In the decade prior to the Internet, the music industry was relatively healthy overall with worldwide sales peaking in 1998 but the music industry has been in constant turmoil ever since Napster came out with its peer-to-peer file sharing service in 1999. It focused on transferring digital audio files in the MP3 format and revolutionized the way public consumes music. At the same time, it rattled the music distribution networks as well as record labels causing a dip in revenue, piracy problems and rightful division of revenues.
Music companies are against the idea of streaming content and these streaming services hate file-sharing outlets. Artists naturally hate everyone because they’re left with peanuts because their content goes through multiple channels before making it to the world.
Currently, the music industry lacks a robust business model which can satisfy the needs of all the parties involved in a transaction. However, by switching to the blockchain, the technology that powers the Bitcoin, one can put an end to the perpetual conflict of interest.
Blockchain encrypts data to enhance security and by enabling information to be widely available, blockchain has set the foundation of the new Internet, web3. Despite the fact that it was initially conceived for Bitcoin, the business and innovation groups are finding numerous utilizations for blockchain. The blockchain has drawn the attention of investors and professionals in different industries and is now showing promising signs to change the music industry in ways that might fulfill the needs of everyone.
Well, almost everyone.
The key issue remains the absence of legitimate and accessible sources of information about music copyright information, including proprietors of rights and permit terms. Authentic information is required for music service providers and rights administrators to assimilate royalty exchanges for the billions of music uses that happen every year. This lack of correct data leads to inefficiencies, resulting in pools of unclaimed royalties, wrong transactions, and lawsuits.
A number of attempts have been made in the past few years to solve the crisis by building single large comprehensive databases. Some of them being the World Intellectual Property Organization’s International Music Registry (IMR), Global Repertory Database (GRD), and the International Music Joint Venture (IMJV) among royalty collecting societies from the United States, Canada, United Kingdom and the Netherlands but none of them have been successful in their mission because of lack of reasons such as funding, the complexity of gathering and maintaining all that data in one place.
Blockchain technology may be the solution as it is synonymous with transparency and accountability. It replaces the rigid frameworks with an approach in light of interoperability among existing databases.
“The network is robust in its unstructured simplicity. Nodes work all at once with little coordination.” – Satoshi Nakamoto, Founder(s) of Bitcoin
A blockchain is an electronic ledger (register) of digital records, events, or transactions that are represented in a condensed form known as a hash (digital security feature), authenticated, and maintained through a “distributed” or “shared” network of participants using a group consensus protocol.
Similar to a checkbook, it is a ledger of one’s personal transactions, with each entry indicating the details of a particular exchange, the blockchain is a complete listing of all transactions. However, unlike a checkbook, the blockchain is distributed among millions of computers where any changes require the approval of the network at large making changes without permission almost impossible.
Blockchain technology’s most distinctive feature is to eliminate the need for any third-party interference in certain cases. This shared record, or ledger, is distributed to all participants in a network who use their computers to validate transactions and thus remove the need to intermediate. Since the music industry relies upon “trusted third parties” for content licensing and distribution, blockchain might change the whole game.
In the world of music, discovering new content is very subjective and varies from person to person. Broadly, music consumption can be boiled down to two processes; Top Down and Bottom Up. These may or may not coincide but definitely exist in the same instance.
– Top Down: Commercial Music
This approach is followed by regular listeners and focuses on the radio-friendly material. A handful of people who hold the major inﬂuence over what becomes popular and what doesn’t decide their playlist once the selected artists are successful. The acts will soon be all over the place, thanks to the millions of dollars spent on their tried and tested marketing campaigns.
The popularity isn’t limited to airplay, festivals, streaming services, music charts, and endorsements but the media as well which results in their posts on the top of everyone’s feed.
The internet has lessened this autocracy to a certain extent, however, the democracy isn’t as far as one might assume it to be. Since the major labels can afford to influence the choices of the general public, they’re spoon-feeding specific music and the naïve are becoming fans without realizing.
The iteration rate at these centralized sources of power and wealth is extremely high as the talent roaster is replaced at the very moment a new sensation is “discovered” and the ones who manage to stay for long enough are the artists who make up maximum people’s ‘most played playlist.’
Therefore, the presence of a sub-par act everywhere is most likely because they’re ‘priority’ for a major label and a great act no-where to be seen maybe because they’ve been dropped out.
That’s Top Down music discovery in a nutshell.
– Bottom Up: Underground Music
It’s true, in the era before the internet, coming across an unknown artist’s music was difficult if not impossible. Only a limited number of musicians were able to get their works published, diligently keep a track of fan mails and tour every part of the world, something one would expect a top tier artist to do on a regular basis currently.
In a Bottom-Up model, unsigned acts put out their music for anyone on the planet to listen, making them the tastemakers instead of the big players.
