From David Bowie to Blockchains: Blockchain Technology and the Music Industry
The rock-and-roll community was dealt a significant blow on January 10, 2016, when English rock star David Bowie succumbed to an 18 month battle with cancer. Bowie was known for his eccentric lifestyle, rebellious personality, and above all, his incredibly revolutionary music. His illustrious music career has left quite the legacy, one that continues to impact today’s music and recording artists.
What many may not be aware of, however, is David Bowie’s relationship with blockchain technology. No, he is not Satoshi Nakamoto, but some of Bowie’s financial innovations are still leaving a mark on the blockchain industry today.
In the mid-1990s, David Bowie, Bill Zysblat, Bowie’s financial manager, and a banker named David Pullman came up with the idea of Bowie Bonds. These ingenious products were asset back securities that used the revenue from Bowie’s albums as collateral. The bonds were backed by twenty-five of Bowie’s albums, each recorded before 1990. They were issued in 1997 and had a ten-year maturity, yielding 7.9% annually. This was 132 basis points higher than the 10 Year Treasury yield of 6.58% at the beginning of 1997.
The cash that Bowie raised from the offering was used to purchase old recordings of his music. Though he ended up forfeiting the royalties for these albums for the life of the bonds, he was able to reclaim a large part of his previous work from former manager Tony DeFries.
What does this have anything to do with blockchain technology? David Bowie, eleven years before the publishing of the Bitcoin white paper, found a way to securitize himself. Today, this is analogous to tokenizing oneself or one’s music, representing the next major change that the music industry needs to undergo.
David Bowie’s musical career is a perfect example of why music right and music sharing need blockchains. Music distribution is controlled by third parties like Apple Music, Spotify, and Google Music. Artists sometimes have little-to-know influence over where their music is played — this is at the mercy of record and production companies. In Bowie’s case, he had to securitize his music to buy back the rights to songs he wrote and recorded. It was a rude awakening when he realized that he did not control the rights to many of his songs.
To add insult to injury, the widespread practice of illegally downloading songs off of mp3 converting websites robs artists of the royalties and credit they deserve. Blockchains can help mitigate these risks and implement fair music distribution channels.
Blockchain technology can be used to cut expensive intermediaries out of the equation. If artists are allowed to tokenize themselves, and their music, much like Bowie did with Bowie bonds, then they can raise funds they need to record their music upfront without having to borrow capital from record labels. There are several blockchain platforms already in development that give artists the tools they need to start their own ICOs and fundraising efforts to jumpstart their careers.
Whenever an artist tokenizes their music, they are turning their intellectual property into a tradable asset. The value of their token will be an accurate, supply-and-demand-based reflection of their musical output. It creates a way for artists to be in control of their financial assets, instead of music managers and recording studios like it is now.
Another way that blockchain technology can impact the control of music rights is by keeping a decentralized record of every publication. Music can be published on a blockchain’s ledger with a unique ID and a specific timestamp. The ID and timestamp are immutable, providing a secure proof of ownership that solves the problem of music being illegally downloaded, copied, and modified by unscrupulous users. This will ensure that artists are paid relatively when their content is used because music rights are much more strictly controlled.
Blockchain technology can also implement unique infrastructures that support micropayments, which are impossible with traditional payment methods because of transfer costs. The integration of micropayments will support a new wave of on-demand music services. Users can select the songs they want to listen to, and immediately artists are rewarded with cryptocurrencies when their records are played.
The most prominent way that blockchain technology can impact the music industry is through direct artist-to-consumer interactions. Music composers and recording artists no longer have to go through a third party purchasing platform or broker to stream or air their music. Instead, artists can be compensated directly the second their song is played. What’s more, consumers can enjoy the benefits of receiving music directly from the creator, cutting down on purchasing and streaming costs that come with using large, centralized platforms like Apple Music, Spotify, and Google Music.
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