The unsurpassed reach of the Internet and the emergence of a range of new digital technologies have transformed virtually every corner of the music industry for fans and creators alike. While consumers enjoy vastly more options, these market disruptions are presenting a range of important challenges for creators, producers, and distributors of music.
Musicians are struggling to balance their passion for music with the need to be knowledgeable and vigilant about the financial rewards for their talents. Of the $15 billion in global recorded music revenue for sound recordings reported by the International Federation of the Phonographic Industry for 2014, only a small portion of the money beyond the initial recording advances ultimately makes its way to artists as ongoing revenue.
After a year long study, the Berklee Institute for Creative Entrepreneurship states ”significant funds are often paid to the wrong party,” the institute states. “Anywhere from 20-50 percent of music payments don’t make it to their rightful owners.”
ABI Research predicts that, by the end of 2018, we’ll see 191 million streaming subscribers, generating US$46 billion. In a world where data is readily available and micro-payments can be tracked, accountability should be a foregone conclusion. However, the industry has yet to require services and intermediaries to provide complete, readable, up-to-date data about music sales and uses in an industry-standard format.
A recent report from Deloitte suggests a solution, “blockchain has the potential to disrupt existing but also to enable new business models.”
“With the advent of blockchain this industry structure could change significantly. Blockchain technology permits bypassing content aggregators, platform providers, and royalty collection associations to a large extent. Thus market power shifts to the copyright owners.”- Deloitte
Blockchain technology’s benefits, according to Deloitte, can be grouped into three main categories; getting consumers to pay more often, tracking copyrights, and increasing efficiency.
An “Increased willingness to pay” is an attainable goal, the report says. “Especially younger digital natives are more willing to pay a few cents for a music track they favor than to be charged a flat monthly subscription.” The research team went on to explain that “paid content can receive a boost from new, micropayment-based pricing models” that blockchains can enable since today’s credit card processing fees make buying a single music track at a time too expensive.
Another benefit is a blockchain’s ability to track items with a high level of integrity. “Copyright tracking becomes more accurate, as does allocation to media copyright holders and the subsequent distribution of royalty payments,” the report explains. “Copyright infringements and piracy would be nearly impossible.”
The final benefit is efficiency increases across the board, from the studio to the consumer. This would be possible using a blockchain “since costly monitoring of contractual agreements and complex distribution of profits are not necessary,” the report states. Also, marketing of the music itself will affected as the “allocation of advertising budgets becomes more accurate and targeted as media usage can be directly linked to the respective content items”
“Thanks to blockchain, the distribution and monetization of bite-sized content becomes much more fluid and prevalent.”- Deloitte
Grammy-nominated British recording artist Imogen Heap has been an outspoken proponent of blockchain technology since early 2015 and released the single “Tiny Human” via the Ethereum blockchain for $0.60 per download last summer. Although the income from the event was less than encouraging, Heap proved the viability of the technology and went on to found Mycelia for Music, which uses blockchain technology to bring “fair trade” to the recording industry.
In a July 2015 interview with Forbes, Heap described the Mycelia idea as a system, library and database. The creative content is hosted by “Spores,” which form a collective foundation. The services which artists and users engage with are provided on top of this foundation, and are referred to as “mushrooms.”
The platform is designed to provide artists with exclusive control over their own work, when they get paid, what they charge, and who they split the money with. However, the artist states “It’s not just about listening, it’s about seeing the entire life behind the music, the whole life of a song.”
“I see blockchain as a beacon for all the information about my song,” states Heap.”As well as the music, I could release information about the moment I wrote it, where I wrote it, what gear I used, who has covered it, who else worked on it.”
“The more elaborate and detailed, the more fun and useful the services can be when pulling data from within it.”- Imogen Heap
The Deloitte report lists five more use cases for blockchains in the Media Industry. The first details how content can be sold in new ways with new pricing options. “Monetization options emerge for an increasingly fragmented content inventory (e.g. blogs, news bites, photos).” New places that haven’t been practical storefronts before, such as a social media page or blog, are now able to sell any type of content with full sales tracking.
Marketing Content in a way that bypasses the current aggregators is another use case Deloitte explored. Bypassing the middlemen in this way is only possible when blockchains permit an exact tracking of content usage, the report states. It also enables a direct allocation of advertising budgets.
Distributing royalty payments precisely is also possible, with a blockchain keeping track of every sale. This use case allows “real-time allocation of royalty payments” and more importantly, is an alternative to today’s “imprecise” estimation of sales.
A fourth use case that Deloitte points out is for secure and transparent customer to customer sales. The firm believes that the younger, digital-native, generation is far more inclined to acquire content from each other, which results in a lot of piracy. Blockchains can help turn these transactions into sales with “automated, real-time billing.”
Lastly, Deloitte describes a new market, calling it “paid content without boundaries.” The current regional limitations of paid content subscriptions and complexities of Digital Rights Management (DRM) are overbearing, and result in many lost customers that may want content but don’t have access to it. This problem can be decreased through Blockchain technology, according to the firm. Direct linkage of the consumer using blockchain authentication would greatly simplify the process.
“The blockchain has the potential to make DRM systems obsolete or at least to reduce the complexity of these systems, because every transaction/ consumption is tracked in the blockchain and directly linked to a user.”- Deloitte
Blockchain technology, according to Deloitte, is ideally suited to making the world and the content industry more transparent. “However,” the firm concluded, “the technology and the mechanisms are still young and evolving, and industry-wide adoption of standards is most probably still a few years off.”