Microsoft Introduces Blockchain Payment System for Xbox, With Billion-Dollar Game Developer on Board

Microsoft is planning to slash operational costs by introducing a new blockchain to manage royalty payments for gaming developers.

Built on top of the Quorum blockchain using Microsoft’s Azure Cloud, it will initially be tested on Microsoft’s Xbox gaming console to manage payments for video game publishers, including Ubisoft, one of the largest gaming publishers worldwide. The company made $1.65 billion in sales last year and produces a cascade of hit franchises such as Assassin’s Creed, Prince of Persia, Just Dance, Rayman, Far Cry and the Tom Clancy series.

The new blockchain could also be used to manage Microsoft’s movie royalties and other verticals that require licensing for intellectual property. Microsoft expects the solution to encompass thousands of royalty partners and process millions of transactions per day to make it one of the world’s largest enterprise blockchain ecosystems.

Microsoft’s current software system for royalty management is reportedly complex, despite what appears as a smooth transaction for the end user making a game purchase. The legacy system juggles thousands of titles, vendors and publishing houses across the globe, reconciling transactions that have to adhere to various jurisdictions and tax codes.

To impact its bottom line, Microsoft and its multinational accounting partner Ernst & Young (EY) are hoping to streamline the royalty payment process and cut operating costs in half by eliminating the costly manual reconciliations and partner reviews that are required to build trust.

“Smart contract technology is far more flexible and scalable than any prior solution for managing business agreements,” says Grace Lao, General Manager of Finance Operations at Microsoft.

But blockchain skeptics often point out that scaling for enterprise solutions has not yet become a reality. Test pilots and visionary applications need to be applied to real-world use cases and solve tangible problems. With Microsoft’s Xbox blockchain initiative, it hopes to prove that the new technology can deliver on processing millions of transactions not only faster than the legacy system but in a much more transparent way.

Blockchain’s automation would allow smart contracts to be executed instantly. Information that’s recorded, validated and automatically verified on a digital ledger would eliminate the traditional verification steps that can slow down royalty payments and require 45 days or longer to process and complete.

“The scale, complexity and volume of digital rights and royalties transactions makes this a perfect application for blockchains,” says Paul Brody, EY Global Innovation Leader. “A blockchain can handle the unique nature of each contract between digital rights owners and licensors can be handled in a scalable, efficient manner with an audit trail for the participants. By deploying this on Microsoft Azure, we believe this will be highly scalable across thousands of royalties and content partners.”

If implemented successfully, blockchain applications for royalty payments would have a huge impact on creatives such as a gaming developers, software developers, audio and video artists, writers, graphic designers, musicians and digital media content creators who would benefit from a transparent system that can track royalties faster and process payments more quickly.