Blockchain Technology
The Future of The Music Industry
What is Blockchain Technology? — A form of recording data in a way that makes it impossible to manipulate or change.
Blockchain Technology in The Music Industry — A public ledger that automatically records a songs’ streams, and automatically distributes profits regarding ownership and means of production.
How Would This Technology Change The Music Industry?
Ability to drastically help independent and beginner artists with transparency.
- Transparency regarding where the artist’s music is being used and exactly what profits come from that. (Yes, I know, shocking that artists don’t already have a way of viewing this information.)
Incorporates “smart contracts” that allow for automatic and verified payments.
- Smart contracts are terms of an agreement between two parties that are created and fulfilled through code. These transactions are irreversible and fully trackable.
Potential to eliminate piracy.
- There are various concerns for this potential since the music industry has attempted to eliminate piracy multiple times before, and has failed each time.
Six Official Promises of Blockchain in The Music Industry:
- Perfect Royalty System — Streamed songs are registered in blockchain and a smart contract records the payments and divides profits automatically with digital coin.
- Perfect Music Database — Public and decentralized registry where a song’s data is held. The ownership/production rights are held in a certified and transparent database.
- Full Transparency — A public registry will clearly state the rights holders and other intermediaries, ultimately eliminating the need for some intermediaries.
- Alternative Profit — Possibility for fans who purchase a newly released song to hold a small fraction of the royalties; letting them invest and fund their favorite artists.
- Eliminate Piracy — With an automatic database and usage of smart contracts, any form of unauthorized use of music can be traced and blocked immediately.
- Clear Music Value Chain — Providing artists, and the public, credible information regarding who along the music chain is getting paid and what they are getting paid for.
Competing Forces:
- Technological Control Over Users — To fully eliminate piracy with blockchain technology there needs to be technological control over users and their practices. The music industry has failed to eliminate piracy various times due to this concern.
- Private and Proprietary Blockchains — Without rules and regulations, major companies like Spotify and Apple Music could end up using private and proprietary blockchains; ultimately monopolizing the market.
- Greedy Major Record Labels — Since blockchain provides a place for automated financial transactions and investments, it also provides another market for major record labels to manipulate and control.
Why Independence is The Future of The Music Industry:
Blockchain technology has the ability to increase the financial inclusion of artists and their fans; ultimately encouraging more artists to create their music independently.
- The music industry has been controlled and manipulated by gatekeepers for quite some time. Labels have a significant amount of control over what music is heard by the public
- With the help of streaming platforms, change has begun; blockchain would be the next technological step in giving back power to creators and their fans, rather than to the label and other intermediaries.
- There are too many payment discrepancies in the industry and blockchain could remove the middleman from the process of sales and streaming.
Improving the current environment for new artists will result in a more diverse music market in almost every genre.
- Smart contracts ensure artists are paid directly following the purchase or stream of their song. — This means that both the content and royalty payments are independently distributed.
- This type of system allows the artist to receive almost all of the payments made by premium members, and ad revenue made by non-paying members.
- According to Opus, a blockchain-based music streaming platform, the “support local artists” mentality is back and is the reason that independent labels currently hold 32% of market share revenue.
Current Blockchain-Based Music Streaming Platforms:
- ANote Music — Planning to launch a new platform in the summer of 2021. It will provide artists a new way of gaining capital by allowing users to invest in music royalties. Additionally, it will allow users to make capital from their musical insight by buying and trading these royalty shares.
- Opus — Decentralized streaming platform that cuts out the middleman in order to provide creators with more profit. This network for file sharing essentially acts as a server as well.
- Ujo — Decentralized database of music ownership that allows artists to independently upload their work and earn 100% of sales and tips. Additionally, it automatically divides profits among collaborators
- The Open Music Initiative — This is not a platform or database but rather integrates blockchain technology, to identify ownership rights, into major media companies like Soundcloud, Spotify, YouTube, Sony, and Netflix.
- eMusic — Similarly, this platform rewards users for contributing to their database by giving out VIP tokens. The intent is to find a new source of revenue for creators by encouraging users to listen more.
- Viberate — A large platform of this kind that has encouraged music industry giants to test out blockchain-based models.
- Flow — Warner Music Group has invested in this blockchain-based music network. The goal is to create new ways for fans to further explore their favorite creators and interact with them like never before.
