Thought leadership | 07/23/2020
Are blockchain-powered music streaming platforms the next Spotify?
Song writers, recording artists, record producers, labels, streaming platforms, performance rights organizations, promoters, agencies… They are all key players involved in the music industry. And they all ‘get a share of the pie’ of the music revenues, whether it’s from album sales, digital downloads, concert tickets, streaming services or merchandising. How exactly do they divide it up? That is the million dollar question… While fans and musical audiences have never been so wide, the music industry remains a complete black box, in which artists sorely lack control and ownership over their content. This is where blockchain technology can contribute to opening it up, giving you the power to change things.
The traditional music industry’s black box
Imagine a market consisting of three groups of actors: creators on one side, sellers on the other and in between intermediaries that put people in touch with each other. Everything seems ok so far, except that creators don’t have any visibility on the price the consumer pays for their creations. They don’t have any insight into the exact commision the intermediaries and vendors take, and therefore the exact amount of money they’ll receive from a sale. They won’t even know the number of sales their creations achieved. As an entrepreneur, wouldn’t these be things you’d really want to know?
This is what the music industry roughly looks like… A very fragmented and intermediated industry built on partnerships between the creator’s side (songwriters, recording artists and producers), the customer-facing side (including streaming services such as Spotify, Apple Music, Youtube or Pandora) and the business side, which connects the other two (like publishers and record labels). Having so many actors and complex interconnections leads to a complete lack of transparency, especially to the artists themselves. As a result, things don’t always go smoothly: information and money might not be fairly shared. For instance, it is almost impossible to keep track of the songs created and the associated copyrights, nor the revenues generated and their redistribution (if any).
Power concentrates in the hands of few big guys
Inside this black box, money and data flows tend to be concentrated in the hands of a few large players: the super-powerful labels and the front-line streaming platforms. In the Billboard’s 2019 Power 100, ranking the most influential individuals in the music industry, the top 10 names includes CEOs and key executives from Universal Music Group, Live Nation Entertainment, Spotify, The Azoff Company, Sony Music Entertainment, Warner Music Group, Apple Music and Atlantic Records (owned by Warner Music). Called the “big three”, Sony, Warner and Universal labels can “make up almost 80% of the music market or even more depending on the year”. Moreover, streaming services contributed to 75% of the total US music industry revenues for 2018.
In reaction to this concentration, and the potential power abuse that it may create, some artists are leaving their label for another or starting their own independent one, such as Taylor Swift and Kiesza. This is done in both an attempt to free themselves from “unfair contracts and controlling behavior” and to take back control and ownership of their own songs.The same Taylor Swift also took a stand against Spotify and Apple Music’s artist royalty practices back in 2015. A 3-year-long battle for the rights of artists in the digital age, asking for an overall change: “her feud with Spotify was never a feud with Spotify at all — it was a feud with the entire industry, the changing landscape, and the way fans expect to access music now”.
In this changing landscape, artists and songwriters appear to be the “big losers”, lacking control over their songs and remuneration. However, fans also appear powerless and disconnected from their favorite artists’ situations. With the rise of streaming services, they have traded their ability to support them for convenience and accessibility. Today, they are increasingly unable to directly promote and fund them throughout their career. Despite attempts to take back control, the whole system of intermediaries needs to be reconsidered. This is where blockchain technology could come in.
What could blockchain do for music
From a lack of transparency to power being in someone else’s hands, there are many challenges in the music industry. Luckily for the artists, this is exactly where the blockchain technology’s strength lies in: enabling immutable data registration and sharing it transparently with no third parties involved. Working as a distributed and public ledger, it validates and registers any transactions without the need for a central authority. In other words, it allows parties to make secured peer-to-peer exchanges of value – whether it is data, copyrights, money, etc. Applied to the music industry, blockchain technology has the power to disrupt intermediaries and transform the entire value chain:
- publishing – on the creation side
- artists-fans relationship – on the customer-facing side
- monetization – in between, on the business side
Taking back control on data and copyrights
The first challenge blockchain technology could answer is enabling shared and decentralized reliable data. Indeed, “data on everyone who holds rights to a track are fragmented across different, incompatible systems that can be out of date and contain conflicting information. We don’t always know who made a track or who owns its rights. As a result, rights holders often don’t get paid. When they do, royalty reports are difficult to understand, and rights holders can’t tell if they’re being paid fairly”. That’s why some blockchain music startups such as MediaChan, Jaak and Blokur aim to create a global shared database “that brings together information from the recording and publishing sides of the music industry”.
