What To Expect From Blockchain In Music Industries?

photo: some rights reserved under a Creative Commons BY-NC-SA International 4.0 licence by Wolfgang Senges; photo processing via Prisma

Why is it that Blockchain appears to be the megastar on the roster of newcomers? I mean, look back… it is just about two years that blockchain became an insider’s tip first. For music. For Bitcoin it had been around for some time already then.

Today, music conferences are chasing anyone who can spell the word, and Blockchain startups keep popping up.

True, I’m also excited about the opportunities that might arise. But… why?

If you absolutely can’t wait and read it all, here is the ultimate Blockchain promise for all artists:

You finally can be in control of your works.

Why?

Actually, this one post is a bit too short to explain the Blockchain architecture. Let’s do that in another one. Or more.

For those who think that Virtual Reality rather than Blockchain is the next huge thing in music, check Benji Roger’s approach. Interestingly, he combines both.

But first, take a step back.

The health of music business

Why is the music industry longing for a new underlying ecosystem? That’s easy to answer. It is because the current music industry works… somehow — but certainly not as it should do. There is a long list of issues to tackle. And there’s quite a number of people who think that music business could be rethought and shook up by Blockchain in many ways.

Let’s check a number of the issues in music business and see if they could improve with Blockchain.

Licensing
One thing about licensing is absolutely simple and easy to understand. If you make use of music you need the consent of the rightsholder. If you ask me, one has to get the Ok from all creators (composers, musicians, producers) as well.

Various tariffs and legislations varying from one country to another plus some strange political decisions „help“ to make it a minefield. A global database undoubtedly would be an enormous improvement. But with the Global Repertoire Database (GRD) the last attempt failed.

Blockchain experts suggest their solution can hold all data necessary. Although, it’s still questionable if each and every musical work can be integrated and stored as part of „the block“. The challenge lies in the vast capacities necessary.

Unlicensed use
A slightly different but related problem is that of using works that have not been licensed — or, it’s not clear whether they were licensed or not (David Lowery vs. Spotify).

As part of the Blockchain technology we get so called „smart contracts“. Each song comes bundled with individual contracts and, hence, the rights to use it. One core promise of Blockchain technology is that previously stored data cannot be tweaked, corrupted, damaged or exchanged. It’s only possible to negotiate again. The old contract gets voided by signing a new smart contract. This can only be done with the consent of all signees of the previous contract. No contract means you can’t play the song. Same goes for a contract that’s not signed by all parties.

Misuse of works
There always has been a strong anger and indignation of composers and musicians when their works were misused. The reason could be Trump (or any other political party) using your song publicly in his campaign, or you don’t like something more common such as cat content with your music. Much worse is the use in an context that is ethical questionable or plainly not tolerable (porn, racism). You may stop the use then by legal means. Yet, often that’s just temporarily because the party misusing it most likely finds a loophole.

Now imagine you are the composer and it’s simply impossible to play your music as long as you don’t allow it. That would be awesome. Of course, the question is — is this possible on the finest level of all granularities? Or is it just too much overhead for the single DIY artist? How much effort is it to negotiate and define one smart contract that matches your requirements? And, what about live covers of your works?

Leaked releases
There always has been music that was leaked at a moment when it wasn’t intended to go public yet. Or, at least we were told so.

Blockchain is a technology that brings an ecosystem for the entire music industries. Each player, no matter how big has to rely on it. Imagine the whole industry being connected as we are connected to the power supply system. Your latest release will only be available to the public if you plug it in. The release date is yours.

Streaming
We, the old generation, might have our issues with the album format dying. But, let’s be honest. With the exception of a few glitches streaming is great. We are in need of a model like that for the generation growing up now. 15-19 year olds are said to have a tendency against ownership of music. It’s true. Talking to real people like my nephew confirms it.

What’s wrong with streaming? Low payment and licensing issues are the worst in streaming. Licensing I mentioned above. From my point of view, the crux with payment is missing transparency and a pricing strategy that as of today is not matching the immaturity, the level of acceptance on the market. Streaming and its payment model need to be rethought.

