Chapter 4: Solutions To Self-Sustaining Systems in Music

The Open Music Initiative is a non-profit initiative creating an open-source protocol for the uniform identification of music rights holders and creators. On June 5th, 2017 the Open Music Initiative Summer Lab kicked off it’s second ever summer lab. Led by Eric Chan, four teams consisting of 19 fellows with various skillsets were assigned different tasks to identify and solve problems within the music industry. Our team consisted of five students: Luís Claudio Arcos, Soma Suuki, myself, Yi Pan, and Xueqi Zhang. The problem that we were given was How do we commercialize mix-tapes built from original material and back catalogs?

This Week

This week, our team is working on building a prototype that would encompass musical granularity in music licensing. As mentioned in Chapter 3, Incorporating musical granularity can give the option for samples and songs, that are being licensed, to be fully understood, thus giving the option to give intent to a song. Creators of the original samples and songs would receive attribution in the works derived from their content. No product in music licensing has ever done this before.

John Hult | Unsplash

Clear Tracks

In building a prototype to test, we had to do some research on existing solutions, and what the problems that arose in their creation. One company that we we were able to contact was Clear Tracks. For artists, the company offers a service that allows the artist to take control of their own music catalog and keep 100% of the rights and 100% of the revenue from their music. Danny Anders, founder of Clear Tracks, explained that there were multiple problems that their team came into contact with when first starting the business several years ago. These problems are as follows:

• Labels do not care about micro licenses in music. Labels such as Universal are managing artists such as Katy Perry, Halsey, Tori Kelly, ect. They do not care about micro-licensing because it has no proof of value.
• The data to back up license agreements is hard to acquire. In music licensing, agreements had to be made on a case by case basis with the copyright holders and the licensee. Labels did not have the time nor the patience to make thousands of individual agreements, that may not even make any money for them.
• Pre-clearing music for licensure is not the way to go. This process can take months to do. The songs that come from these major artists are often in the Top 100 Hits. Because of their popularity, thousands of musicians are going to illegally sample and cover their music. It is difficult to convince larger institutions to set up agreements when there is no proven value or they are not payed in advance.
• Asking for forgiveness is another option. The utilization of the well-defined DMCA system can help negotiate this tricky territory.
• Even if the copyright holders wanted to give samples, that data is hard to acquire. Labels are highly unlikely to have all of the individual samples from every song that they distributed over their hundreds of artists. Someone needs to make those samples again and distribute them, and that takes time and effort.

The problems that Clear Tracks have encountered in the last two-three years are very telling for the state of micro licensing. Our team has a hypothesis on how to solve one of those issues: To use rule-based intent driven payment schemes enabled by Smart Contracts and distributed ledgers that allow copyright holders to reduce the man hours involved in license negotiations drastically. A one stop micro license for the copyright holder would become the norm.

What Makes a Self-Sustaining System?

If we were to incorporate smart contracts, why would people want to use our system? What would they want to keep coming back? What is the value for the stakeholders? These are some of the possible solutions we were able to devise:

• The system would allow derivative creators to operate legally. Copyright law states, than in order to use a copyright holders song, that the licensee needs to gain direct permission from the copyright holders. Our would allow this through smart contracts, giving creators a piece of mind and the safety of operating legally.
• Our licensing process would be simplified. Independent artists want a process that is easy and sustainable. Today, the system for licensing involves cold calling many artists and assistants to gain consent to use their work. We want to enable a way to give creators even access to a one stop licensing process.
• The process would encompass musical granularity and give the option to set an intent for the creators work. We need a system that would have a set of preset questions, when the copyright holder would upload their music to the platform. Those questions that one would include might be cursing vs. clean, where you would like the music to be used, where you would want it to be distributed, and the BPM of their song. In asking these questions, it gives artists the option to set their rules and intent for their music in the Smart contract to potential licensees.
• Target Independent artists. On SoundCloud alone, there are about 10,000,000 independent artists. The market value for independent artists is larger than the market value for labels. Independent artists value attribution and uphold the image they create for themselves. We need a system that would do both.

• We wish to allow contracts to have the flexibility to cater to copyright holders based on the success of the inspired work through a tiered system. If I used a sample from Macklemore and Ryan Lewis’s Thrift Shop, I would owe only 10%, which is basically nothing at first, but then once I hit 51K combined streams and downloads, I would owe more. Once I hit 500K, I would owe even more, and so on.
• We want to proliferate the cycle of creation as licensees become copyright holders. Lines are blurred and stakeholders are mashed together. There would be a constant cycle of uploading and repurposing a work for music licensure. Those who take, give back to the ecosystem of music.

How Would The System Make Money?

Money is an important part to make any system self-sustaining. These are some of the options in how a music licensing system would make money:

• A system that would not necessarily make money, but sustain artists and inspire derivative works.
• A system that generates money through taking a percentage of revenue made through the licenses in our system, while inspiring the creation of derivative works.
• Users will pay a one time fee to a system, and they will have a lifetime of samples for derivative works, endless possibilities, and a seamless way to license and receive.
• A system will charge users a fee per month to use it. Users will have the rights to sample and license music, inspire creation, and a seamless way to license and receive.

These are only possible options. We would love to explore the value in these options, and get your feedback through the comments.

Creation

We are so excited to create our next prototype and to change the way that music licensure works. We are so hopeful for the future, and cannot wait to see the new concepts that we dream, develop, and create for the musical ecosystem.

Jason Rosewell | Unsplash