The Open Music Initiative:
United States-based blockchain technology project, a non-profit initiative.
- Brought together almost 200 leading music, media, technology industries, and academic institutions to hold a verified and public protocol for identifying ownership rights for creators and contributors.
- Founder, Panos Panay, has a Music Business and Management degree from Berklee College of Music. Below he explains the promises behind the Open Music Initiative at the MIT Technology Review.
The Big Payback:
Josh Kin, chairman at USC, titled his research paper on musical reparations “The Big Payback” that has drawn attention to the racist system the music industry was built on. Personally, I believe blockchain could help dismantle the systemic racism in the music industry.
The most well-known controversy is the usage of terminology such as: ‘master’, ‘slave’, and ‘urban.’
- Master referring to the main recording, and slave referring to any additional copies made.
- Urban refers to black musical divisions, however, ultimately it dismantled these divisions and lumped them into one generalization.
- In 2018, Pharrell Williams spoke in front of many major label presidents to address the usage of ‘master’ and ‘slave’ in contracts. Changes were made immediately and a plan to revise older contracts has been made too.
- With the current focus on systemic racism, UMG’s Republic Records called for the end of ‘urban’. They stated that it has developed into a generalization of black people, rather than its original connotation of representing sophistication.
- At the 2020 Grammys, it was announced that the term ‘urban’ would no longer be included in the Grammy’s awards and language.
Making black music more palatable for white people and gatekeeping black artists from top charts is another major issue regarding racial inequality in the music industry.
- Record labels previously known to take songs written and/or recorded by black artists and create new versions with white artists.
- White artists were automatically added to pop radio stations, but black artists had to prove themselves on the ‘Urban’ radio before even being considered for the pop radio stations.
- ‘Urban’ budgets could be 30% smaller than a pop artist’s budget, even if the black artist was more successful. — Consider Nile Rodgers who had the biggest selling single at Atlantic Records and was still only given a $35,000 budget to make an album.
Moving forward will need consistent affirmative action held by record labels and other music management companies.
- Atlantic Records launched an initiative in response to the Black Lives Matter movement. Music companies of all sizes joined in support, promising to take action. — Major record labels pledged $100 million each and UMG set up an additional $25 million fund.
- The Black Music Action Coalition is holding the industry accountable by addressing the pay disparity between black and white artists; while also fighting for black artists to have executive control over their cultural representation. — As of today, they have signed hundreds of top-charting artists, and also have major musical legends working as advisors and advocates.
“Creative Juice” is a great music business podcast that focuses heavily on marketing strategies.
- Marketing strategies are going to become even more useful with blockchain technology. Artists that attempt to blow up as independents and without a major record label will struggle with one thing: marketing.
- Building a fan base, building a brand, promoting work, or promoting shows is extremely hard because useful marketing strategies are constantly changing with time. The strategies that worked 25 years ago will not work today.
- Independent artists often sign with labels and management companies after failing to successfully market their brand and music to a broad audience.
Sources:
Blockchain Explained: What is blockchain? | Euromoney Learning. (n.d.). Euromoney. https://www.euromoney.com/learning/blockchain-explained/what-is-blockchain
Frankenfield, J. (2021, March 25). Smart Contracts: What You Need to Know. Investopedia. https://www.investopedia.com/terms/s/smart-contracts.asp
Halperin, S., & Helligar, J. (2020, August 11). How Pharrell Williams Is Breaking the Chains of the Music Industry’s Troubled Past. Variety. https://variety.com/2020/music/news/pharrell-williams-master-slave-industry-contracts-1234729237/
Madeira, A. (2020, June 6). Blockchain to Disrupt Music Industry and Make It Change Tune. Cointelegraph. https://cointelegraph.com/news/blockchain-to-disrupt-music-industry-and-make-it-change-tune
Mazierska, E., Gillon, L., & Rigg, T. (2020). Popular Music in the Post-Digital Age: Politics, Economy, Culture and Technology (Reprint ed.). Bloomsbury Academic. https://doi.org/10.5040/9781501338403
Panay, P. (2017, April 18). The Promise of the Open Music Initiative — MIT Technology Review. MIT Technology Review Events. https://events.technologyreview.com/video/watch/panos-panay-berklee-open-music-initiative/
