Managed Chaos: Why the Music Industry Needs Blockchain
Just like the financial institutions, the music industry is looking into the Blockchain technology in hopes of finding the treatment of its age-old problems.
The music industry has lived through several so-called revolutions when either the “video killed the radio star” or MP3 killed the record sales or Spotify disrupted the way we consumed music, and so on. However, rather paradoxically the industry has never changed that essentially, at its core which is its relationship with artists contracts, payments, licensing and copyrights.
With good reason, one could call the current state of the music business “managed chaos” where its players record labels and publishers benefit from it. It takes months and years to pay out royalties to artists and composers.
Imogen Heap, artist and Founder of Mycelia for Music, an early adopter of Blockchain, says at the SLUSH conference in Helsinki:
“This is the current state of affairs in the United Kingdom. This is how the money gets down to me as an artist - I’m right at the end of the chain. I am the first person to upload the song and the last person to receive the money. And often it takes up to two years for that to happen.”
Music is one of the most complicated copyright environments with one of the worst data practices. Labels have typically failed to develop comprehensive contracts and keep proper records for the artists they sign leaving data entry to interns or IT departments. Of course, there are thousands of Rights Organizations globally that are supposed to help coordinate music licensing but who will help coordinate the Rights Organizations themselves? For example, it took GEMA, that represents German rights holders, seven years to re-license music on YouTube.
“There have been many historical attempts at doing music rights,” explains Marko Ahtisaari, Founder of Sync Project. “Typically they have failed because there has been a misalignment of incentives - large players in the industry didn’t want to provide access to this data.”
“At the moment you have this extremely complex system for collection of money and data around the world,” continues Heap. “I’m very excited about the potential of Blockchain and what it is doing for the industry, kind of catalyzing us into thinking of reshaping it, making it a more flexible, sustainable, cleaner system. A person would have a digital wallet ID. There would be no need for any banks if it was on the Blockchain.”
All eyes on Blockchain
Blockchain technology represents a decentralized ledger where you can record transactions and monitor the changes associated with transactions over time. It would make a perfect foundation for music rights management.
Ken Umezaki, Founder of Digital Daruma and Co-founder of Dot Blockchain music, calls the music industry “a data business of micropayment collection” which needs to have an architecture that can support that in a very efficient way. He thinks there is tremendous opportunity in the Blockchain to create that operational efficiency.
“If the industry agrees to cooperate and create an interoperable environment where the core business values can be maintained but we all get the benefit having a collective data set from which to work on, publishers would have to stop worrying about collecting micropayments through spreadsheets and focus on what they love to do which is to promote their music or work with the songwriters to make them better.”
Currently, the information related to music compositions and songs is located in over 5000 individual publisher-owned databases. It is certainly not an efficient system. Ahtisaari believes that the Blockchain could help create a place where the information would have a trustful degree of privacy governed according to certain rules and principles. Then everyone would benefit from the entire infrastructure being hosted.
“By using a system which no one owns or controls but everyone takes care of, which is what the distributed ledger is about, we hope we can address this problem,” says Ahtisaari. “The world is turning to streaming entirely. In a significant amount of cases, the streaming service cannot pay because it’s unknown who to pay. There is no easily accessible rights registry.”
For this particular reason, the Open Music Initiative, which Ahtisaari is part of, was brought together essentially by academic institutions starting with Berklee College of Music and Berklee Institute for Creative Entrepreneurship. They approached him along with several other academic institutions to host a group of companies that would commit to bringing about a new kind of music rights registry using the distributed ledger technology. There are well over a hundred companies that signed up, including all the major labels, all the major streaming services with the exception of Apple and significant publishers.
“That’s the idea - to bring together and do a reference implementation showing that this can interconnect but still leave a lot of room for companies to build businesses on top,” says Ahtisaari. “That’s a handwave dream picture. Of course, it is a very contested area so it takes a long time. Right now we are doing the minimal viable first step. It’s like an open-source project.”
Turo Pekari, Senior Advisor, Innovation & Discovery at Teosto, agrees that collective management societies have a crucial role in building applications based on Blockchain because the data is the most important thing and you can’t make anything without it.
Pekari points out:
“Blockchain solutions could provide new growth for the traditional music players. The Blockchain is not going to disrupt the whole existing industry. You can see what has been happening in the financial industry and the Blockchain, the biggest players are making an investment in the technology now. That’s what is probably going to happen in the music industry too. There are ideological goals as well like openness and transparency.”
He sees the role of Teosto in data governance and data validation in future Blockchain implementations, as well as in providing a licensing platform for some writers and possibly in competing with commercial players in that way.
However, Pekari is rather skeptical about the quality of data that would get to the Blockchain. “The quality of music reporting data is something that Blockchain cannot solve,” he underlines. “If we get crappy data, it is going to be crappy in the Blockchain too. A wise thing to do would be a trial implementation in some licensing area where we know that it can actually work.”
So, what should be done first?
The explosion of data has created a massive challenge for the industry as well as massive opportunity. There has never been so much data before in the music industry. And now everything is a digital transaction and can be measured meaning that people can get better and faster access to the information.
Bruno Guez, Founder of Revelator, suggests that the best thing about the Blockchain is a possibility to create a more efficient marketplace and faster payments.
