Blockchain, Smart Contracts, and Reconstructing the Music Industry

Sajad Alkaysi
Apr 28 · 8 min read

Problems in the Music Industry Today

Music as a commodity exploded during the 1920’s when major record labels began to be established. Under standard contract terms, music labels tend to control most aspects of an artist’s career. This includes licensing, accounting, promotion, merchandise, touring, branding, and distribution. By giving up such control, an artist’s creativity is stifled and they lose the autonomy they need to thrive. In recent years, intermediaries such as streaming services are also being used to distribute music. These middlemen take revenue away from the artists, distance the relationship between artists and listener, and sometimes leaves collaborators unpaid. For example, in 2018, Wixen Music Publishing sued Spotify for $1.6 Billion for copyright infringement and failure to compensate (Pham, Money.cnn.com). This lawsuit is one of many that Digital Service Providers (DSPs) face on an annual basis. Rights to songs are constantly being bought and sold but the records of these transactions are stored on private databases. This leaves DSPs running after publishers and labels trying to figure out who owns the rights to a song because they simply do not know who to pay. The music industry generated nearly $43 billion in 2017 and yet the artists only received 12% of that revenue (Bazinet, 61). These content creators are the first to put in work and yet the last to see any revenue. They are given little information on how the royalties are calculated and do not have full access to aggregated data regarding their music. Using emerging technologies such as blockchain and smart contracts, we can reconstruct the music industry.

Source: Nick Pollock, Smashing Ideas

What is Blockchain and How can we use it?

Many have heard of the famous cryptocurrency named Bitcoin, but many have not heard of blockchain. Blockchain is the underlying technology that allows Bitcoin to function as a decentralized currency. Imagine blockchain as a shared database. Unlike the Cloud, where Google or Apple control all the data, a public blockchain is not controlled by a central authority. Instead, anyone connected to the internet can take part in storing the data. Because it is not controlled by one party, theoretically, a blockchain cannot be shut down, hacked, and most importantly, the data cannot be altered again. Cryptocurrencies are one tiny possibility of the power of blockchain.

Just as the name sounds, blockchain is literally a connected chain of blocks where only one block at a time can be added to the “database.” The blocks consist of three entities: hash, hash of the previous block, and data (Nakamoto, 2). Imagine a hash as a unique code or fingerprint that identifies that specific block of data. Every single block also includes the hash (fingerprint) of the previous block. Each block referring to the previous block’s hash creates a “chain,” this is what is meant by the term “blockchain.” This “chain” also serves as means of security; if one were to alter the data in a block, the hash would automatically change. If a hash changes, it would invalidate the block of data working as a detection mechanism.

The most important aspect of the block is the data. This data can contain many different kinds of information depending on the use-case of a specific blockchain. For example, the data in Bitcoin’s blockchain contains information on transactions between entities, which includes information such as the sender, receiver, amount, and timestamp. Once a block is added to the “database,” the data is locked in there forever, viewable by anyone, at any time. This method of storing data can be used in every industry imaginable including healthcare, banking, supply chain, and music.

If you would like to see Bitcoin’s blockchain visit https://www.blockchain.com/btc/blocks. There you can view every block completed since the genesis block was added on January 3rd, 2009. If you click on the hash of a block you can see all the transactions that were stored on that specific block.

When it comes to the music industry, having a grand library of music on a public blockchain would create a more transparent ecosystem. On this blockchain, artists can upload their music and all information they want to include about it. Once uploaded, anyone around the world is able to view the information regarding the song and have the ability to buy it from the artist directly. Since the information is stored forever, we can create a timeline for a song where we see how and when the song was used, whether it be a remix or a video. If a song’s rights are ever sold or transferred, we would all be able to view that information along with the song’s entire history. Having everyone in the music industry synchronized on the same data would be groundbreaking. Ideally, a platform will be built around the blockchain that allows artists to contact other artists directly and negotiate royalties if they wanted to make a remix or use the song in a video. DSPs like Spotify would be able to contact and pay the artist directly instead of chasing the record labels trying to figure out who truly owns the rights to the song. This would save DSPs millions of dollars in lawsuits annually. Also, DSPs can now include all the contributors of the song on their platform allowing us, the listener, to view everyone involved in the project, giving them the credit they deserve. This would also solve another major problem in the music industry regarding data collection on listener demographics, information including age, region, unique listeners, and most frequent listeners. This is all data that help an artist connect more with their listeners. Artists will now be able to see who and how many people are truly listening to their music. With a blockchain like this, middlemen like DSPs and music labels can still continue to exist, only now they are all built around the same data, the same blockchain. Simply by allowing the music industry to share the same secure data, we can create an efficient, transparent, and fair ecosystem. Advancements in blockchain has also introduced even newer technologies to our society. One major advancement is the creation of smart contracts.


