Categories
Blogs

Blockchain: The Cure for What Ails the Music Industry?

By: Michael Schwartz

Since the music industry ventured forth into the digital age, and as streaming services have exploded in popularity, accountability for copyright attribution and royalty allocation has become truly murky. Music creators are constantly fighting for equitable distribution of ownership rights and payment for work product, as well as pushing for increased accuracy and transparency of data that link content creators with their content. Currently, each recorded track has two copyrights—one created by the composer and managed by a music publisher, and the second created by a recording artist and managed by a record label. Muddying the waters further, each copyright has a set of rights that require licensing for use—reproduction and distribution on the composition side, and public performance on the recording side. Further confusion arises from the current assortment of outdated laws and miscellaneous deals that lead to varying licensing and royalty agreements that are not consistent across all use cases. This burgeoning mess is compounded further by processes that rely on bad or nonexistent data, often necessitating poorly applied statistical sampling practices and educated guesses (Rosenblatt, 2018). What is the end result of all this? Content creators get the shaft. Is it possible to bring clarity and transparency to this plague of opacity? Enter blockchain.

A Brief History of Blockchain

In 1991, Stuart Haber and W. Scott Stornetta created a cryptographically secure chain of immutable blocks for documents. Aside from a minor upgrade in 1992 to include multiple documents per block, little else was documented about blockchain for the next decade and a half. In 2009, an entity—perhaps a single person, group, multiple groups—known as Satoshi Nakamoto, credited with mining the “genesis block” of Bitcoin and establishing cryptocurrency as the first application of digital ledger technology, published the first whitepaper about blockchain technology, highlighting enhanced digital trust through decentralization (Goyal 2018). Between 2009 and 2013, blockchain was primarily used for Bitcoin mining and transactional record keeping. Vitalik Buterin, programmer extraordinaire, co-founder of Bitcoin Magazine, and co-creator of Ethereum, extended blockchain technology to contracts and applications circa 2013. Linux jumped into the blockchain game in 2015, followed by EOS in 2017 with an updated protocol for the deployment of decentralized apps (Goyal, 2018). Here in 2020, the next projected innovation on the blockchain horizon is scaling. Boffins of the blockchain world believe the technology will be fast and efficient enough to go head-to-head with some major players in the banking and finance industry. Think Visa and Swift (Gupta, 2017).

How Blockchain Works

Let’s take a moment or two to discuss how blockchain works. To give the short of it, blockchain is a “distributed, decentralized, public ledger.” Digital information (block) is stored in a public database (chain). Blocks are comprised of three specific parts that include transactional information (date, time, amount), transaction participant information (username, company name), and a unique cryptographic hash. In order for new blocks to be added to a chain, a transaction must occur, the transaction is then verified and stored in a block, the block is assigned a unique hash, and once hashed, the block is assigned to the blockchain. Anyone can view the contents of a blockchain and can also connect their computers to the blockchain network as a node. All nodes in the network have a copy of the blockchain which means that millions of copies are spread across a massive network of computers, hence the reason why blockchain is called a distributed ledger. This widespread distribution of immutable information is also why blockchain is considered virtually impenetrable. Since there isn’t a single, definitive record, every copy of the blockchain on the network would need to be manipulated in order to be successfully hacked (Reiff, 2020).

Given all of the pluses of blockchain technology—decentralized, public, transparent, efficient, and by all accounts secure—recent years have seen a rather large number of applications spread across a variety of industries including banking, cryptocurrency, healthcare, property records, smart contracts, supply chain, and voting. Of all the industry applications above, smart contracts may be the most compelling use case for the music industry. These types of contracts are coded into a blockchain to facilitate, verify, or negotiate a binding agreement. When the conditions of the agreement are met, the terms of the contract are then automatically carried out.

Let’s take a look at a clear, though non-music, example of a smart contract in action to better understand this specific application of blockchain technology. Say a property owner decides to rent an apartment using a smart contract. The landlord agrees to supply the door code as soon as the security deposit is paid. Both parties would supply their portion of the deal to the smart contract, which would store both until the agreed upon date of rental, whereby the smart contract would carry out the conditions of the deal, automatically exchanging the door code for the security deposit. This eliminates any potential need for third-party mediators, which often require additional fees for services rendered (Reiff, 2020). Now that we have a clear, though basic, understanding of smart contracts, let’s see how this technology may help transform the music industry.

A Blockchain Transformation

            As mentioned above, copyright attribution and royalty allocation are plagued by opacity. Given the vast number of parties involved with music composition, publishing, production, and distribution, and the convoluted mess of deals that license use rights for streaming on various platforms, it’s easy to see why content creators and those associated with their work struggle to be compensated in a timely and equitable fashion. Robert Ashcroft, CEO of PRS for Music, one of the United Kingdom’s largest music management organizations, went on record noting that “the biggest issue facing the industry in the internet era is metadata.” Music files are seldom attached to the metadata about who wrote it, performed it, produced it, was involved with its production, and who hold its use rights. Without clear and irrefutable attribution information, knowing the individuals who should be getting credit and be receiving payment cannot be identified and therefore go unpaid. Music without definitive ownership cannot be licensed for use (Baym, Swartz, & Alarcon, 2019).