He says at SLUSH conference:
“Focusing on the registry of digital assets is the first important step. Having a better transaction chain for transactions that are associated with digital assets. We are already making use of smart contracts to create a more executable transaction around payments and loyalty distribution. We are not going to focus on core infrastructure or identity just yet or payments just yet. Registry and smart contracts are our interest.”
As it usually goes, the challenge is to get everybody to agree to some format standards around metadata, around smart contracts and payments processes. Every company has their own databases and processes in place. Getting everybody to agree on one format is a huge challenge.
“90 percent of the problem is people in the industry, the adoption issue, and 10 percent is a technology issue,” agrees Ahtisaari. “The technology issue could be leveraged, we just need to collectively agree on the standards. There is some sort of data transaction limitations to the Blockchain that we need to think about. We need to make sure that the scale supports the full number of uses.”
According to Ahtisaari, the first thing that needs to be worked on is the fundamental infrastructure, scaling transactions and this is pretty well-documented in the Bitcoin case which is good. But the key here is that the innovation and experimentation are so fast at the moment that it is a little bit ahead of its skis because there is money involved.
“One thing that makes me hopeful is that there is a system that we can rely on,” he says. “I’m encouraged by the speed of innovation.”
On these platforms, you can create crypto tokens for particular parts of the applications or the platform so there is a way to crowdsource and finance allowing for new business models to be created. To figure them out is the hurdle right now.
“The music industry is a tiny business globally and it hasn’t grown collectively in the last 10 to 15 years. We must bring efficiency in payments to creators. We need to work on that so that new areas have potential to grow. We will find new applications for music and technology. We hope to have the music rights taken care of.”
Projects already applying Blockchain to music
Having a better foundation for monitoring the activities related to digital platforms is of tremendous value for the music industry indeed. However, Blockchain is still a work in progress.
There is a number of music specific applications of Blockchain, with major ones being introduced by such companies and projects like Dot Blockchain music, Ujo music, Media chain, Chainvine, Revelator and Dubset media.
Dot Blockchain music is a startup focused on the establishment of the industry standards and development of such a media format that would benefit musicians, composers, generally all people related to the music through open source protocol and licenses and leveraging Blockchain technology methods. As the end result, Benji Rodgers and his team seek to create a fair and transparent way for music artists, music publishers and rights holders to express their wishes for commercializing their art.
Rodgers says in an interview:
“The Blockchain isn’t about a single company finding a fix. It’s about the key players getting tighter behind a foundation. The solution we are seeking is closer to how ICANN, the privately run but non-profit organization that manages internet domains and addresses, works than it is to a Silicon Valley or London start-up. A shift like this is akin to getting the world to move to the metric system, which isn’t going to be achieved by a Steve Jobs-like figure who will magically solve this problem and build a new system overnight. This is about laying the bricks, mortar and plumbing of a new music industry.”
Ujo music is building a system designed to address major problems of global royalty distribution and licensing. Ujo proposed a new shared infrastructure for the creative industries that aims to return more value to content creators and their customers. Ujo’s model focuses on creating an open-source rights database and payment infrastructure in hopes of revolutionizing how money is distributed to artists and rights holders.
Dubset Media Holdings is a technology solutions company that offers an innovative music marketplace for DJs, artists, labels, publishers, music services, and distributors. Through a cutting edge technology rights management database and easy to use dashboards, Dubset is creating new mix and remix distribution allowing monetization opportunities to be built on transparency, ownership control, and simplicity. It’s leveraging Blockchain for components of the services they are providing.
Mediachain is an open universal media library based on a protocol for registering, identifying, and tracking creative works online. It allows participants to retain control over their data while broadening their reach using a decentralized architecture.
Soundchain, a non-commercial fund, offers a distributed open-source database for managing intellectual property rights. It aims to ensure payment of royalties to musicians and copyright holders with the token created for contract Pay Per Play. The contract is subsidized by the sale of commercial licenses, common users can listen to music for free. The artists are paid a fee for every playback automatically with a microtransaction of $0.01- $2.
Artyom Abaev, Soundchain CEO, told Cointelegraph:
“On our platform, an artist or a rights holder may release their tokens for the track and license a product with the help of our four-layer licenses or with a use of a special constructor. Before the release, an artist or a token holder can pre-allocate them among owners and other musicians. Our license constructor can be compared with open licenses of creativecommons.org but they will be used exclusively for the music industry. We add the fourth layer smart contract code to make sure that market participants act in accordance with the legal text of the license.”
The problem with the implementation of this project is that there are no 100 percent reliable database products. For these reasons, none of the music services are covered to 100 percent for example with Directory of copyright owners. “There is no authority that sets the reliability of contracts,” confirms Abaev. “Historically copyright is declarative in its nature.”
Chainvine is a Blockchain service which aims to provide secure digital management for assets and identity. They claim to have developed a unique enabler for the use of the Blockchain and Blockchain-based technologies engaging with both the public and the private sector.
Revelator serves as a platform for artists, labels and distributors to track their assets, rights and data. It was founded in 2013 by music veteran Bruno Guez and launched in Israel. Backed by a team of seasoned music industry and software development professionals, Revelator is a provider of business marketing solutions for music professionals which seek to solve music business challenges integrating sales, marketing, accounting and analytics into one unified system to provide unprecedented transparency, simplicity and efficiency for both independent artists and record labels.