The way we communicate, buy, sell or send has all changed because of the internet. The internet has allowed us to connect with each other almost instantaneously.
However, we are not truly connecting with each other but rather through ‘middle men’ or intermediaries. For instance if you want to send money you must go through a bank. If you have a desire to buy a particular song you don’t ask the artist, you go through Spotify or iTunes and if you need a ticket for a gig you go through Ticketmaster.
These intermediaries that you use everyday have fundamental shortcomings: They are centralised, meaning they can be hacked, causing problems such as music piracy. They are slow, it takes days for money to travel through the banking system around the world. They are unreliable, as companies like Spotify have been accused of paying out unfair royalties to artists in accordance to streaming numbers. They also breach privacy, for example Amazon collects data on each user and builds a profile to better direct advertising based on their personal interests.The issues raised by these intermediaries are nowhere more transparent than in the music industry. Music has always been a tangible asset, be it vinyl or CD. Now both content producer and consumer need to adapt to safely release or stream an electronic copy of a song.
Major reasons for slip-ups such as piracy, ticket touting and unfair royalties are outdated technologies on which intermediaries operate on. Technologies which are not strong enough to protect rights of consumers and artists alike.
What if there was instantaneous communication, direct from user to user without the need of powerful intermediaries?
Enter Blockchain – a technology which simply allows you to do just that, trade and communicate without the need of these ‘middle men’. Think of the possibilities this could create.
There would be a direct link between music creator and music consumer. A fair trade to manifest on the music marketplace. The potential to solve the problem of correct royalty distribution. Creating greater freedoms in collaboration and content production.
It can even allow you to pay fairly for the music you want to listen to rather than paying a flat rate for streaming. This technology will affect everyone in and out of the entertainment industry, this is its relevance.
The Blockchain birth cycle has been researched in the form of an interconnected story by Philippe Rixhon. He has a great deal of experience in the music business. He is managing director at Aarya Ltd which strives to ‘connect content producers and participating customers’.
He also conducts research at the UCL Centre for Blockchain Technologies. With such experience Philippe’s opinion is invaluable for the topic of blockchain in the entertainment industry.
As the saying goes ‘the early bird catches the worm’. This was true for bitcoins, we’ve all heard the success stories. This is also true for blockchain. Here is the Philippe’s story of events.
It stems from one of the most talked about headaches in the industry, music piracy. In 2010 Labour’s Lord (Peter) Mandelson had just launched the Digital Economy Act. It enables copyright holders, for the first time, to identify and prosecute individuals who access or download web content illegally. It was the first real attempt to tackle the piracy problem which was breaking down the structure of a music industry struggling to keep up.
“With two colleagues I had to present the new laws to counter illegal peer-to-peer distribution of music,” Phillippe explains. “I was interrupted by a Chinese manager and he asked me if I think that the law be it Britain or in France, will solve the (piracy) problem? I immediately answered: ‘No’, because the technical disruption of the internet requires a technical answer and not only a legal answer.”
At the same time, an important debate was being held at the European Parliament. “Two sides were fighting each other on the principles of Article 27 of the Universal Declaration of Human Rights: everybody has the right to access content, every author has the right to be remunerated (paid for their content). The two sides were fighting each other as if you either get this or you get that.”Article 27, although created in 1948, was under question because of the disruption caused buy the internet. The internet was making it hard for both sides to work simultaneously because of technical loopholes which led to issues such as piracy. However, Philippe proposed to reconcile the two sides at the EU Parliament: “You can give everybody the right to access (data) and you can remunerate authors.”
Their response was to ask how might this be done: “The first thing you need is technology, at that moment we did not have the technology to do that because the internet is made to share, it is not made to protect anything. If you have a new technology, then you can create new business models. That was my thesis. And only if you have new business models then you can have new policies and new laws, because laws of course, always follow the facts.”
At the end of 2015, a leading software publisher asked Philippe to check if some of their Blockchain research could be applied to the music business. “The research was focused on: can Blockchain be useful to avoid touting of concert tickets. I’m from the music business, touting is an issue, yes, but it’s not the biggest one in ticketing. The management of the tickets, tracing the ticket etc. is much bigger than dealing with touting.”
