Of course, nowadays every well-known, moderately known and unknown act has an online presence to engage and inform their fan bases through an array of social media platforms and dedicated websites. Still, the music biz today is an even tougher business to earn a dollar than it ever was before. (See also the December 10, 2014 Subway Fold post entitled Is Big Data Calling and Calculating the Tune in Today’s Global Music Market?.)
In an effort to adapt dramatically new technology to energize, innovate and democratize the music industry, two recent startups, both still in their development stages, are using blockchain technology in previously unseen and imaginative ways. The blockchain is, in its simplest terms, a distributed, decentralized, transparent and encrypted database that acts as an online ledger to record transactions, documents and other information. It is most often used to memorialize transactions involving bitcoin. (See the May 8, 2015 Subway Fold post entitled Book Review of “The Age of Cryptocurrency” concerning a comprehensive new book on this subject.)
These early stage startups were the subject of a truly fascinating article posted on Billboard.com on August 5, 2015 entitled How ‘the Blockchain’ Could Actually Change the Music Industry by Gideon Gottfried. I will summarize, annotate and ask some unencrypted questions of my own.
The first startup is called PeerTracks. Their plan is to establish a music streaming and retail platform that includes “fan engagement and peer-to-peer talent discovery”, according to its president, Cedric Cobban. They will use the blockchain for its transactions and paying artists directly for any revenue generated when their music is streamed “on a per-user-share basis”. Their launch is currently planned in about two months.
The core of their approach is to generate marketing revenue through the use of “artist tokens”. This is a system whereby each musical artist can create their own tokens with their name and image, and then set the permanently fixed amount of them to be made available. These tokens are intended to take on the characteristics of a “sub-cryptocurrency” (similar to some of Bitcoin’s characteristics), whereby the value that emerges for them is a direct indicator, based upon supply and demand, of the artist’s appeal. Site users can also speculate on the future value of the music and merchandise of currently unknown musicians.
The artists on PeerTracks will have the capabilities to affect the relative value of their own tokens. They will be enabled to buy back their tokens with any income they generate from “streams, sales, merch, tickets”. They can also permanently eliminate some tokens to decrease their supply and, in turn, increase their value.
Conversely, artists can affect demand by the types of items they offer to their token holders. Among other things, they can offer “discounts, free tickets, giveaways”. By providing incentives for fans to acquire their token, artists can raise the tokens’ relative values. As well, there are potential benefits to advertisers on PeerTracks interested in implementing paid sponsorships for more recognized music acts with product giveaways.
All songs uploaded on the site will be accompanied by a “smart contract“. According to the immediately preceding link to Wikipedia, smart contracts are “computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause”. The smart contracts on PeerTracks divide up the funds generated accordingly among the parties involved in the song’s composition and performance. This is considered to be an important advance in using the blockchain and, it is hoped by developers currently working on this, will become a platform upon which new business models will emerge.
The second startup in this space is called Ujo. Their plan to use the blockchain to improve both the distribution of royalties to artists and music licensing. They intend to accomplish this by establishing a “rights and payment infrastructure”. It will be free to use and open for third parties to create their own apps for new services including, among others, curation, streaming and negotiation. Similar to PeerTracks, they are working on an alternative means to distributing revenues to “artists and rights holders”. Furthermore, they are trying to build a blockchain-based means to determine ownership of creative works.
The prospective adoption of this by the music industry of this entirely new system is expected to take time because of its tendencies to keep data private as well its outdated and often incompatible systems. Phil Barry, who is involved Ujo along with about 20 other developers, hopes their new system will unify and replace the legacy systems. He believes the platform will provide economic advantages to artists and recording companies receiving their royalties through it. As well, this will provide “new revenue and business models”, new ways for consumers to enjoy music, and simplification to the manner in which “music is managed and licensed”.
When an artist creates a new song in the future, using Ujo it will be permanently stored on the blockchain and assigned a unique ID. If another artists or performers changes anything about the song, their subsequent versions will receive a new ID and be “instantly recognizable”. Any resulting revenue from the song will then be distributed immediately and “proportionately to each rights holder”.
My own questions are as follows:
- What other marketplaces, technologies and professions would benefit from using comparable types of blockchain adaptations?
- Could traditional legal documents such as contracts, leases and wills, among many others, be written to the blockchain to make certain that all parties to them met their obligations?
- Could artists’ tokens likewise be created for actors, writers, painters, graphics artists and other creative types?
- What would be the results of a book or any other publication being written to the blockchain in terms of royalties, rights, subscriptions and recognition?
March 4. 2016 Update: For a related follow-up on this post please see the new Subway Fold post entitled The Mediachain Project: Developing a Global Creative Rights Database Using Blockchain Technology.
June 5, 2017 Update: An new article posted today, June 5, 2017, on the Harvard Business Review blog entitled Blockchain Could Help Musicians Make Money Again, by Imogen Heap, looks at the potential of blockchain technology from a musician’s point of view. A highly recommended read if you have an opportunity to click through.
* For an outstandingly written and highly engaging account of the total transformation of the music industry, I very highly recommend a recently published book entitled How Music Got Free: The End of an Industry, the Turn of the Century, and the Patient Zero of Piracy, by Stephen Witt (Viking, 2015). I just finished reading this and to say the least, it rocked.