Besides, blockchain technology could help creators keep track of their content and how it is used by the music ecosystem. By publishing their songs “on the ledger with a unique ID and timestamp in a way that is effectively unalterable”, creators can solve the well-known problem of illegal music downloading, copying and/or modification. “Each record can store metadata containing ownership and rights information in a transparent and immutable way for everyone to see and verify” explains Techcrunch. This ensures that the rights owners get paid for the use of the content.
Direct relationship between creators and users
From a listener perspective, there are few options to support and promote one’s favorite artists so far. Fans also have no idea of how much the musicians earn when they purchase their music. This is a stark contrast to the sport industry, where everyone knows how much a player gets paid. Blockchain technology could bring some transparency and allow fans to directly promote their favorites. One way would be to invest in an artist’s success by purchasing crypto tokens. In 2017, DJ Gramatik launched its own token GRMTK using SingularDTV (a company developing an entertainment app ecosystem on top of Ethereum). He raised close to $2.5 million through an ICO, opening about 25% to fans and the crypto community. By doing so, any owner of GRMTK tokens received a share of his royalties.
This more “intimate” connection is also possible in the other direction, allowing musicians to reward fans with free concert tickets, exclusive or early access to recordings, directly or via tokens. The New-York based startup eMusic aims to better reward both artists and fans through “a decentralized music distribution and royalty management system” powered by eMusic’s membership tokens. Among its features, it includes a fan-to-artist crowdfunding and a fan reward system that offers exclusive artist content, promotional incentives and cheaper prices relative to other streaming platforms.
Peer-to-peer and instant monetization
Blockchain technology could also revolutionize the monetization of music by allowing musicians to sell their music directly to fans, meanwhile cutting off the middlemen like labels or publishers. Indeed, cryptocurrencies often allow micropayments, unlike classic payment mediums that can charge heavy transfer costs. This could lead to a new generation of blockchain-powered on-demand music services, in which users immediately reward the stakeholders with cryptocurrency while playing the song. Leveraging on smart contracts – or in short the “lines of code that execute a specific function once certain conditions are met” – blockchain-powered streaming platforms can instantly split and pay the royalties to the rights holders. This is exactly what blockchain music startups like Ujo Music or Emanate do. In 2015, the singer Imogen Heap released her single “Tiny Human” on Ujo Music, as did DJ RAC in 2017 with its full-length album “EGO”.
In 2015, Imogen Heap also launched the Mycelia project, an overall initiative aimed to use blockchain technology to provide artists with the tools to take back control of their song. “It’s about trying to take away the power from top down and give power, or at least a steering, to the artist to help shape their own future” according to her own words. Among the project initiatives, she has created a creative passport i.e. “a digital identity” or “personalised ID for music makers, where they can access, update and manage information about themselves and their works, and share it with others.”
Technology is ready. What about you?
Despite the blooming of blockchain music projects, there are still obstacles to overcome. Choon’s bankruptcy – another blockchain music startup – back in December due to liquidity trouble shows how it remains difficult for blockchain-powered alternatives to stand out of the crowd and become sustainable. In other words, to ensure a bright future for blockchain music and artists, these platforms need to reach mass-adoption. In terms of user experience, there are also improvements to be made. While it’s difficult to imagine a more convenient way for accessing to digital music, blockchain streaming platform user experience remains a bit rocky for instance.To register as a fan, and so listen to music, you often need to download and install a crypto wallet app as a gateway to blockchain apps. Then, you might need to buy Ethereum (ETH) or the associated crypto – if you don’t already own any – to proceed to payments through the platform. You easily can see where the problems could arise from a general user.While these on-boarding steps are not an issue for a regular crypto owner, these platforms might need to better integrate the crypto beginners in their experience. So that they make sure to reach the largest possible audience to contribute to improving the music industry. In 1995, less than 40 million people used the Internet worldwide. As blockchain can appear complicated to use today, the Internet in the 1990s was very complicated. It was a “geek thing” with very ugly and unfriendly-user interfaces. In the 2000s, entrepreneurs actually realized that what mattered was the user experience and started to work on it to finally reach the seamlessness we know today. And this is exactly what people in the crypto community and at Ledger are focusing on today as well.
Beyond daily uses and financial transactions, blockchain and crypto also bring new uses and systems, complementary to the ones that work well today, but replacing those that don’t, like music streaming. With one guiding principle in mind: putting people back in the center, giving them back control over their lives.