The recently released “Music on the Blockchain” report from a research group at Middlesex University, is the most in-depth look so far at how the music industry can benefit from Blockchain technology and via four different key approaches, the report looks succinctly dissects the threats and opportunities, challenges and approaches to potential success.
Nick Mason drummer of Pink Floyd leads off in the foreward to the report.
“If Blockchain technology can help the commercial and contractual relationships in music keep pace with technology and the communication between artists and fans then it could be truly revolutionary,” writes Mason.
“Distributed Ledger Technology (DLT), or ‘Blockchain’, has started to receive increasing media attention and investment from several sectors including governments, financial services and the creative industries. The potential application in relation to music is of particular interest, as it appears to offer solutions to problems artists have highlighted for decades – around transparency, the sharing of value and the relationships with intermediaries that sit between the artist and fan, the central and most important relationship in music.”
1. A Networked Database For Music Copyright Information
Any piece of recorded music contains at least two copyrights: one for the sound recording itself, relating to the performer and the record label, and one for underlying words and music, relating to the songwriter or composer and the music publisher. These could be stored on the Blockchain, via a cryptographic hash. Improvements in authorship and attribution alone, however, would not overcome the fact that there is no single database that documents ownership of all song and recording copyrights. Instead, there are numerous databases, none entirely comprehensive; information can vary between one database and another, with no central authority to settle conflicts. Each individual database must be contacted in order to correct any errors.
2. Fast, Frictionless Micropayments
Royalty payments, for both the sound recording and the underlying words and music, are often slow, taking months or even years to reach the bank accounts of rights holders. Given that fans can listen to tracks at the click of a mouse, this seems archaic. ‘Friction’ is an issue too since, by the time the money reaches rights holders, more than one performance rights organisation, or PRO, may have deducted administrative fees (Rethink Music 2015, p20). Blockchain technology has the potential to change this situation in various ways. Firstly, the low transaction costs of cryptocurrencies, which have a large range of denomination, typically to eight decimal places, make micropayments feasible. This is particularly important given the small size of typical payments in the streaming era. It would also allow content creators to receive ‘tips’, even in very small sums. Tapscott and Tapscott (2016) suggest that the blockchain could also allow for the ‘micrometering’ of streamed content such as videos: thousandths of a penny for milliseconds of video. It remains uncertain, however, whether consumers will pay for streams, which are currently more typically monetised through subscription or advertising models.
3. Transparency Through The Value Chain
There is a lack of transparency in the value chain for recorded music. ‘Significant funds are often paid to the wrong party’, while ‘large pools of royalty revenue end up outside the artist’s reach in a so-called “black box” – where rightful owners of royalty revenue cannot be accurately identified because of a lack of an industry-wide system for tying usage to ownership’ (Rethink Music 2015, pp 3-4). And since the specific details of many streaming deals are hidden behind non-disclosure agreements, it is difficult for artists and songwriters (or their managers) to assess whether labels, publishers or collective management organisations are processing payments efficiently (Cooke 2015). Perhaps the most ingenious aspect of Bitcoin was that it produced a practical working solution3 to the so-called Byzantine Generals Problem (Lampert et al 1982), essentially the problem of exchanging information over an unreliable and potentially compromised network. Nakamoto’s solution used a ‘proof of work’ algorithm (Back 2002) to achieve consensus without, crucially, requiring a central trusted authority or intermediary to verify the transaction. This could radically transform a culture of ‘black boxes’ and non-disclosure agreements, bringing transparency throughout the value chain.
4. Access To Alternative Sources Of Capital
Seed funding – often a crucial step between start-up and venture capital investment – is a major challenge in the record industry. Blockchain technology could help in three ways. Firstly, despite some growth in alternative funding models such as Seed Enterprise Investment Schemes (SEIS) and crowdfunding platforms, access to capital for artists attempting to operate without a record label remains limited. This is in part because of the difficulty of understanding a clear pathway to profitability for some artists and of effectively assessing, and therefore pricing, capital. The transparency inherent in delivery of music via the blockchain could improve investor ability to monitor activity and investment outcomes, facilitating the modelling of likely returns and potentially affecting the pricing of capital.
Particularly in terms of storing music copyright data, fast and frictionless royalty payments, transparency through the value chain and access to new sources of capital, blockchain technology does seem potentially transformative. Whether a shift to a networked record industry actually comes to pass, of course, is another question entirely. Certainly there is a need for further research into the possible benefits of blockchain technology for the record industry, in particular to explore the extent to which blockchain technology can co-exist with current contractual and copyright systems. Equally, possible barriers to, and disadvantages of, adoption must be explored in greater detail. More broadly, research needs to be extended to potential applications of the technology in those music industries not directly related to recorded music – and, indeed, in other creative industries entirely. This will provide the agenda for our own future research.