This is the intended purpose of blockchain, tracing and recording transactions means trade can operate in a more precise and just way.
“Then I got hit intellectually, six years after the 2010 challenge of Article 27, somebody showed me a technology which potentially could solve it.” The arrival of Blockchain provides a potential solution to the problems faced by the music business because of digitalisation.
What blockchain can do for consumer and artist
Intrigued by the potential applications of that technology, Philippe joined the UCL Centre for Blockchain Technologies. It had been founded in 2015 first to explore the effect of blockchain in the finance world.
Having attended a conference at UCL, Philippe realised that the use of blockchain in finance can be translated into the music world without much alteration.
This is where it can get a little complicated; however we can narrow the crossovers from finance to music into three simple steps:Firstly, the basis of blockchain is that all transactions are recorded into a distributed ledger (a register) for everyone to see. Philippe translated this to the music world: “Imagine a fan register: a digital asset (such as an MP3 file) changes holder through a transaction; you send me your copy of Beyonce’s latest song. The blockchain transaction is immediately recorded into the register. The register knows who is holding the digital asset and how it came to their holders.”
The point of this fan register is to allow a particular artist to keep the contact details of a buyer. This will make it possible for the artist to contact them personally for commercial and creative opportunities.
The second crossover is all about contacting the individuals who you have stored in the ‘fan register’. As Philippe learned at the UCL conference, blockchain allows for easy invites of shareholders to annual meetings (or general assembly), it also allows for them to send each other reports and sign-able documents much faster and completely direct.
Translating that to music, Philippe says: “Imagine you have a fan register and I know who is holding a (particular artist’s) music. I can invite them to a concert just like I have invited them to my general assembly. I can send you news and alerts (about concerts and album releases). I can sell you a concert ticket although the only thing I know about you is that you bought one song of that artist. I can start to collaborate with you on whatever.”
Blockchain allows for direct peer-to-peer payments without the need of a bank, and this allows artists to contact consumers directly. The possible accessibility is huge, changing the game in how we interact with artists and music.
Finally Philippe talks about price strategy: “If you are at the stock market you set the current price of a share between demand and supply and then if demand and supply agree with the price you exchange that share, that’s more or less a perfect market.
“Imagine a music market where between demand and supply they would set the price of a song by Beyonce slightly higher than a song by me. Then when the price is set it is exchanged. If you go to a music streaming site like Spotify the price is fixed by them.”
How might this differ from what is available now? “Recorded media and entertainment is one of the few industries that does not know who their customers are. They have no contact because there are so many intermediaries. You go and you buy the latest album from Taylor Swift from Tesco, Tesco knows you (if you pay with a credit card) if you buy it on Amazon, they know you. They know your address, credit card etc. so they start to build a profile. But Taylor Swift, she does not know you and because she does not know you, there are a lot of artistic and commercial opportunities being lost.”
Imagine direct contact between you and Taylor Swift inviting you to concerts, offering latest albums and merchandise straight to you without the need of intermediaries. This works in both directions, so a customer could potentially contact an artist to ask them questions or to request merchandise etc. Essentially benefiting both parties involved.
Increasing creative freedom
Blockchain can also help with artist-to-artist collaborations. “Artistically music is very creative and a lot of music is generated because people do mash ups: they hear something, they have an idea, they mix the two and they create a new piece. To mix you need to know who are the stakeholders,” Philippe told us.
“Imagine with blockchain that suddenly I know all the stakeholders. Then much more music creativity is possible because I can mix much more things. I could even speak with them: ‘Ah you wrote that tune, could I adapt the second violin there?’” Knowing who holds the creative rights to a song will speed up and improve collaborations and remixes.Increased collaboration is a significant result of the use of blockchain technologies, but by far not the only one. Philippe discussed the case of Imogen Heap and Ujo Music – in 2015 the pair worked on a track called Tiny Humans, using blockchain to complete one major aim, which was to distribute royalties to the artist and a few people around her. “So what she’s doing is independent of everything. Crowdfunding to fund the next album. You can do your own distribution of your song and if you can do that you can bypass a lot of intermediaries,” Philippe said.
We already see that major labels are losing importance in the world of the internet. Artists can be independent through online platforms like YouTube. Blockchain could take this independence even further.
