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Blockchain: The Music Industry's Newest Savior

By

Tim

Prentiss

WriterETHNews.com

Some say blockchain technology is going to revolutionize the music industry. Haven’t we heard this somewhere before?

In May, Wired posted an article listing 187 things blockchain was supposed to fix; it included everything from curing cancer to making pornography more affordable. The list was not exhaustive, however. It didn't mention, for instance, the music industry, though many companies have sprung up claiming they will use the technology to save the industry.

Of course, the claim is appealing. The record industry has never really recovered from the "disruptions" of the past two decades, and it desperately needs a new economic model.

It's an industry with a long history of extracting work from artists without properly remunerating them, and blockchain promises to empower artists and help them receive their fair share in an industry where revenue tends to be devoured by corporations at the top of the food chain, while artists themselves get scraps.

Multiple companies have created blockchain applications for music distribution. While some of these seemed to wither away – launch dates never met, social media pages on the projects slowly going quiet – others had little promise to begin with (some were essentially "it's Bandcamp, but you can pay with bitcoin!").

Still, there are benefits blockchain could provide. Most obviously for tracking royalties. The need for improvements on that front have been highlighted by the recent history of streaming service Spotify.

Last year Spotify bought blockchain company Mediachain, which described itself as a "a peer-to-peer, decentralized database for sharing information across applications and organizations."

This acquisition followed a $43 million lawsuit over royalties Spotify failed to pay. The company said it simply didn't know who was supposed to receive the royalties. The Mediachain acquisition, Spotify claimed, would give it a new tool to help cut through the confusion.  

In a blog post describing Mediachain, founder Jesse Walden explained:

"Platforms like Spotify and Soundcloud have an incentive to find a reliable, long-term solution to the fractured data problem in order to avoid future lawsuits. Spotify seems to be leading the charge, having recently committed to 'fix the global problem of bad publishing data once and for all.'"

This comment suggests Mediachain was not intended to supplant the current, dominant music delivery platforms. It instead offered a solution that could be utilized by those major players. So with Spotify now possessing Mediachain, was that "global problem" solved "once and for all"?

The January following the acquisition, Spotify was again sued over unpaid royalties, this time for $1.6 billion.

(ETHNews reached out to Spotify for a comment regarding how, or if, the Mediachain acquisition has altered Spotify's practices, but we received no response.)

Spotify's business model is remarkable in many ways. In spite of being arguably damaging to the artform itself, in spite of having accelerated the contraction of artists' revenue, in spite of the fact (if the lawsuits are any indication) that the company regularly gives itself deep discounts by neglecting to pay for the music it streams, the company still manages to be utterly unprofitable.

Last week Spotify released a quarterly report announcing a $100 million loss. It was the third quarter in a row Spotify lost money. What is even more remarkable is that these losses are occurring during a period in which Spotify continues to increase its listener base. And it's not just Spotify that continues to grow. A Nielson report indicated that in 2017 Americans listened to about five-and-a-half more hours of music per week than they had one year earlier.    

What that statistic indicates about the value Americans place on music is certainly debatable. Possibly all those listens mean love of music is at an all time high. Or it's possible music is now appreciated with a fervor similar to that usually reserved for wallpaper – not engaged with deeply, but always there, blandly present in the background. But whatever this increased "consumption" of music indicates, the question still remains: Why, if people are continually listening to more music, can no one seem to be able to turn a profit?

An article in Fortune placed the blame for Spotify's failure to profit on record companies. No matter how many subscriptions the service sells, went the argument, record companies will continue to squeeze. As evidence, the article cited recent federal legislation that would extend copyrights to 144 years. Spotify can only really be profitable (again, according to the article) if it is allowed to give away other people's work nearly for free; unfortunately record companies have stables full of aggressive attorneys and charming celebrities who apparently prevent this from happening.

Spotify (and other "disruptors") created a business model that can only be profitable if content is virtually free; ergo, content should be free. The utter strangeness of this argument went completely unacknowledged in the Fortune piece. 

eMusic, possibly the oldest streaming music service, has come to a similar conclusion. According to a white paper recently issued by the company, the problem facing musicians is that middlemen take such a large chunk of the money that musicians can't make a living. A chart included shows artists typically receive only 10 percent of revenue, while publishers, labels, and retailers get the remaining 90 percent. The solution to this problem is (you might have already guessed) blockchain.

By using blockchain, according to the paper, eMusic will be able to change that split a simple 50/50. Half to service providers, half to the artists/labels. Since blockchain allows for automation of royalties payments, publishing companies are no longer need to be involved.

The plan appears to be an attempt to create a comprehensive platform that allows for a more direct interface between artist (and/or record companies) and service providers, taking money that would historically go to publishers and reallocate it to those service providers, including, but not exclusively, eMusic. The paper does admit getting those other providers to participate may be difficult. It states: 

"We are under no illusion that convincing established service providers, such as Pandora or Spotify, to incorporate our blockchain platform will be easy."

So why would these other providers, ostensibly eMusic's competitors have any interest in participating?

"By championing an equitable split of revenue, artists distributed through eMusic can better-negotiate promotional support and will be given more weight in profit-driven algorithms that drive music recommendations on major retail platforms."

By using blockchain to cut publishers out of the equation, an artist can pay streaming services a bigger percentage, which will incentivize those services to play that artist's music more often.

Essentially it is payola. Rather than empowering artists, the plan seems like a method to increase the tribute paid to those already in control, a very different picture than that described in the more optimistic predictions. Like this one:

"For independent or new artists, this technology will cut costs effectively. Music companies will have to readjust their business models because blockchain will be at the center of this power dynamic shift from big corporations to artists."

The statement of blockchain's potential is eerily similar to this comment also heralding an increasingly decentralized future, in which independent artists can gain some power:

"It's no longer about a big behemoth beaming something at a mass audience … It's about a mass of niche audiences picking and selecting what they want at any given time."

But that second statement is not about blockchain; it's from a 2005 New York Times article about how the internet had created an opening for independent music labels to thrive. For the music industry, blockchain is now promising some of the same benefits the internet promised, yet failed to deliver, more than a decade ago: greater control for artists and freedom from the dominance of a few huge companies.

Some of us, those old enough to remember the first time we heard the word "email," may experience some déjà vu when we hear these claims about blockchain's potential. And many of us may be skeptical when told that a new technology is about to undermine the control of billion-dollar corporations.     


Tim Prentiss

Tim Prentiss is a writer and editor for ETHNews. He has a master’s degree in journalism from the University of Nevada, Reno. He lives in Reno with his daughter. In his spare time he writes songs and disassembles perfectly good electronic devices.

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