The music industry has lived through several so-called revolutions when either the “video killed the radio star” or MP3 killed the record sales or Spotify disrupted the way we consumed music, and so on. However, rather paradoxically the industry has never changed that essentially, at its core which is its relationship with artists contracts, payments, licensing and copyrights.
With good reason, one could call the current state of the music business “managed chaos” where its players record labels and publishers benefit from it. It takes months and years to pay out royalties to artists and composers.
Imogen Heap, artist and Founder of Mycelia for Music, an early adopter of Blockchain, says at the SLUSH conference in Helsinki:
“This is the current state of affairs in the United Kingdom. This is how the money gets down to me as an artist – I’m right at the end of the chain. 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.”
Music is one of the most complicated copyright environments with one of the worst data practices. Labels have typically failed to develop comprehensive contracts and keep proper records for the artists they sign leaving data entry to interns or IT departments. Of course, there are thousands of Rights Organizations globally that are supposed to help coordinate music licensing but who will help coordinate the Rights Organizations themselves? For example, it took GEMA, that represents German rights holders, seven years to re-license music on YouTube.
“There have been many historical attempts at doing music rights,” explains Marko Ahtisaari, Founder of Sync Project. “Typically they have failed because there has been a misalignment of incentives – large players in the industry didn’t want to provide access to this data.”
“At the moment you have this extremely complex system for collection of money and data around the world,” continues Heap. “I’m very excited about the potential of Blockchain and what it is doing for the industry, kind of catalyzing us into thinking of reshaping it, making it a more flexible, sustainable, cleaner system. A person would have a digital wallet ID. There would be no need for any banks if it was on the Blockchain.”
All eyes on Blockchain
Blockchain technology represents a decentralized ledger where you can record transactions and monitor the changes associated with transactions over time. It would make a perfect foundation for music rights management.
Ken Umezaki, Founder of Digital Daruma and Co-founder of Dot Blockchain music, calls the music industry “a data business of micropayment collection” which needs to have an architecture that can support that in a very efficient way. He thinks there is tremendous opportunity in the Blockchain to create that operational efficiency.
“If the industry agrees to cooperate and create an interoperable environment where the core business values can be maintained but we all get the benefit having a collective data set from which to work on, publishers would have to stop worrying about collecting micropayments through spreadsheets and focus on what they love to do which is to promote their music or work with the songwriters to make them better.”
Currently, the information related to music compositions and songs is located in over 5000 individual publisher-owned databases. It is certainly not an efficient system. Ahtisaari believes that the Blockchain could help create a place where the information would have a trustful degree of privacy governed according to certain rules and principles. Then everyone would benefit from the entire infrastructure being hosted.
“By using a system which no one owns or controls but everyone takes care of, which is what the distributed ledger is about, we hope we can address this problem,” says Ahtisaari. “The world is turning to streaming entirely. In a significant amount of cases, the streaming service cannot pay because it’s unknown who to pay. There is no easily accessible rights registry.”
For this particular reason, the Open Music Initiative, which Ahtisaari is part of, was brought together essentially by academic institutions starting with Berklee College of Music and Berklee Institute for Creative Entrepreneurship. They approached him along with several other academic institutions to host a group of companies that would commit to bringing about a new kind of music rights registry using the distributed ledger technology. There are well over a hundred companies that signed up, including all the major labels, all the major streaming services with the exception of Apple and significant publishers.
“That’s the idea – to bring together and do a reference implementation showing that this can interconnect but still leave a lot of room for companies to build businesses on top,” says Ahtisaari. “That’s a handwave dream picture. Of course, it is a very contested area so it takes a long time. Right now we are doing the minimal viable first step. It’s like an open-source project.”
Turo Pekari, Senior Advisor, Innovation & Discovery at Teosto, agrees that collective management societies have a crucial role in building applications based on Blockchain because the data is the most important thing and you can’t make anything without it.
Pekari points out:
“Blockchain solutions could provide new growth for the traditional music players. The Blockchain is not going to disrupt the whole existing industry. You can see what has been happening in the financial industry and the Blockchain, the biggest players are making an investment in the technology now. That’s what is probably going to happen in the music industry too. There are ideological goals as well like openness and transparency.”
He sees the role of Teosto in data governance and data validation in future Blockchain…