Smart Contracts and Use-Cases

Ethereum is a platform that allows anyone to create a smart contract. Imagine Bitcoin as a phone app with one use, being a peer-to-peer digital currency. Ethereum on the other hand can be viewed as the app store, where anyone can create decentralized applications (dApps) using smart contracts (Buterin). Smart contracts are electronic contracts built using blockchain to store agreements between two or more party members. These contracts are essentially small programs that are being processed by thousands of computers around the world. The most significant difference between an electronic contract and a smart contract is that a smart contract self-executes. Meaning, that in a smart contract, once certain conditions are met, the actions defined in the contract will be triggered. Due to a smart contract’s ability to self-execute, it eliminates the possibility of the contract being breached, it is instantaneous, and removes the need for third party involvement.

A lot of the money that music labels and streaming services take from artists is the cost for dealing with revenue. The process of paying each contributor fairly is a complicated task. It is a slow process that is open to all kind of risks and leaves a lot of smaller contributors running after their money. Using smart contracts, you can list all the contributors involved and define exactly what percentage of the revenue they will receive. These contributors can include anyone from writers and performers to film crew and samples. Due to a smart contracts ability to self-execute, each contributor will be paid fairly as soon as the revenue is generated. The condition would be the revenue being sent to the smart contract, thereby, triggering the action of distributing the revenue between the contributors. This removes the need to pay a middle man and gives more money to everyone involved. An artist can also include rules that reward listeners for sharing their songs or albums. Rewards can include a percentage of the revenue generated from the referral, encouraging fans to create playlists and share. This powerful referral program lowers the need to hire promoters and allows us, the listener, to work hand in hand with the artists as their promoters.


What is being done today?

Many start-ups are being created to help streamline these innovative ideas. The english artist, Imogen Heap, was the first to release a song on a blockchain. With the song “Tiny Human,” Imogen Heap also included the instrumental version, 7 stereo stems, front cover image, the music video, documentation regarding musicians, gear, credits, and lyrics, and the making of the song documented. All of this is uploaded on the same blockchain; in this case, the Ethereum blockchain. Imogen Heap released this song for free as an experiment but is now working to create a platform called Mycelia that is similar to a global music library mentioned earlier. Other startups include Open Music Initiative (OMI), Choon, Musicoin, Viberate, and Voise. Almost all these startups are dApps built on the Ethereum network in order to utilize smart contracts to deal with revenue. Most projects have the same goals of bringing the power back to the artist, having a fully transparent ecosystem, and an automatic flawless payment system.

If you would like to download “Tiny Human,” visit http://imogenheap.com/home.php?article=2430.

Emerging technologies such as blockchain and smart contracts are bringing the power back to the artist. When an artist truly owns their music, control their future, and connect with their listeners, they are able to explore their talents without limitation. We as listeners also benefit from this autonomy. Some benefits include being introduced to a larger variety of music, being able to support our favorite artists directly, and even rewarded for sharing music. Since the blockchain is public, we will have access to all the same information that the music industry keeps hidden today. With the flexibility of blockchain and smart contracts, the opportunity is endless.

Thank you for reading, feel free to leave a comment below. All feedback is appreciated!

References

Bazinet, Jason B, et al. “Putting the Band Back Together.” Remastering the World of Music, 1 Aug. 2018, pp. 1–88., ir.citi.com/NhxmHW7xb0tkWiqOOG0NuPDM3pVGJpVzXMw7n Zg4AfFFX eFqDYNfND 0hUxxXA.

Buterin, Vitalik. “Ethereum White Paper; A Next Generation Smart Contract & Decentralized Application Platform.” Blockchainlab.com, 2013, blockchainlab.com/pdf/Ethereum_white_paper a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf.

Levi, Stuart D., and Alex B. Lipton. “An Introduction to Smart Contracts and Their Potential and Inherent Limitations.” Harvard Law School Forum on Corporate Governance and Financial Regulation, 26 May 2018, corpgov.law.harvard.edu/2018/05/26/an-introduction-to-smart-contracts-and-their-potential-and-inherent-limitations/.

Nakamoto, Satoshi. “Bitcoin: A Peer-to-Peer Electronic Cash System.” Bitcoin.org, 31 Oct. 2008, bitcoin.org/bitcoin.pdf.

Pham, Sherisse, and according to documents filed in a California court on Friday. “Spotify Sued for $1.6 Billion over Tom Petty, Doors Songs.” CNNMoney, Cable News Network, 3 Jan. 2018, money.cnn.com/2018/01/03/technology/spotify-lawsuit-wixen-songs/index.html.

Pollock, Nick. “Blockchain & The Music Industry.” Smashing Ideas, 18 Dec. 2017, smashingideas.com/blockchain-music-industry/.

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