Change the record: how blockchain will disrupt the music business

August 29, 2018
Chris Wheal

Blockchain technology could potentially rock the music industry in a way not seen since the start of the digital era by offering solutions to its most fundamental problems from piracy of digital records, improper rights management and delay in rewards to artists.

blockchain

Distributed ledgers could save the music industry billions

When peer-to-peer file sharing began 20 years ago by Napster, a website and software application that facilitated and promoted the swapping of MP3 music files, it became a world-wide phenomenon with millions of participants. Yet new advances bring both a blessing and a curse.

With many nervous about the direction that new technologies are taking the music sector, there could no better time for secure blockchain-enabled, encrypted databases to enter the field.

These distributed ledgers could save the industry billions by tracking and validating asset ownership and ensuring royalty money gets where it needs to go. A move that could lower the price of music to consumers and also increase returns to the content writers and artists.

Artist rights management

One of the biggest problems in the industry right now is that there’s no verified global registry of music creatives and their works.

Allowing consumers access to a vast library of songs for a monthly fee might broaden their music horizons, but figuring out which rights holders to pay – from music labels, producers, musicians and vocalists – becomes a complicated task.

A recent PWC report entitled Blockchain: recording the music industry, states that every stakeholder in the music business will gain from improving the title system for music rights.

Whether led by a consortium of music labels, rights organisations, or an entrepreneur, a distributed database for tracking recording and composition rights could slice millions of pounds out of the industry’s overhead. This, in turn, would leave more money for artists, distributors and stakeholders. Not only would this system save money, it would also make accounting transparent.

In a survey, MUSO found that 60% admitted to illegally downloading or streaming music, film, and TV programmes

Piracy of music

According to the annual Global Piracy Report from data tracker MUSO, music piracy grew 14.7% last year with 73.9 billion visits to music piracy sites made worldwide.

In a survey, MUSO found that 60% admitted to illegally downloading or streaming music, film, and TV programmes. Of those, a whopping 83% they had tried to find the content on existing streaming services before pirating with many not realising that downloading music for free meant that the artists do not get paid.

Technical advancements, according to intellectual property lawyers IPWatchdog, have created a sharing environment where boundaries to content are incredibly porous. This has led to several companies, such as MediachainBindedPixsy, and TinEye, among others, to attempt to use blockchain technology as a tool for managing intellectual property, primarily to register copyrighted works and allow owners to easily protect those works.

Ralf Brechter, director of industry cloud solutions for the Media Industry Business Unit at SAP, said blockchain has the potential to change one of the oldest, most complex processes in the media industry.

He said: “When a piece of content is consumed, a blockchain stores a cryptographic hash of the digital asset and associates it with the creators’ addresses and identities. It may also store instructions on how to compensate the artist through smart contracts, which facilitate or verify the performance or negotiation of a contract. It also allows artists and the rights owners to set rules on exactly where and how the content may be used.”

Cutting out the middle man

Streaming services such as Spotify and Amazon Music currently require an additional layer of intermediaries to ensure that the artists’ rights management process is conducted properly. One of the key opportunities offered by blockchain technologies is their ability to increase efficiencies through the removal of unnecessary intermediaries within a transaction.

The PWC report said that providing an alternative to the ‘trusted intermediaries’ that have emerged and become established to run registries, keep records, handle transactions or negotiate terms would shake up the industry.

It said: “The myriad of intermediaries which conventionally have separated artists from the consumer is breaking down rapidly, hence ensuring greater protection of the rights of the owners.”

As a result, a host of new players have sprung up from Musicoin and Revelator to Choon and Potentiam that want to revolutionize how value is created and shared in a musical economy. They propose using the blockchain to make digital-rights management more transparent by bypassing the usual middle men and paying artists in near real-time with micro payments from fans.

Companies such as YouTube have also begun investigating blockchain platforms

Benefits for industry leaders

Companies such as Netflix, YouTube, Spotify, Amazon or Alibaba have also begun investigating ways in which blockchain platforms could aid with the complex intermediation process.

Last year Spotify acquired the Brooklyn-based blockchain start up Mediachain Labs. The start-up had developed a decentralized, peer-to-peer database to connect applications with media and the information about it, as well as an attribution engine for creators, and a cryptocurrency that rewards creators for their work.

Spotify said that Mediachain will help further its “journey towards a more fair, transparent and rewarding music industry for creators and rights owners.”  This comes after Spotify settled a licensing dispute with the National Music Publishers Association (NMPA) in the US over unpaid royalties.

According to the NMPA, Spotify had failed to obtain mechanical licenses – which refer to a copyright holder’s control over the ability to reproduce a musical work – for a large number of songs on its service.

The company claimed this was because it didn’t have the necessary data to locate the parties and “didn’t know who to pay” and agreed to pay more than $20m to music publishers as a result of this settlement, in addition to a $5m penalty.

NMPA said this was a huge problem in the industry and estimated that as much of 25% of the activity on streaming platforms is today unlicensed.

smart contract

Blockchain can store instructions on how to compensate the artist through smart contracts

Streaming music and fair payment

Imogen Heap, a British musician and developer, has used and is a strong proponent of blockchain tracking technology. In 2015, she used the Ethereum blockchain-based Ujo platform to launch the song “Tiny Human” for $0.60 (45p) per download. She said that it was time for the music industry to take the long-view look and explore blockchain together with its creatives for the sake of its sanity and future.

She added: “It won’t be hard to make the business more efficient, as it’s such a giant mess right now. The larger players in the industry just need to have faith that they will make more money by doing the right thing — which would lead to fair remuneration, transparency, and a multitude of new business opportunities for artists.”

Yet, industry author Daniel Sanchez said that although blockchain as an idea is promising it’s not one that solves musicians’ pressing financial problems. He added that companies would first have to convince fans that purchasing tokens is more practical than automatically paying for a streaming music service.

He said: “It would also have to convince artists. Cryptocurrency isn’t a practical alternative for musicians who need to make a living. Imagine having to figure out how to receive payments in Ethereum right when the rent is due.  Or, when you’re out of gas.  Let’s not even mention when you need to buy groceries.”

Roneil Rumburg, CTO of new start-up Audius, disagrees and says their goal is to build a blockchain streaming music service where listeners don’t have to understand blockchains. Users will pay for Audius tokens or earn them by listening to ads. Their wallet will then pay out a fraction of a cent per song to stream from decentralized storage across the network, with artists receiving roughly 85%— compared to roughly 70% on the leading streaming apps.

He said: “A user wouldn’t even know that they have a wallet. They’ll just hear an ad every once in a while, get a subscription, or pay per stream. Since Audius is open sourced, developers will be able to build their own listening clients on top, which could specialize in discovery of certain types of music or offer their own payment schemes.”

Apple and Spotify now command approximately 110 million paid music subscribers

Shake it up

Steve Jobs said in 2007 that “People want to own their music.” It seems in retrospect he was wrong and Apple and Spotify now command approximately 110 million paid subscribers or “music renters” combined.

Blockchain could potentially take the streaming revolution a step further and allow the content creator to be rewarded the most for creating and sharing work as well as enabling interactions between artists and fans.

Music streaming might have slaughtered CD sales in the same way that video killed the radio star, but blockchain could potentially stop any more fatal bleeding in the sector.

 

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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