- Alibaba’s Ant Financial Aims for 2 billion Users by Bringing Blockchain Technology to Alipay - January 20, 2017
- ChronoBank Plans to Use Multiple Blockchains - January 20, 2017
- Hyperledger Welcomes New Blockchain Platform Partner Cello - January 20, 2017
- WISeKey and Stratumn Join Forces to Use Blockchain for Real-Time Accountability and Traceability in Enterprise Processes - January 20, 2017
- Blockchain Report – European Union Agency for Network and Information Security (ENISA) - January 20, 2017
- FINRA Seeks Comment on New Report on the Potential Implications of Blockchain - January 18, 2017
- Finlync Designs ERP Integration to Distributed Ledger and Blockchain - January 18, 2017
- European Central Bank Considering Digital Currency – Cryptocash - January 18, 2017
- US Homeland Security Testing Blockchain To Track People, Goods Across Borders - January 17, 2017
- Israeli Tax Authorities Might Go After Bitcoin - January 16, 2017
- Senior US Regulator David Blaszkowsky Joins Canadian Blockchain Intelligence Group (BIG) Advisory Board - January 16, 2017
- Seven European Banks Cut Blockchain Deal to Facilitate Easier Cross-Border SME Commerce - January 16, 2017
- Marketforce to Host 2nd Annual The Blockchain Summit on 28th March 2017 in London - January 15, 2017
- Waves Platform Implements New Blockchain Scalability Approaches - January 14, 2017
- China’s Puerbank Group Launches Global Node for A Standardized Blockchain-Based Digital Currency in the UK - January 14, 2017
- DU and Guardtime Partner with Dubai’s NMC Hospital to Revolutionize Electronic Health Records with Blockchain Technology - January 14, 2017
- Report: Blockchain Slated to Become $8 Billion Global Industry By 2024 - January 14, 2017
- Blockchain Could Save Financial Services $110 billion over Next Three Years - January 14, 2017
- Russia Embraces Bitcoin – No Plans to Ban Cryptocurrencies - January 14, 2017
- Canadian BTL Group Completes Blockchain Pilot With Major Global Energy Company - January 12, 2017
- Tokio Marine & Nichido Fire Insurance and NTT DATA Cut Blockchain PoC For Insurance - January 12, 2017
- HfS Research Recognises VirtusaPolaris for Emerging Blockchain Services in BFSI - January 12, 2017
- Deloitte Launches Blockchain Lab in New York - January 12, 2017
- SWIFT launches Blockchain Proof of Concept In Hyperledger - January 12, 2017
- Blockchain VIP’s to Gather for Major Retreat This Month - January 12, 2017
- IBM Watson Health and US FDA Announce Blockchain Healthcare Data Project - January 12, 2017
- Equibit Development Corporation Sets $7 million Funding Target, Crowdsale Date - January 12, 2017
- US National Science Foundation Offers $8.5m in Funding for Blockchain Proposals for Cyberinfrastructure Security - January 11, 2017
- China Poised to Dominate Fintech and Blockchain Markets in 2017 - January 10, 2017
- Respectonomy Social Network To Tackle Censorship Using Blockchain - January 10, 2017
- South Korea Plans to Launch a Full-Scale Pilot Project on Blockchain-powered Financial Services - January 10, 2017
- Postal Savings Bank of China (PSBC) Announces First Blockchain Financial Service - January 10, 2017
- Reserve Bank of India (RBI) Releases Bullish Report on Blockchain for Clearing, Settlement - January 10, 2017
- Blockchain TV – TED Talk | How the Blockchain will Radically Transform the Economy | Bettina Warburg - January 10, 2017
- Alfa-Bank and S7 Airlines Close Blockchain Deal in Russia - January 10, 2017
- Life.SREDA and the Russian Republic of Tatarstan To Introduce Blockchain Technology For Public Administration System - January 10, 2017
- Union Square Ventures Leads $4M Funding Round for Blockchain Startup Blockstack - January 10, 2017
- US Department of Energy Eyeing Blockchain Solutions for Security – Seeking Proposals - January 10, 2017
- India’s Axis Bank to Use Ripple Blockchain for Cross-Border Remittances - January 10, 2017
- Georgia to Store Real Estate Documents in Blockchain System with Bitfury Group and Hernando de Soto - January 10, 2017
- US Depository Trust & Clearing Corporation Selects IBM, AXONI and R3 to Develop Derivatives Processing On Blockchain - January 10, 2017
- Grantcoin Foundation Expands Board of Directors – Distribution Rescheduled to Late January - January 8, 2017
- UNICEF, UK Home Office and BTCC to speak at London Blockchain Week 2017 - January 6, 2017
- American Company The Seam to Form Cotton Blockchain Consortium with IBM on Hyperledger Fabric - January 5, 2017
- Move over Bitcoin – MIT Cryptographer Silvio Micali and his Public Ledger ALGORAND… The Future of Blockchain? - January 5, 2017
- Blockchain to Play Role in Future of Transportation? UBS Teams up with ZF and innology SE to Make it Happen - January 5, 2017
- Blockchain Group Hyperledger Expands into China - January 5, 2017
- The Evolution Of Casinos – Next Generation Transparent Ethereum Smart Contracts Based Casino “Edgeless” - January 5, 2017
- Healthcare Sector Plans to Move Hard and Fast to Blockchain in 2017 - January 5, 2017
- Russia Eyes Blockchain Potential for National Payment System - January 5, 2017