

"Hit movies at least have a premiere to recoup costs; but unless you're JK Rowling or Dan Brown, there's nothing like it for books. E-book piracy is rampant and hard to avoid, and consumers hate traditional forms of DRM for e-books."

College textbooks have been hit hard. They are very expensive to produce and have limited recycling. "Students are very annoyed about buying textbooks, and this leads to a perverse feedback loop: the more students pirate e-textbooks, the more expensive the textbooks become - which exacerbates the piracy problem."

Custos is currently doing a pilot for e-book protection with a partner in the UK (Educated Digital) and has just been featured at the London Book Fair.

Many small, independent producers are taking content directly to consumers and breaking away from the 20th-century model of movie studios, van Rooyen said.

Platforms like Alexandria and LBRY offer very compelling new ways for creators to deliver content directly to their audiences, without a middleman profiting from it and creating a content distribution network.

“Of course, Bitcoin itself is well suited for media distribution. Licensed digital content is well suited for global payments.”