Know who owns rights to what is one of the greatest challenges currently faced by the music industry as well as those involved in it. Many believe Blockchain technology could be the answer to this issue by making royalty payments faster and more efficient whenever a song is consumed.
Guest post by Alexander Stewart from Berklee’s Music Business Journal
One of the biggest problems the music industry faces today is knowing which labels and publishers, performers, songwriters and producers own the rights to songs and recordings, and what their split of the royalties might be. Many believe that record keeping with Blockchain technology can help. Advocates of Blockchain foresee a music industry where every time a song is sold or streamed, payments on royalty splits would be clearer and quicker.
A Blockchain is ultimately a database that maintains a continuously growing list of records secure from revision or tampering, and one that enables trading with a cryptocurrency, such as Bitcoin. Participants would engage in a new and efficient protocol that promises more transparency in transactions and a tamper proof medium of exchange. Less middlemen would be involved all around, which is reassuring for an industry riddled with issues of trust over intermediation.
In a perfect world, the Blockchain would also become the single stop to publish all information about the making of a song. The suggestion too is that Blockchain would devolve control to the original parties in the exchange. For instance, notaries could be replaced, as every transaction would be time stamped automatically and given a unique ID. A cryptocurrency would also facilitate international settlements between collections societies by eliminating the exchange rate risk.
Building the technology is a logical first step, but shopping for its acceptance is not far behind. The data transparency issue is thorny. Blockchain needs multiple participants sharing data in a single space avoiding third-party checks on the accuracy of the terms of trade therein. The Global Repertoire Database, supported by the EU countries, failed to materialize two years go because it could not overcome the skepticism of publishers, songwriters, and many national collection societies, including USA’s ASCAP and BMI. If successful, Blockchain would supersede the need for a GRD type solution, but the historical record so far is not encouraging.
Even if it were possible to reach a trusted consensus in the Blockchain without the need of a third-party organization or authority, the technology appears to have technical limitations as well. There is, in effect, a real trade-off between the performance of the system and the amount of data it can process in real time.
Currently, if Blockchain were powered with Bitcoin, Bitcoin transactions could not keep pace even with credit card clearances. A 2015 Lloyd’s report makes the point that in its current configuration Bitcoin is far from Visa’s peak volume of 47,000 clearances a second (the report puts Bitcoin at seven transactions per second). In fact, the computing power needed for the Blockchain with Bitcoin would delay transaction processing. In part this is because every participant must replicate all contents of the chain as it adds on the next link.
With music, a commodity bundled with many rights and so many potential licensing outcomes, the size of the metadata needed for a transaction would be large. In fact, a Bitcoin powered database would be useless if there was a time lag in a transaction display because it could lead to double spending. This would clearly be a disincentive for a trade that deals in a low value product of mass consumption.
A Blockchain could move forward perhaps with another cryptocurrency, a development that would be welcome. In the meantime, Blockchain could serve as a repository of the chronology of all metadata, i.e. a decentralized data store, with the ability to operate at low cost, something like the GRD but with a special new codec.
Nevertheless, for an industry increasingly preoccupied with the right input format of its metadata, the question arises as to when and where will the input of the data happen. A DIY band that is self-published might be disciplined enough to pay attention as they record what contribution is apportioned to this or that member of the group. But most musicians separate the act of creation from the record keeping of the business data, so it is unlikely that the messiness of the original data is going to magically disappear with Blockchain, (even with unique personal identifiers and an established cryptography).
There are several music business startups that have set out to build a Blockchain and capitalize on it. One of them is PeerTracks. It plans to use the technology to craft a type of artist equity trading system within a streaming and music retail platform that will generate fan engagement and peer-to-peer talent discovery too. It would pay streaming revenue directly to the artists on a per-user-share basis using so-called ‘artist tokens’. Every artist would have their own name and likeness circulating in tokens and each artist would decide on the number of tokens in circulation, thus creating a cryptocurrency of artist tokens to replace ordinary money. Valuations would be commensurate with the popularity of the artist in a closed echosystem. The question as to how this echosystem would interface with the rest of the monetary transactions in the economy is still unclear.
Another startup, Ujo, is building a system designed to address two major problems in global royalty distribution and licensing. Ujo proposed a new, shared infrastructure for the creative industries that aims to return more value to content creators and their customers. Built in collaboration with artist Imogen Heap, Ujo’s model is different as it focuses on creating an open-source rights database and payment infrastructure. Like Peertracks, Ujo wants to revolutionize how money is distributed to artists and rights holders, but does not seek to create an alternative medium of exchange such as the ‘artists tokens’ of PeerTracks. Presumably, it awaits establishment of new and more efficient cryptocurrency than Bitcoin.
Another talked about projects is the Dot Blockchain Music Project, or Dot BC project, founded by PledgeMusic founder Benji Rogers. According to Rogers, this project aims to “create a new music codec (.bc) containing a minimum viable data set that would create a globally distributed database of music rights to an open source architecture and user interface.” Once a .bc file is delivered to a digital service or player, it would be decoded in compliance to the .bc rules, authorizing or rejecting the playback of the content. A payment would then be made to the owner or rights holder for the usage of that music. The key is the act of creating the .bc files that would build and then add to a global decentralized database of rights.
