Wednesday, digital music service Spotify announced its acquisition of Mediachain Labs for an undisclosed amount. In 2016, Mediachain raised $1.5 million in venture capital for its blockchain-based startup. The company aims to put ownership and rights to media, like music or books, on a blockchain-based distributed database. This would allow for creators to safeguard their copyrights and would enable the tracking of creative works as they spread online.
By using a blockchain-based timestamping system, a creator’s work can effectively be notarized, much like how Proof-of-Existence platforms (like Stampery or proofofexistence.com) operate. If that blockchain can be used to securely store data regarding when something was created and who created it, rights holders can be protected.
Because Mediachain was obtained by Spotify, one can surmise that Spotify is attempting to streamline back office processes, ensuring creators get paid appropriately. Last year, Spotify reached a $30 million settlement with music publishers over unpaid royalties. Part of the issue stemmed from Spotify being unable to identify some of the publishers of songs. Terms of the settlement will see Spotify and participating publishers working together to establish best practices for getting rights holders paid. Spotify has agreed to take reasonable steps toward ensuring all music is matched to the appropriate publishers going forward, and hold recurring discussions about how to improve the royalty payment process.
It seems Spotify’s acquisition of Mediachain Labs is in line with its post-settlement commitments. Spotify shared a press release on its website which reads, “Brooklyn-based Mediachain Labs has been the driving force behind the Mediachain project, a world-class blockchain research agenda and open source protocol to better manage data that is critical to the health of the music industry. The Mediachain team will join our New York City offices and help further Spotify’s journey towards a more fair, transparent and rewarding music industry for creators and rights owners.”
Mediachain, which originally set out to create its own blockchain, announced in February that it had begun to integrate with Ethereum. In a blog post on Medium, Mediachain said what Ethereum can provide is a “perfect fit with the Mediachain vision.” The blog continues, reading, “We believe that dApps, on top of Ethereum and other platforms, can create a more fair distribution of value between participants in the media ecosystem, appropriately compensate the content creators, and maybe even challenge the dominant surveillance capitalism mode of the social/user-generated content web. A perfect fit with the Mediachain vision.”
Mediachain has been working towards finding an efficient way to store the metadata for creative content. Storing vast amounts of data online can quickly become prohibitively expensive, even when using distributed file storage methods like the InterPlanetary File System (IPFS).
Spotify has over 50 million paying subscribers, over 100 million active users, and has paid out $5 billion to rights holders as of September 2016. Spotify is currently valued at $8.53 billion after raising $526 million in a fundraising round that closed June 2015. The company is planning an eventual public offering, but it may eschew a traditional IPO and instead directly list shares on the open stock market. That means its stock price would be set by supply and demand. With an upcoming stock issuance impending, acquiring a blockchain technology company is a strategic move for Spotify.
With blockchain technology rapidly increasing in popularity, seeing the buzzword “blockchain” in a company’s pre-IPO (or pre-direct listing) prospectus should only help to excite investors. The savvy investor knows blockchain tech will play a major role in the future, even if it’s hidden away, running behind-the-scenes operations of major enterprises.