Part 1: How we tried to buy Imogen Heap’s song on Ethereum

Source: NaBHaN on Deviantart

Not surprisingly, early enthusiasts have started experimenting with blockchain models for music distribution.
 
 In this part, we look at how the block chain concept is being applied to music distribution, why it seems relevant, and whether it is working. 
 
 Before we lose you, here’s our assessment:
 Blockchain technology has a lot of promise, especially for artists. In it’s current state of application, however, the technology is not ready to replace existing music distribution services because:
 a) potential benefits are heavily skewed towards artists, 
 b) user adoption entails seismic shift from established processes 
 c) current models offer no incentives to users

For a positive perspective, listen to what Phil Barry of Ujo Music, one of the pioneer blockchain distribution services has to say.

Relevance to music distribution

We wondered why a concept that is difficult to grasp or explain is even being considered for music distribution? Issues with the current state of music distribution, as frequently brought up by critics include:
 
* compensation; anywhere between 20%-50% of music payments don’t make it to rightful owners
* attribution; it is difficult to trace or know where an artists work is being used / performed
* transparency; lack of reports or clarity in distribution of payments / royalties
* ownership and control; pricing or contracts are usually delegated to parties other than creator
 
 The first thing we noticed was that all issues are centered around artists, not users. It appears that consumers of music are spoiled for choice: free streaming services like Pandora or Spotify, distribution platforms like YouTube or Soundcloud, and numerous radio stations and apps! 
 
 Assuming that initial applications are going to be artist-centric, blockchain’s relevance to music distribution can be put to test by solving any or all of the above issues.

What early blockchain solutions look like

Two notable solutions are starting to experiment with blockchains for music distribution: Ujo Music and PeerTracks.

PeerTracks is a music streaming and retail platform that allows for fan engagement and peer-to-peer talent discovery.” Although it sounds like many of the existing music streaming services, PeerTracks uses the blockchain to manage transactions and ensure that revenue generated goes directly to the artists. Unfortunately, PeerTracks hasn’t launched yet, so we couldn’t test the rails on this one.

Imogen Heap’s “tiny human” prototype on Ujo Music

Ujo Music, according to its creators “uses blockchain technology to create a transparent and decentralised database of rights and rights owners and automates royalty payments using smart contracts and cryptocurrency” It aims to address three of the issues outlined previously: compensation, transparency, ownership
 
 Currently, Imogen Heap’s ’Tiny Human’ is the only track on Ujo, available as a “prototype”. Imogen Heap has been very vocal about adopting blockchain tech for fair control and ownership of artist rights. We respect that.
 
 Ujo’s interface looks great, but what’s really novel is the attempt at a framework to modularize ownership and compensation.

Song components or “stems” can be bought separately

First, the song is broken down into components called “stems”, each of which can be individually purchased.

Revenue distribution can be documented in “smart contracts”

Second, ownership and artist compensation based on individual contribution is defined in a “smart contract” and visible for all to see.

Artists get to set the price in “smart contract” policies

Third, the “smart contract” also includes a policy that describes how much Imogen Heap wants to price the song, i.e., the price for streaming vs. downloads vs. licensing….

Every transaction is available for artists to see, i.e., no middlemen

Lastly, a record of every transaction made, by license type is instantly captured and available as a report for Imogen Heap to view and analyze.

So…are blockchains helping?

All of this looks and sounds very neat. But, why use blockchain? How is this different from say, what Bandcamp does?
 
 First, Ujo is supposedly an “open” platform that is free for artists to use. While the exact signup process is not yet clear, the objective is to let artists keep all revenue generated. Band camp, on the other hand, is also free to signup, but the only way it is able to stay in business is by charging a revenue-share fee (15% for digital and 10% for merchandise). 
 
 Second, Transactions on services such as Bandcamp are handled by traditional financial systems, ex: paypal, credit cards etc., As a result, each purchase incurs a transaction fee of 4–6% that goes to a third party payment processor. Furthermore, these transactions take time — depending on the type of service artists can see their spoils no earlier than 48 hours and as long as months after a purchase. 
 
