Can Blockchain Technology Disrupt the Music Industry?

Angel B
Angel B
Jul 19, 2018 · 5 min read

Many have claimed that the advent of blockchain technology would revolutionize the music industry. Has it already started, or is it still mostly hype?

Since the success of Imogen Heap’s release “Tiny Human” on the Ethereum blockchain in 2015 (users were charged $0.60 in ETH per download), proponents of the technology can claim, to an extent, that blockchain technology has already disrupted the music business. Blockchain, by nature, enables transparency over who owns copyrights over a digital work of art or song and further promotes digital payment through cryptocurrencies and smart contracts. If the music industry adopted a blockchain-focused distribution model, artists might not need the help of labels to secure royalties or brand partnerships. It would also mean that artists could become entrepreneurs and handle their revenues from album sales or radio royalties themselves, activities traditionally performed by record labels.

Are we there yet? What are the current issues musicians face and can blockchain technology and startups solve these issues?

Image source: Smashing Ideas

The global music industry is a tremendous one. In 2017, the revenues from the industry were around 16 billion USD, showing the predominance of three major record labels: Universal, Warmer, and Sony. The global recorded music market grew by 8.1%. Among the various revenues streams, over a third came from global streaming. In particular, approximately 176 million users of paid subscription services (such as Spotify or Deezer) shaped this revenue stream.

Nonetheless, many issues remain, mostly around the payment of royalties to artists. Music creators often find it challenging to properly see the reward of their work in a business where many intermediaries control revenues. A report suggests that for every $1,000 of music sold, the average musician gets a paltry $23.40 (just over 2%). Another dramatic stat shows that music producers get barely anything out their song played on air: on Apple Music, musicians earn $0.00783 per stream. They receive $0.00397 per stream on Spotify and $0.00074 per stream on YouTube. To meet the US monthly minimum wage, musicians would need over 188,000 total plays on Apple Music (and even more on the competing platforms).

To summarize, musicians do not make much money from album sales, cannot claim or follow up on royalties efficiently, and on top of that, face RIAA file sharing issues. In this context, how can blockchain help musicians get the right reward or claim copyright on their work?

Image source: Smashing Ideas

Blockchain could help in the following areas:

Contracts & IP Protection
The first area where blockchain technology could disrupt the music business is in content rights distribution through smart contracts and IP protection. When a song is put on a blockchain, it gets allocated to a unique number, and hence is protected from fraud. As blockchain further enables peer-to-peer transactions via a digital currency such as Bitcoin or a smart contract such as Ethereum, content creators can get money directly from fans or businesses as seen in the example of Mycelia. Overall, since no data can be changed in the blockchain, there is real transparency which lets content creators control their work. For example, illegal downloads of a song would be impossible on a blockchain.

Creative Earnings
Musicoin and Revelator are active music blockchain-based startups that provide alternative solutions for the typical music industry issues. In the case of Musicoin, fans can enjoy free streaming and listen to over 30,000 songs while musicians get rewarded more efficiently by cutting down middlemen costs as seen in Spotify or major streaming services. Revelator provides music publishers, rights societies, record labels, and musicians the opportunity to monitor copyrights efficiently thanks to accurate data management on the platform. Musicians could see how much their copyrights could earn them. and PeerTracks are also alternative solutions to track royalties efficiently. PeerTracks claim that they will enable artists to claim 90 percent of their sales income instantly while BitTunes offers a bitcoin-based peer-to-peer file-sharing platform that lets fans stream what music holders have stored on the platform.

· Removing all intermediaries in the music business: artists connect to fans or enterprises directly

· Letting artists becoming entrepreneurs and controlling their royalties

· Issuing smart contracts and allowing peer-to-peer transactions, so artists receive payments from fans directly

· Allowing complete transparency over credit rights and payment of royalties

However, how many musicians, record labels, music publishers are active on the blockchain? Since the success story of Imogen Heap, are there any significant examples that prove that the music industry is disrupted? Even though great enthusiasm is seen from musicians or fans willing to move toward a platform that compensates musicians better, we need more industry data to support the idea that blockchain has already disrupted the music industry.

· Artists are not ready to leave record labels since record labels invest money in A&R; they scout new artists and handle administrative tasks such as royalty collection or artist promotion that artists prefer not handle.

· Blockchain technology is still a novelty for many artists, record labels, and music publishers. It requires time and various experiments to convert people to this type of technology.

· Cryptocurrencies are volatile which means payment can be affected. If a musician gets paid in Bitcoin, and suddenly the price of Bitcoin drops, how can he or she ensure to get stable money to pay for food or rent?

· The adoption of blockchain isn’t mainstream yet. Proof of this, although the idea of Musicoin to replace Spotify is excellent, it registers fewer musicians and songs compared to the primary streaming services. Furthermore, new artists need more exposure to get known. Being played on music streaming platforms provide such exposure. Exposure is not money but is essential for an artist.

· Music contracts are yet too complicated to be hosted by smart contracts as blockchain technology lacks the security sufficient to protect audio files.

· Let’s not forget than the music industry is not yet 100% digital. Physical revenues from records for instance still make up a third of global revenues in the music industry.

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