Once the lesser known acts gain momentum they will soon attain money, contracts and build an organic fan base. Eventually, they’ll reach the top by not being hand-picked by major labels, but by the support of their listeners from the scratch.
This is the Bottom Up approach and blockchain might help the upcoming artists deliver what they’re actually capable of.
Numerous blockchain-based applications have come up for music in the recent past and most of them use blockchains for “behind the scenes” or “B2B” rights and royalty processing, while others include end users in transactions. Here are some examples:
Choon is a music streaming service and digital payments ecosystem. Gareth Emery, international DJ and the brain behind Choon, says, “I was one of the people who wanted it to become electronic cash, where you’d go and buy your Starbucks or whatever with it. That didn’t happen, but I kept an eye on it, and when Ethereum came out, that completely revitalised my interest.”
The idea is that the platform will also enable artists to sell downloads, tickets and merchandise, as well as to stream private concerts and accept tips from fans by attaching Choon’s NOTES currency, Smart Record contracts, and an oﬀ-chain Real Time Royalty Network payment distribution system. Their aim is to return 80% of proceeds for streamed music or media directly and immediately to content creators as well as replace much of the industry’s current antiquated machinery.
Ujo Music is a project of ConsenSys revolving around the Ethereum blockchain. It built a prototype for the innovative British singer/songwriter Imogen Heap. The system makes it possible to license Heap’s song “Tiny Human” on different terms: as a permanent download, a stream, stems (individual tracks, for remixing), or for sync rights. But even before releasing music, bands or groups can use Weifund, a crowdfunding app upon which users issue value tokens redeemable with band-specific goods and services. The Boardroom app can be used to allocate contracts and set up royalty percentages amongst members, and Balanc3 even specializes in doing taxes for musicians.
Core Rights is a pure application of B2B blockchain-licensed music transactions. Its marketplace consists of venues not just limited to restaurants, bars, and retail stores, which pay performance royalties for music they play on their audio systems. Venues choose the music they want to play and buy licenses to it; each license is represented as a smart contract with the rights holder on a blockchain. Its working has been described further in the text.
PeerTracks, according to its president Cédric Cobban, is a “music streaming and music retail platform that allows for fan engagement and peer-to-peer talent discovery.” PeerTracks uses the blockchain for its transactions, paying streaming revenue on a per-user-share basis, meaning that the revenue each user generates will go directly to the artist’s users are actually listening to. All the content on this platform is attached to a smart contract and it automatically divides the funds depending on the actual real-life contract.
It revolves around the idea of “artist tokens,” a concept comparable to Pokémon cards; every artist on PeerTracks can create their own token and set the number of available tokens. The aim is to create a type of sub-cryptocurrency, the valuation of which directly reflects the appeal of an artist based on demand and supply. This leads to speculating on that creator’s future potential as the consumers’ incentives are with that of the artist.
BitTunes is an Australian Bitcoin-based peer-to-peer digital music sales network upon which artists are directly compensated for every download of their music. Even better, when a user downloads an artist’s music, they too generate revenue every time they contribute to an upload of that music to new purchasers. The BitTunes model rewards both the artists and listeners who help spread their music, monetizing the peer-to-peer sharing model that has proven so effective at distributing music in the recent past.
Storj is an online data storage platform built on the blockchain that stores data on a decentralized network that’s multitudes faster than the cloud and encrypted from end-to-end, and even allows you to rent your drive to the network.
Custos, a South African copyright protection outfit, plans to implement a “tracking technology” that creates a bitcoin watermark on copyrighted media. If that material is found pirated, Custos analyzes the file and follows the trail of pirated or unlicensed content back to the source to impose a swift retribution. Custos also intends to incentivize the users of the peer-to-peer networks they are tracking with a monetary reward for identifying the source of pirated material.
Musicoin is a blockchain-powered platform that connects music listeners and fans to free music streaming. Musicoin is also a cryptocurrency that is instantly paid to artists on the Musicoin platform every time one of their musical works are played on the platform. The content is governed by “smart contracts” that the rights holder may divide and distribute to others if necessary. For example, a three-piece band could design a smart contract which pays each band member equally per play, or choose to allow a greater or lesser percentage of the payout for certain members.
VOISE is an innovative cryptocurrency powered solution for the music industry that allows artists to monetize their work in a collaborative P2P marketplace. They can set a price for their works, provide free sample tracks and seek support from music enthusiasts and users on the platform.
Volareo combined with Musicoin is Alexa on Blockchain Steroids which is the world’s first blockchain-enabled music speaker. Musicoin blockchain pays some of the highest streaming rates in the world and delivers cryptocurrency to artists just seconds after you press “play”. Even more astounding though is that this is all free for the listener. Musicoin enables this feat with an innovative economic model tied to its cryptocurrency. Consequently, Volareo will come with a lifetime of free music.