Delays and non-payment of artist and songwriter royalties are a common refrain of artists and songwriters. Whether it is by design or not, is immaterial. The Dot BC project needs the cooperation of major corporations and collecting societies, for without that innovators would arguably stop in their tracks. The demand for music data is evident, but the incentive to supply it is less clear. A number of incumbents benefit from the status quo, but can we look to certain innovative music services as facilitators of change?
Companies like Kobalt, Stem, and Songtrust offer great tools to help musicians, managers, labels and publishers better manage their dataflow. They could take advantage of a shared metadata network by offering users the best in class tools to work with. Also, platforms like Spotify and Soundcloud have motivation to find a reliable and long-term solution to the transparency problem in order to avoid future lawsuits. Spotify seems to be leading the charge, having recently committed to “fix the global problem of bad publishing data once and for all”. They also have the scale and technical resources to ensure the availability and operation of the network.
Because the Blockchain does not possess cognitive empathy and does not understand nuance, it is unlikely that conflict resolution will obviate person-to-person dialogue. There will be need for trusted arbiters. Today this function is performed by PROs and other services that administer copyrights. It is likely that such organizations will continue doing data auditing and conflict resolution for their clients, rather than be superseded by new technologies.
Widespread adoption of Blockchain platforms within the music industry could prompt a new wave of change, yet remain compatible with contemporary models of digital music consumption and distribution. From the consumers’ perspective, very little would change except that a Blockchain would ensure that copyright theft and piracy would become almost impossible. However, the main advantage occurs in the way that artists are able to manage their intellectual property, ensuring that the way their content is used and paid for is controlled.
For music labels and licensing bodies, there is an opportunity to be on the leading edge of change by working with artists and distributors to establish new standards and ways of working that reach right across the industry. A Blockchain platform employing identity management and smart contracts could lock in rules for how revenue flows from consumer to artist every time a piece of content is played or streamed, thus reducing the costs associated with collecting and managing statistics, maintaining copyright databases and distributing royalty payments. It could also enable new business over micropayments being considered elsewhere in the media industry.
Also, the adoption of unique ID resolution could enable two or more parties to discover and share a common identifier for a song. The identifier can be random so long as it can also be discovered by alternate IDs such as ISRC or other internal fields or keywords. This stores songs in the Blockchain forever via a unique ID. So if even one note of a song were to be changed, a new ID would be created so remixes, dub plates, and flips would be instantly recognizable. Money won’t land in one big pot as a flat-charge to be paid out pro-rata, but distributed instantly and proportionately to each rights holder.
One of the key features inherent in Blockchain is the ability to put data into a public ledger that has a level of privacy. However, there are limits to the information that artists and businesses want to enter into any Blockchain. Some things best remain private and many transactions should never be made public. In some cases, there could be private sales of valuable assets where certain parties would not want that information entered into any public ledger.
Another concern that is often voiced is the uploading of incorrect and/or incomplete data especially as it pertains to publishing rights. According to some experts Shazam or Gracenote technology might help detect errors at the input stage, but it is difficult to imagine automatic correctives only.
Finally, Blockchain is not an authority unless given that recognition by humans. Yet Blockchain belongs to no one, and is only a public ledger or record of information pertaining to a transaction or asset. It can be polluted. It cannot be held accountable because it has no one to be accountable to, and no one is truly responsible for it. Since it is designed to exist in a decentralized format, the perceived value is that anyone can enter information into a Blockchain and by making it public, almost anyone can use it to validate a transaction.
Still, Blockchain technology is slowly making its mark in general business. Examples include a payment system and digital currency, facilitating crowdsales, or implementing prediction markets and governance tools. It offers many captivating possibilities of eliminating the middleman in order to increase efficiency and transparency.
Worldwide, the financial services market is the largest sector of industry by market capitalization. If Blockchain technology could replace just a fraction of that by enabling these peer-to-peer transactions in other sectors then it clearly has the potential to create huge efficiencies. Many banks across the world are conducting research on how this technology could benefit them. These types of transactions are also very relevant to companies like Airbnb or Uber. One of the more popular ideas is the idea that the Blockchain could offer a decentralized Uber service, a way to have riders order and pay a driver over the Blockchain, all without using a middleman like Uber that takes a cut to connect rider and driver.
The music trade, like other industries, will likely make more use of the technology in time. An early adopter is Imogen Heap, who released her song Tiny Human on Ujo Music in October last year. Imogen Heap attached a smart contract to the song, a programmable agreement that a computer can read to facilitate, verify, and enforce terms, simplifying a trade. Heap also used Blockchain architecture to manage intellectual property rights and arrange payment splits. Although still in its foundational stage, her so-called Mycelia project is spearheading new ways of doing business. The Dot BC project, which released its Blockchain alpha test this August, may not be far behind.
By Alexander Stewart
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