Written by Giovanna Dughera
Blockchain, the technology behind Bitcoin, is an open-source distributed database using state-of-the-art cryptography that may facilitate collaboration and tracking transactions and interactions[1]. Developed to support the rise of the Bitcoin, the blockchain protocol can create trust and truth, enabling offline actors to cut out intermediaries and exchange true value directly. It’s easy to see how this would benefit a variety of industries and products well beyond Bitcoin.
Take the music industry: technology allowed the easy diffusion and distribution of music above and beyond the physical boundaries of audiotapes. The music industry is dominated by intermediaries who make music available without enforcing any mechanism over illicit appropriation of this content, while at the same time appropriating most of the value generated in the legal transactions. In short, the music industry faces plunging revenues, lack of transparency, feuds over the fair distribution of profits and piracy. These issues have consistently damaged the value chain, leading to increased erosion of profits especially for the artists at the very end of the chain notwithstanding being the creators of the tunes. To quantify the impact, musicians are paid on average $0.000035 per stream, or $35 per million streams[2].
But what is blockchain and how can it provide a solution to this issue?
“At its core, the blockchain is a distributed ledger that can validate and register transactions without the need for a central authority. No one owns the ledger — it’s spread across the nodes that constitute its network and is publicly available to everyone. Information stored on the ledger is interrelated through cryptographic hashes, which make it virtually irreversible and tamper proof. In a nutshell, it means that parties can make peer-to-peer exchanges of data, money or anything else of value in any amount and in a secure manner.”[3]
Essentially, blockchain can create trust needed to establish a secure platform for content exchange between creators and consumers. Thanks to blockchain, artists could publish their songs online autonomously, dictate the price for download based on the use that the consumer will do of the song (private versus commercial, for example), and decide how the profit gets distributed along the value chain, reducing the predatory power of distributors and record labels.
Imogen Heap is an innovator in this field: a passionate musician and programmer, she saw the potential of blockchain in revolutionizing the music industry and decided to release her album Tiny Human on public blockchain last year[4]. On top of this experiment she is actively working on Mycelia, a music ecosystem that would centralize the release of the music (directly by the artists), the control over payments from customers, smart contracts to maintain control over the use of the music and ensure fair pricing based on commercial versus non-commercial use. The overall ecosystem would also allow musicians to collect copious data on consumer preferences that can be used as a sophisticated feedback tool – data that currently is wasted because of the lack of an aggregation system that can collect it.
Heap envisions the development of a new marketplace – not just for music, but for all types of creative content – where all information is stored, collected, certified and made available through distributed blockchain network, with no friction and a significantly lower degree of risk for all parties involved.
Of course, this approach is new and untested and poses a series of questions and challenges before it can be applied on a wider scale. First, blockchain networks would still need to be managed and it’s unclear who would take ownership of the oversight process. There is also a risk on the consumer side: changing the current system in which music can be easily and widely accessed for free requires a change in perception on the value of the content, making consumers willing to pay for the use they make of it.
Moreover, this technology would allow artists to largely cut out the players that currently get the biggest share of the pie – distributors and record labels – and it’s unlikely that they will surrender without a fight. While their predatory practices have already convinced artists of the likes of Beyoncé to regain control on her music by pulling out of Spotify, not many others have enough following to make this move economically viable – blockchain technology may allow them to take this leap of faith. If this is the future of the industry, middlemen will have to increasingly move away from distribution and towards marketing, where their skill at identifying and promoting talent can really add value and help make sense of the amount of data the new technology will collect.
Revolution or fad? Only time will tell if Heap’s vision of creating a “fair trade” for music is right.
(786 words)
[1] http://www.mckinsey.com/industries/high-tech/our-insights/how-blockchains-could-change-the-world
[2] http://fortune.com/2016/09/22/blockchain-music-disruption/
[3] https://techcrunch.com/2016/10/08/how-blockchain-can-change-the-music-industry/
[4] http://myceliaformusic.org/2016/05/14/imogen-heap-decentralising-the-music-industry-with-blockchain/
Yet another great one Giovanna !!
I particularly like your choice of industries (Nutella, and now music)!
It is quite interesting to read about Heap’s initiative on testing blockchain for the music industry. If proven successful, this would be a great step towards ensuring that the benefits are distributed equitably, as pointed out in the blog. This technology would also encourage new talent to take up music as a serious career, especially in countries and cultures where it is not considered a very lucrative profession.
However, one thing that I haven’t clearly understood is the similarity or conflict of blockchain with something like a YouTube. Listeners today (including myself), hardly pay anything to listen to a song that they want to. They can watch it and listen to it for free on YouTube in most cases. I am not sure if YouTube is expected to pay a royalty or something to the artist, but for the end consumer the songs are technically free. Why then would consumers want to switch to a technology that would want them to pay to download a song.
While I agree that YouTube may be spoiling the market and the ethical solution would be something like a blockchain that maintains the same ease for consumer in terms of download but now ensures that a fair payment is made to the artist, I just wonder how practical this would be to implement in terms of getting the consumers to pay, given what they have gotten used to.
Thanks for your comment Nidhi! I completely agree, however due to the word limit I capped my discussion on demand-side risk. Generally speaking, blockchain would allow artists to get more control on the commercialization of their music: by cutting out the middlemen they would be able to get higher margins, so they could still offer their music for free for non-commercial use (same as listening on Youtube), very low prices for non commercial downloads, whilst imposing a clearer pricing structure for any other commercial use. We will see if this innovation brings on a much needed shift in the perception on the value of music from consumers’ side too!
Applying blockchain in this industry would definitely help reduce the conflicts of interest that plague it and develop a relationship between the content creators and their fans; however I wonder how they would be able to deal with the issue of piracy in an industry where customers are now used to downloading and streaming free music.
Very inspiring article. Applying the technology of blockchain has been very popular in financial services and the food industry, I didn’t know there are also people using blockchain to revolutionize the music industry. Maybe this can also be applied to other industries, such as art dealership.
Hi Giovanna, Insightful article indeed! Blockchain definitely can help in reducing inefficiencies on the demand side. But, how would you see it as a proposition from the consumer? For example: I would be glad paying 8 bucks a month on Spotify than pay per song. Also, how do you see an offering like blockchain technology fit in promoting the discoverability of new music?
Thanks Prakash, especially for introducing me to the concept of blockchain! I agree that the consumer side is tricky, however I believe that with more transparent pricing and with a larger share of profits going directly to artists (rather than to intermediaries such as the labels) this system would allow for a more competitive pricing structure so ultimately downloading music legally could become much more affordable than it is today. It’s still speculation but I’m very optimistic about the redistribution of value that could arise from this innovation.
Very interesting article!
And by the number of articles that somehow relate to blockchain, we can get an idea of how powerful is this concept and how it could impact so many different industries.
There is a lot of skepticism about this as well and it will be very interesting to see how this will develop in the near future!
I definitely agree that blockchain has the potential to carve out some of the mismanagement along the way, by driving transparency and some control to the musicians. Maybe I don’t understand the technology well enough, but what would stop someone from legally purchasing the music through the block chain, and then using a computer program to record the playback? This would get around the encryption and get back to where we started?
The game-changer, in my opinion, is when a critical mass of device manufacturers and playback devices start requiring a blockchain authentication or some form of encrypted verification in order to playback the music.