How the Blockchain is Changing Licensing in the Music Industry

Blog Posts 0 Comments

daisi

By: Daniel Eggleston

Since 1999, online piracy has caused a lot of problems for the music industry.[1]  While online streaming services like Pandora and Spotify have helped to curb illegal music downloads, they haven’t made it any easier for artists to get paid for their work.[2]  What’s more, streaming services and music companies often disagree when divvying up the money, leaving artists stuck somewhere in the middle. [3]

Traditionally, songwriters and recording artists assign their rights (to a work) to a third party known as a performance rights organization (PRO).[4]  PRO’s keep track of how many times a song is used, and determine the amount of royalties paid to the copyright holder.[5]  Copyrights to a song are usually assigned to a music publisher, while copyrights to a recording of a song are assigned to a record label.[6]

From the artist’s standpoint, how a PRO or record company tracks a song’s use is an opaque process.  Despite the advent of online streaming sites giving artists more exposure than ever, these artists are nevertheless having difficulty translating that exposure into profit.  For example, “a major music service . . . pays an average of $0.000035 per stream,” equating to approximately $35 for a million streams.[7]  For most artists, this means streaming revenue isn’t much of an income source.

The blockchain could be the answer artists have been looking for.[8]  The blockchain is “a way to structure data, and the foundation of cryptocurrencies like Bitcoin,” allowing parties to share a digital ledger across a network of computers.[9]  Anything of value can be tracked and traded on this ledger, and it doesn’t require a control center.[10]  This emerging technology will likely be used for many different business applications,[11] and it is already being applied to the music industry.[12]

Unlike the traditional method of assigning rights to a PRO or record label, artists can track the number of plays and purchases of a work through the digital ledger.[13]  This method offers greater transparency for the artists;[14] as “there would be no opacity in accounting, no delay in payment, and no confusion over who owned or controlled which rights to the work.”[15]

The music startup Revelator has already found success utilizing this new platform. On September 12, 2016, Revelator raised $2.5 million dollars in funding for its blockchain-based platform.[16]  Revelator will enable an artist to monitor his or her song rights and receive royalty distributions directly, eliminating the traditional role of a performance rights organization.[17]

This startup—along with others like it—will address some of the problems that have plagued the music industry since its inception, and will do so in a number of key ways.  First, these startups will resolve the long history of distrust between artists and the companies who handle their royalties because of the transparent nature of blockchain transactions.[18]  Second, these startups are highly efficient.  Unlike the traditional methods of royalty distribution and licensing, an artist can directly transfer or assign rights “per territory, per licensor, and per product,” and receive mass and micro-payments at fractional costs.[19]  Third, the blockchain creates a new business model allowing artists more control over the rights and distribution of their work.[20]  Finally, the digital ledger inherent in blockchain technology allows for the “global registry of rights information and distribution of assets with complete tracking, transparency, and trust.”[21]

Revelator is just one example of an emerging trend; many other startups are experimenting with the blockchain’s applicability to the music industry.[22]  However, big record companies and online streaming services still control how the majority of the market accesses music. As such, if these blockchain-based companies gain traction it will be interesting to see whether the bigger companies push back or begin to incorporate the blockchain technology into their business models.[23]

 

 

[1] https://techcrunch.com/2016/10/08/how-blockchain-can-change-the-music-industry/

[2] See id.

[3] See id.

[4] Music Royalties, Royalty Exchange, http://www.royaltyexchange.com/learn/music-royalties.

[5] See id.

[6] See id.

[7] Imogen Heap, Don Tapscott, Blockchain Could Be Music’s Next Disruptor, Fortune (Sep. 22, 2016 3:59 PM) http://fortune.com/2016/09/22/blockchain-music-disruption/.

[8] See id.

[9] Robert Hackett, Wait, What is Blockchain?, Fortune (May 23, 2016, 9:00 AM), http://fortune.com/2016/05/23/blockchain-definition/

[10] What is Blockchain?, IBM http://www.ibm.com/blockchain/what_is_blockchain.html.

[11] See id.

[12] See Heap & Tapscott, supra note 7.

[13] See id.

[14] See id.

[15] See id.

[16] Jacob Timp, Music Platform Raises $2.5 Million For Blockchain-Based Music Rights Technology, Coin Telegraph (Sep. 12, 2016, 12:49 PM), https://cointelegraph.com/news/music-platform-raises-25-million-for-blockchain-based-music-rights-technology.

[17] See Gideon Gottfried, Blockchain Platform Colu Partners With Revelator in Push to Fix Music’s Data, Billboard (Aug. 18, 2015, 10:40 AM), http://www.billboard.com/articles/business/6664006/colu-revelator-blockchain.

[18] See id.

[19] See id.

[20] See id.

[21] Id.

[22] See Jonathan Chester, How Blockchain Startups Are Disrupting The $15 Billion Music Industry, Forbes (Sep. 16, 2016, 11:07 AM), http://www.forbes.com/sites/jonathanchester/2016/09/16/how-blockchain-startups-are-disrupting-the-15-billion-music-industry/#77f4d29d652c.

[23] See id.

Photo Source:

http://www.bearnes.devon.sch.uk/wp-content/uploads/2016/11/Daisi.jpg