 Ujo rides on the Ethereum network. Ethereum is a “decentralized platform” that runs smart contracts. This means that Ujo does not need to spend money to manage the technology infrastructure to let artists distribute and make money from their music. This benefit is passed on to the artist, who in effect gets to keep all the revenue from a purchase. Also, the spoils are transferred instantly to the artist’s “wallet.”
 [We’re not getting into a lot of detail here, but read about decentralized management of blockchains here]
 
 Third, the accessibility of an “open, decentralized” platform along with the flexibility of “smart contracts” opens up possibilities that a centrally managed platform such as Bandcamp or Spotify may not allow. For ex: bands can setup contracts that allow fans to get a share of their revenue in return for promoting their music or creating artwork for their album cover.
 [Read about IDEO and Harvard i-lab’s take on some benefits here]
 
 Ok, artists stand to benefit, even though these benefits are yet to be seen. But, what about users? Why is a blockchain appealing to the end consumer? For starters, does the blockchain make it easier for me, as a user to a) find music that I like, and b) access it more conveniently? 
 
 Unfortunately, the first part of the question will have to wait. There’s only one service with a single song for download at this point. We can, however test whether the blockchain has made it more convenient to access music.

The blockchain download experience

We can’t imagine music access being any more convenient that it already is, but let’s look at what the blockchain has to offer by downloading Imogen Heap’s song ‘Tiny Human’ from Ujo Music.

Create a wallet to store cryptocurrency before purchase

Even though the price of the single is listed in USD, payment can only be made using Ether, a cryptocurrency created within the Ethereum ecosystem. We’ve never owned Ether, so we first need to create a wallet. 
 
 At this point, we’re sensing that the prototype was designed for early adopters of Ethereum and / or strong proponents of the blockchain. This was not designed with the general user in mind.

Refilling wallets is not straightforward…

We’re only being partially facetious when we say that we were under the impression that this wallet would magically link to our bank account and that we would finally be able to purchase the song. Unfortunately, we were in for a far more complicated process.

7 steps to download a song

Needless to say, we were not too stoked to read the 7 step guide to “pay for Imogen’s new song!” on the Ujo blog.

Unlike regulated currencies, cryptocurrencies like Ether are not readily available to transact. Visa or MasterCard is not going to work with your bank to process Ether and inform you about the point in time exchange rate. This is handled by a growing number of cryptocurrency exchanges. Mt.Gox was the most popular exchange until this happened. These exchanges do not inspire much confidence.

Kraken.com, a cryptocurrency exchange

Undeterred, we signed up with Kraken.com just as the Ujo blog suggested. Strangely, we felt the need to scrutinize the ToS and Privacy Policy on this site, possibly because of what we’d read about Mt.Gox. 
 
 We thought the exchange transaction would be largely straightforward. We only needed ~.45 ETH, and the process to buy ETH with USD on Kraken seemed quite intuitive. This was not to be. Kraken offers a “tiered” service system, requiring different levels of personal information to unlock different types of transactions as seen below:

Tiered service levels at Kraken.com

We needed to be on Tier 2 to buy ETH with USD. With some skepticism, we filled out a form and gave away our address to a private entity that we knew little about. But, as with anything prefixed with an ‘*’, the fine print counts. For reasons unknown to us, Kraken wanted us to upgrade to Tier 3 in order to buy Ether with USD.

No reason was given for why we needed to upgrade to tier 3

At this point, we were not comfortable sharing SSN numbers, mailing government documents to verify our address, or handing out photographic evidence to a private exchange. We’re not even privacy pedants! It just didn’t seem worth going through all this trouble to download a song. As if things couldn’t get worse, the Kraken website stopped working mid transaction.

Just when we were willing to give in…

Conclusion

Blockchain technology sounds fantastic as a concept. From what we’ve read about it’s application to financial services, real estate, licensing, ID management, we’re extremely excited for the technology. But, as it applies to music, we don’t think blockchain for music is ready, just yet, to replace existing services solely on a better promise to artists. The solution is not ready for consumers and offers zero incentive for users to switch over.

In Part 2, we will attempt to design and issue our own tradeable digital token on the Ethereum network.