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Blockchain: How It Can Help Artists Get Paid

You’ve probably heard of “blockchain”. You’ve almost certainly heard of its successful applications, with the most prominent being Bitcoin.

Blockchain has the potential to have a massive impact on all industries, and the music industry is no exception.

But first what actually is the blockchain? If you don’t know the answer to this question, you’re not alone. The “blockchain” is buzzword that’s thrown around in conversation far more than it’s actually understood.

This was a topic of discussion at our recent Music Tech Summit in Sydney, where Blackbird Ventures’ Joel Connolly helped break it down for us, along with Daniel Dewar music startup, Paperchain.

 

What is blockchain?

At its core, blockchain is what is referred to as a “distributed database”. Where traditionally, databases of information are controlled by a central entity, blockchain is distributed across a number of locations.

At the Music Tech Summit, Joel Connolly described, “It doesn’t live on any one person’s server. It doesn’t belong to one particular person. It belongs to everybody.”

Brain hurting yet? You could almost think of it like P2P file sharing, where instead of the file being on a central server, it’s distributed across a number of computers.

“It doesn’t live on any one person’s server. It doesn’t belong to one particular person. It belongs to everybody.”

Joel Connelly – Blackbird Ventures

Let’s get a bit technical. Daniel Dewar gave us the low down on a few key components that truly distinguish the blockchain:

  1. It is decentralised and participants are incentivised to maintain truth.
  2. Each transaction of information within the blockchain is timestamped to create an accurate chronological history.
  3. “Mining” occurs, where algorithms determine the validity of each transaction before it is processed.
  4. All participants are anonymous.
  5. It is “immutable”; that is, all transactions that are added to it can’t be erased.

According to Dewar, the anonymity of the blockchain and its incentives for networks to self govern are its greatest strengths.

“This allows for transactions to occur in an environment where network members do not trust each, without an intermediary or arbiter of truth.”

 

How Blockchain can help artists get paid

The music industry, like many, is primed for blockchain derived disruption.

At the Music Tech Summit, Joel Connolly spoke about what he believes are the two key ways this could happen: centralising data and eliminating intermediaries.

Connolly says that the power silo’s which have dominated the music industry since its inception will start to break down, with metadata the determining currency.

“The problem with metadata in the music industry is that each label, publisher and distributor all have their own databases with their own metadata. And there is a real major problem with inconsistencies in that data.”

“And what does that mean? That means that artists lose out on a bunch of money because if you try to report a song has been played to a different database in a different country, and you’ve got the wrong data then that money just goes and sits somewhere else.”

“Artists lose out on a bunch of money because if you try to report a song has been played to a different database”

Joel Connelly – Blackbird Ventures

Connolly believes that blockchain technology could help unify all of this data and break down a lot of friction in the industry.

“I think anything that can come along that’s going to try and reduce the influence and the impact that [power silo’s] have, the better for artists and musicians in the end.”

Daniel Dewar gave us some really good examples of significant areas where blockchain technology could help unify data. Case in point: copyright management.

Historically, this area has struggled with conflicting claims of ownership and lack of transparency. Many teams are investigating how right owner information can be published to a central blockchain.

Similar solutions could be found in the distribution of royalties, leveraging smart contracts like those used in Ethereum to algorithmically and openly define royalty splits and payment.

Dewar describes, “The potential is there for transparency to be provided in an area of the business which has been traditionally (and purposefully) opaque.

“Artists could have full visibility over the money supply chain before it reaches them.”

It could also breathe life into the live music space. Ticketing is another potential use-case, with a blockchain network used to manage tickets and regulate scalping.

Many of the intermediaries that contribute to exorbitant processing fees (we’ve all been there) could be removed at the same time.

This comes down to the crux of things.

The use of blockchain technology can streamline not just data, but processes and a lot of middle men; intermediaries who ultimately chip away from the artist’s bottom line.

 

The resistance

Every disruptive technology, almost by definition, will face strong resistance. The music industry is dominated by powerful incumbents who could lose out through change.

At the same time, the very nature of blockchain technology poses its own difficult challenges. Dewar is certain that if some key issues are not resolved, it may not be the stroke of divine inspiration we’ve all been waiting for.

A significant talking point will be that of proprietary data. Labels, publishers, performance rights organisations and digital service providers all see their data as proprietary and would not want all of this information made public.

To resolve this, there will have to be some level of permission and regulation of access to the blockchain, which starts to defeat its purpose in the first place.

Cost and energy is another major factor. The “mining servers” which help process blockchain transactions are extremely resource taxing.

Dewar believes that a music industry blockchain would require more transaction power than any existing network, including Bitcoin (which by the way consumes more electricity than the whole country of Ireland).

“Who would be responsible for the energy costs? Would the music industry need to build its own power grid? What responsibility does the music industry have to energy consumption and green futures?”

A blockchain network also requires political consensus from all parties, which like most things political, is prone to absolutely nothing happening.

“Who will write the rules and who will build it?”

Unprecedented cooperation within the music industry will be needed.

Perhaps the biggest issue, however, is that the music industry isn’t yet ready for a blockchain network.

Think about it this way: do you know how on the night before going to the dentist you brush your teeth three times and floss for the first time in months? This is effectively what the music industry needs to do.

The industry needs to clean up a lot of its practices before a blockchain could be even remotely useful.

As Dewar describes, “current data hygiene is extremely poor and use of standards is ineffective.”

Adopting a blockchain will not fix bad data, or the process through which data is collected; only how it’s stored and transacted. It will not magically amend all of the basic industry habits, only fill in the cavities.

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