Attempts have been made through the years to create a universal database for music, and it’s safe to say that those efforts have been spectacular failures. The Global Rights Database project was commissioned in 2008 and flopped miserably in 2014, entrenched in debt to the tune of roughly $14 million. International Music Joint Venture and International Music Registry crashed and burned as well. It seems that the hope for blockchain technology and smart contracts is that, “there will be a transparent, decentralized shared registry in which each song bears not only a unique fingerprint but also a unique, correct, and definitive set of metadata, indicating who gets credit for everything.” Rethink Music, a project of the Institute for Creative Entrepreneurship at Berklee College of Music, published a report noting how common it is for payments to never reach rights holders, and when they do, it’s not uncommon for years to have passed. They concluded their report by strongly encouraging investigation into blockchain as a potential fix for the music industry’s massive shortcomings (Baym et al., 2019).

Since each block in a chain is immutable, blockchain could serve not only as a content repository, but also as a contract enforcing entity and bookkeeper. Copyright attribution would be “automatically enforced and documented by the protocol of the network.” Licensing for use and subsequent distribution of payment could be handled instantaneously. The transparency of blockchain virtually guarantees that money could never be hidden from those to whom it’s due. Affiliating with publishing rights organizations would be left up to artists as blockchain does not require intermediaries. Content creators could also independently and accurately assess how their music is being used, how much their music is being used, and verify that they are being justly compensated (Baym et al., 2019). Essentially, blockchain has the potential to entirely reshape “the way music is produced, bought, sold, listened to, and managed in a fair and transparent way (Daley, 2020).”

As is typical with any potentially disruptive technological innovation, the challenge is to unite all industry players around mutually acceptable standards for metadata, smart contracts, and payment processes. Currently, every major publisher, recording studio, and aggregator have their own databases and established business processes. Engendering support for full-scale change and adoption is where the difficulty lies. Marko Ahtisaari, CEO of Sync Project, notes that “90 percent of the problem is people in the industry, the adoption issue, and 10 percent is a technology issue.” Change is difficult, period. Successfully implementing change, whether adopting a new technology or adjusting established operational processes, requires an investment of effort. For many music industry players, the effort needed to bring about meaningful change through blockchain is not an investment they are currently willing to make. Moreover, record labels and music publishers currently benefit from the industry in its current state; a state that is rather fittingly described as “managed chaos.” Imogen Heap, UK singer-songwriter, founder of Mycelia for Music, and early adopter of blockchain technology, points out that “I am the first person to upload the song and the last person to receive the money. And often it takes up to two years for that to happen (Khartanovich, 2017).”

Despite what may appear as lackluster adoption of blockchain technology in music, here in 2020, there are increasing numbers of blockchain applications within the music industry. Artists like Lupe Fiasco, Gramatik, and Pitbull have advocated for distributed ledger technology. MediaChain, a New York based business-to-business blockchain firm, is using smart contracts to help content performers and performing artists directly outline their royalty stipulations to guarantee payment without hassling with often confusing and costly third parties or contingencies. MediaChain’s success has been so notable that Spotify acquired them in 2017 to help spread blockchain technology throughout the music industry on a much larger scale. Open Music Initiative (OMI), a nonprofit from Boston, is also exploring blockchain to solve royalty and payment issues. Their work involves identifying and linking rights holders with their original content. Soundcloud, Red Bull Media, Netflix, Sony, YouTube, and Spotify are but a few of the 200 members that comprise OMI, pushing for a transparent, open source industry-wide protocol (Daley, 2020).

Examples abound of new companies and streaming services employing blockchain to varying degrees of success. Now that songs are inextricably linked to ownership rights along with smart contracts that clearly detail licensing and use for streaming, musicians are beginning to receive equitable and timely payment for their content. As greater numbers of content creators become more fluent with blockchain technology, they will be able to manage the way in which their music is released, how it is used, how much it is used, guarantee payment for all use cases, and perhaps most importantly, free themselves from the opacity that has long threatened a sustainable career in the music industry.

Works Cited

Baym, Nancy, Swartz, Lana, & Alarcon, Andrea (2019). Convening Technologies: Blockchain

and the Music Industry. International Journal of Communication 13, 402-421.

Daley, Sam. (2020, January 29). 17 Blockchain Music Companies Reshaping a Troubled

Industry. Retrieved from https://builtin.com/blockchain/blockchain-music-innovation-examples

Goyal, Swati. (2018, November 3). The History of Blockchain Technology: Must Know

Timeline. Retrieved from https://101blockchains.com/history-of-blockchain-timeline/

Gupta, Vinay. (2017, February 28). A Brief History of Blockchain. Retrieved from

https://hbr.org/2017/02/a-brief-history-of-blockchain

Khartanovich, Margarita. (2017, January 24). Managed Chaos: Why the Music Industry Needs

Blockchain. Retrieved from https://cointelegraph.com/news/managed-chaos-why-the-music-industry-needs-blockchain

Reiff, Nathan. (2020, February 1). Blockchain Explained. Retrieved from

https://www.investopedia.com/terms/b/blockchain.asp

Rosenblatt, Bill. (2018, February 25). The Big Push To Reform Music Copyright For The Digital

Age. Retrieved from https://www.forbes.com/sites/billrosenblatt/2018/02/25/the-big-push-to-reform-music-copyright-for-the-digital-age/#43ca81e02d6d

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s