On the other side, this technology can help the big players like the labels and the streamers. As Philippe points out: “They will use Blockchain primarily for other reasons, reason one is smart contracts for royalty distribution. Because they want a system to simplify the distribution of rights. It is for them a headache too. It is not just the meant to set up new business models, as pursued by Imogen Heap, it is also the possibility to drastically improve existing commercial models.”
New business models
An associate of Imogen Heap, Peter Harris, formed a new audio streaming platform called Resonate. This is another business model based on Blockchain.
“We are different in two fundamentally unique ways one is that we are owned by the community, we are a cooperative so everyone is a co-owner in the business. And so that means being able to vote in elections vote on issues, there’s democratic governance like all co-op’s have. That also means to be able to share in the profits if we are successful,” he told Artefact.“The other fundamentally unique point is that we have a model called stream to own and this is a top up system based on micro credits with a gradually increasing cost, the more times you listen to the same song the more you pay, until it equals the price of the download.”
The company strives for a fair deal between music consumer and music producer, just like the price strategy outlined earlier. However Peter tells us that in doing so there really is no such way of paying artists fairly it always benefits some more over others. What is certain, however, is that this system excels that of current streaming platforms like Spotify in terms of royalty distribution.
There are criticisms of the platform. For example, with the stream-to-own model consumers will actually end up paying more than that of a flat rate as in Spotify. Peter explains that through the numbers he’s seen, if you’re listening to new music the first time around it’s actually cheaper: “It’s only when you’re a heavy user and re-listening to the same music that it starts to get a little bit more expensive but also you’re owning the songs,” he said.
“I think this really speaks to who our main market is. We’re really interested in serving the needs of fans that spend above average, who really care about independent music.”
So how is blockchain used in this business model? “Blockchain has inspired this project and it will be a way that the service function but we’re also in beta right now,” Peter said.
“There really is no point in trying to put that into a blockchain yet because you can design something based on theory and then it’s through real interaction that you find out how people actually use something,”
Peter himself outlined some criticisms that he has found in using Blockchain: “What if someone else gets their hands on the release first, what happens if the artist makes a mistake you can’t change it later. If your talking about a blockchain system it gets much worse and creates a nightmare in terms of bad data, if it’s not designed well.”
As with any new technologies problems do occur, perhaps it’s a matter of placing guidelines to use them in the right way to make them sustainable for the consumption of the masses.Resonate is by no means the only company to be using this technology as an inspiration for a more democratic music marketplace. “The whole industry is talking about it and looking at it so it’s not a question of if it’s a question of when with what tools and how are the systems designed. I hope in the long run something that’s both open and democratic and is compelling to the largest percentage of the industry gets built,” Peter said.
The change is coming, and with it a new way of interaction for consumer and artist. Even the larger players like Spotify have bought Mediachain, a blockchain company in New York and as Peter explains, “they’re looking at it, they understand it, they know it’s necessary and it’s really true for everybody.”
The point is that MP3s are too easily altered, it is easy to replace or completely erase an artist’s data from this kind of file. However Benji tells Fact magazine that “the persistence of information on ownership is going to become really important. The bass player who played on a track that’s sampled 600 times and then played on a platform that makes money – how does that money get back to the bass player?”
If the likes of labels, licensees and streaming platforms all transact on a blockchain platform, it would be possible to easily obtain royalties owed to the bass player from samples. All the information would be recorded and made immutable to anyone but those with the rights to change it. Along with business platforms like Peter’s, this shows that a much brighter future for the industry is possible.
So Philippe had found a technology that was used primarily for the finance world and transposed its model to a music business field. What is revolutionary is its potential, it may only be in beta now and it may not be the sole technology used to tackle problems like piracy, royalty distribution. ticket touting, greater consumer interaction with artists etc, but it’s the basis for all these possibilities.
The scale of this technology is revolutionary for the music industry but it doesn’t stop there. Music is just a small sector of its potential, anything which needs tracking such as the food or medicine industry will also benefit from this technology. Of course finance is already moving in this direction fast with the media-friendly cryptocurrency, Bitcoin.
Featured image by Ed Uthman via Flickr CC