Other blockchain powered music centric enterprises:
Each of the projects mentioned above has one thing in common: they all store associated transaction information on blockchains, but the music itself can exist outside the blockchain. As it turns out, blockchains are not efficient enough to store the digital content along with transaction information, and there is no compelling reason to do so anyway.
As discussed above, transaction data outside of a blockchain is insecure and to solve this, it is necessary to include information in digital media files with a high level of security.
– Linking Blockchain Transactions with Music Files
Links can be made between transactions and the audio files on blockchains by attaching an identifier in each transaction record that matches an identifier each time. There are two ways of achieving this: either with encryption or watermarks.
Using encryption as a method, the whole file has to be encrypted and be accessible only through a software that decrypts it under specific situations.
Watermarking, on the other hand, is a simpler way to ensure the integrity of the identifiers embedded in the files. Watermarking does not impede the use of the music in any way and identifiers embedded via watermarks are secure, just like data in a blockchain. It’s possible to make changes such as music format conversions while preserving the watermark.
– Embedded Identifiers and Blockchain Applications for Music
How can identifiers help in enabling blockchain applications for music? Here’s an example:
Core Rights, a blockchain start-up can supply music files that are suitable for its licensing marketplace, which venues are willing to pay for and play. The files could contain watermarks which would distinguish them as Core Rights files. A Core Rights blockchain would record all the transactions including information about the licensee and the ISRC of the licensed recording, as well as information identifying the recording’s underlying composition. A player app could read the watermark and deposit a transaction on a blockchain in real time, and/or the watermarks could be detected and matched to transactions on the blockchain as part of a periodic auditing process. Watermarks embedded in music files can facilitate licensing of stems or samples in remixes and mashups through blockchain transactions.
Another example could be the use of “found” music files in remixes. A producer could use an app that reads the watermark in a music file, deposits a licensing transaction on a blockchain, and then provides stems (individual tracks) to the producer for remixing. The service provider behind the app could then pick up the transaction from the blockchain and process the appropriate royalties. Finally, the producer would complete the remix and submit it through the app to the service provider, which would return it watermarked with a new identifier, which the service provider would associate with identifiers for the stems. This would enable the producer to protect and license rights to the new remix: information about the stems used in the remix is stored on the blockchain, so the service provider can process the required rights and royalty transactions on the stems whenever anyone licenses the remix.
More generally, there is much discussion currently – such as within the Open Music Initiative – about processing DSPs’ royalty transactions on blockchains. For example, whenever someone plays music through an interactive streaming service like Apple Music or Spotify, it would deposit a transaction on a blockchain so that all applicable royalties can be paid to rights holders. The same identifiers that are stored in blockchain entries can also be embedded as watermark payloads to the files supplied to those DSPs. Entities that are owed royalties, such as record labels, can extract identifiers from those files and get access to transaction information from the blockchain without any need to contact the DSPs directly.
Whenever someone plays music through an interactive streaming service, the service could deposit a transaction on a blockchain so that all applicable royalties can be paid to rights holders. This would be a simple and secure alternative to complex metadata standards and monolithic databases.
Such a scheme is compatible with the architecture of Dot Blockchain Music and the vision of Open Music Initiative.
While music lovers have hailed digitization as the democracy of the music industry, the global music industry has paradoxically remained the same. Illegal downloads eat an artist’s royalties and music labels revenue. There is a lack of robust rights management system and access to real-time digital sales data which cause the loss of revenue to the artist.
During his TNW conference, former world’s no. 1 DJ and producer, Hardwell revealed that integrating Blockchain technology in distribution of music is on the cards for his next five-year plan.
Since blockchain technology is based on ‘Smart Contracts,’ transactions occur across a peer-to-peer network and are computed, verified and recorded using an automated consensus method, eliminating the need for an intermediator or third party to manage or control information.
Blockchain technology can also revolutionize the field of digital rights using its decentralized ledger system, which will make sure that no single person or entity can claim ownership over a piece of work. Combined with all the information about the music such as lyrics, composition, linear notes, cover art etc., can be coded onto the block which will create an immutable record.
And, most importantly, the technology behind Blockchain can create a more direct relationship between artists and listeners as they don’t need to be in touch with brokers and can get directly compensated every time someone uses or plays their songs. This is a perfect solution for bedroom producers who aren’t backed by major record labels.
A shift like this is akin to getting the world to move to the metric system, which isn’t going to be achieved by a Steve Jobs-like figure who will magically solve this problem and build a new system overnight. This is about laying the bricks, mortar, and plumbing of a new music industry.
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