The promise has it that Blockchain technology brings transparency. In this case, everyone will not just see music streams. It might bring a new visibility into financial streams. This includes the sometimes questionable involvement of labels within streaming companies, and maybe even obscure payment activities within streaming providers — if there are any:

More than ever, we are trying to figure out what’s happening; why certain artists don’t feel like they’re seeing a portion of that money.[..] It’s certainly true that with certain artists [..] it’s not that we’re not paying out to them, it’s just that they’re not seeing the money… Until [Spotify] really understand[s] what’s happening and where the money’s going, it’s hard to blame any particularly corner of the rights-holder universe.

[Sachin Doshi, Spotify’s VP of Content and Distribution, in conversation with Tim Ingham for Music Business Worldwide at Way Out West 2015.]

Ticketing
The second-market sales of tickets is a huge issue. It ruins an artist’s image when within minutes of general sale the second market has horribly overpriced tickets while the event is sold out. That’s nothing to do with reselling single tickets. It’s a business gone wrong.

As with the release of music, within the Blockchain system ticket sales can be controlled better. Here, the key is selling so called „tokens“. Due to transparency and strict control of sales it should be impossible to cheat on this.

Collection societies
Lots of artists (and licensees) are incredibly unsatisfied with the work of collection societies/PROs. In Europe, the recently realised directive on collective licensing has set new standards which is a first step. Kobalt’s acquisition/launch of AMRA (with a whole bunch of successful artists on the roster) is another symptom of the issue, as is the modest but nevertheless highly ambitious and persistent approach of C3S SCE [I’ve been involved as a founder and executive director in the launch of C3S SCE until April 2015]. One important factor is the lack of willingness to fully embrace the advantages of technology. There are test runs. But no implementation.

If Blockchain results in a bottom-up redefinition of commercial relations and transactions one question raises: What will the role of collection societies be? Is there any task left for them? As mentioned above, it could be the administration of generalised contracts. This takes the load from the single artist — but it is a step back from what Blockchain can deliver. Or, collection societies might welcome Blockchain. Because it helps to negotiate contracts for single works on a very detailed level of granularity. Less people would moan about a vast number of tariffs, instead you can find a fit for everything. However, collection societies must be open and qualified to offer a high expertise in efficient administration. We will see where this leads to, and if collection societies can get along with Blockchain.

You know, it’s about technology.

Control by artists
If transparency and commercial control is not what you are into maybe political and economical power by artists is.

You may remember the strike of the Writers’ Guild of America in Hollywood in 2007–2008, or maybe even the one from 1988. Unfortunately, a strike of musicians or composers today can be only of little impact because there still is a huge back catalogue to access. What if there’s an option for musicians to literally cut the line? No music on air, no streaming, nothing?

It’s a vision, sure. Personally I doubt if your contractors are willing to sign a document with an option like this. But, at least the presupposition to the feasibility is given.

Higher transparency due to Blockchain

At first sight, Blockchain seems to offer lots of options for improved DIY business. As a tool against piracy and fraud. As a support to improve the business in favour of a fair payment for artists.

The most important advantage though — which is essential to an improvement in all aspects — is higher transparency.

Missing transparency is a core matter in music business as Berklee Institute for Creative Entrepreneurship (BerkleeICE) unsurprisingly found out last year. If you take a look at the issues above you can summarize that missing transparency is what makes the negative impact of single issues grow.

The BerkleeICE report called for a „decentralized rights database, controlled by a nonprofit“ and — for use of Blockchain technology.

Time to do something about it.

The music industry is in a substantial mess. But it has the opportunity to turn a good technology (streaming) in a beneficial and financially successful one. For all parties involved.

The opportunity is even better now than ever because with Virtual Reality another new technology for all content is set to rise. A new standard can help that. In a joint approach, we must agree to the standard, and we have to implement it before creators suffer from the result of yet another technology.

We might not be aware of it but where would music business, and content industries for the better be without standards? The most essential one is mp3. And don’t think that TV would have worked out like it did without standards.

Time to roll up our sleeves and get to work. Time for a Blockchain sandbox trial.