by Tomas Kasparas Jurevičius
So now that we have the mechanics of Blockchain more or less figured out, let’s look at the potential of Blockchain.
It really does take time and effort to understand the Blockchain, not to mention the sweat to build it. But here is some good news: with complexity, comes versatilityand adaptability.
We should understand that our beloved technology does not serve merely the purpose of crypto-currencies. Blockchain is fundamentally versatile and can be applied in various industries and markets. It can tackle various problems of latency, integrity, authenticity and information asymmetry.
Whether it is the question on the reliability of a national voting system, security and accessibility of your medical records or a convenience of renting a flat. Blockchain can be the answer. With blockchain, nobody will be able to hack your elections, your medical records won’t be lost and will only be accessed by a permissioned doctor, your sketchy landlord will have no choice but to give you your deposit back.
OK, so now that we understand that Blockchain has a potential to tackle various issues, let’s look at a specific application example: the industry that helps us have blood-pumping fun on Friday nights, sentimental and soothing Sunday nights and even enhanced-focus time on weekdays. Nope, it’s not the Pharmaceutical industry, it’s the Music Industry.
Music Industry has arguably one of the most antiquated structures in today’s fast-moving world and is becoming increasingly inaccurate and outdated. Application of Blockchain could bring strong and positive winds to such industry.
Problems in the Music Industry:
You would fool yourself, to think that a producer (a musician/artist) directly supplies the product (music) to the consumer (a fan). The structure of the industry is unnecessarily complex and inefficient. Here is a basic(?) organizational structure:
The number of intermediaries The number of agents involved in the business is rather horrifying. From agents to managers, who even amongst themselves couldn’t tell the difference in their role, to labels and publishers, who in some cases, take a big share of the revenue without a reasonable purpose. Next to that, in today’s digital age, music streaming platforms such as Spotify, really do not help the picture and just take a bigger bite of the revenues (artist receives $0.00397 per stream). Meanwhile, in the end, just a few drops of revenue trickle down to the artists themselves.
Transparency A huge problem, since there are so many intermediaries and players in the industry, is clarity on who owns what — the copyrights. The contention point as well is: what really creates, increases and boosts the value of the music that reaches listener’s ears. Is it the name of the artist? Is the prestige of the label? Is it the strong network of the distributor agency? And so on. Hence who should earn more? Essentially, not being clear on the input, the ownership rights and profits make the operations strongly intransparent, which ultimately hinders trust in the industry.
Unstructured databases and high costs Lastly, tied down to the issue of ownership rights, is unstructured and often-conflicting records on who owns what in what countries, and for what type of use. Data collection is extremely time-consuming and unstructured. — ex. 28 collection societies collect royalties for public performance rights and mechanical recordings in 28 different markets (PwC). This reinforces lack of transparency and leads to slow royalty payments, payment inaccuracies, revenue leakages and high costs in collecting and administrating the data.
Why Blockchain in the Music Industry?
Given the nature of Blockchain technology, we know that the issues listed above, if targeted right, could be resolved.
Firstly, trust is the fundamental component that has to be ensured for personal and economic exchanges to be performed. As we know, Blockchain transforms the notion of trust and therefore the way in which businesses, artists and consumers exchange value and decide to interact.
And here, Blockchain has a potential to completely disrupt the Music industry by becoming an alternative to the ‘trusted intermediaries’ that negotiate terms, handle the records and transactions and run the registries. It can become a platform where music makers would be able to self-publish their work, bypassing the complex and outdated ecosystem of intermediaries — that would give them more control over their work and data associated to their products and fanbase.
A key component would be the role of smart contracts in the Blockchain. With a smart contract parties could negotiate and predefine their ownership rights, royalty fees and obligations. The relationship would be already fixated and transparent, therefore no intermediaries and danger of information asymmetry. Next to that, smart contracts would ensure a reliably delivery of transactions.
Tokenization of music on the blockchain can come in very handy as well: with increasing demand on artist’s production (if more people buy and stream on the platform) the crypto-tokens tied to their music increase in value, generating earnings-on-a-go.
A distributed database for recording and composition rights, smart contracts and tokenization can slice millions of euros of administrative, legal costs and intermediary fees.
It is also interesting to note, that the technology could break the artificial legal parameters that restrict ownership in certain territories — this might emerge as extremely important, considering the strong growth of streaming services both in mature and emerging markets.
So, is it already here?
The industry is changing slowly, and naturally with some resistance. Just like in the financial sector, incumbent institutions and companies are in a defensive stance against an uncomfortable new technology with unproven opportunities, benefits and risks.
Multiple start-up companies (Ujo, Viberate, Mycelia, Blokurand multiple others) are working hard to establish themselves and attract both the musicians and consumers to their platforms.
The key drive to change in the industry is the speed of changing consumer habits. The faster the consumers change, the faster the industry will adapt, and blockchain may just be in the midst of it all.
Implementation of one huge blockchain system to tackle of these problems is rather questionable and practically not feasible. However, small structures concentrating on event booking/selling or streaming and distribution and cross-sector platforms might just do the trick and benefit everyone.
In the next couple of years, be sure to follow the change, it might be a very exciting and interesting sight to see.