Why Blockchain Might not be the Perfect Technology for the Music Industry

Music is great, we all love it. So why don’t we want the best for the artists we spend so much time listening to? Sure, we may feel that we’re supporting them when we listen to the “Shape of You” on repeat through Spotify, but consider the fact that each play earns Ed Sheeran only a fraction of a fraction of a dollar. Many people tend to believe that the blockchain is the solution, but the technology fueling the majority of cryptocurrencies may be too slow and the transaction fees may be too heavy for the music industry, which begs the question: What type of distributed ledger technology could be the key to a music industry makeover?

Compact discs (and how far we haven’t come)

CDs changed the face of music by making it more accessible than ever before, and streaming did the same thing a generation later. But when CDs and digital music entered the mainstream market, artists were left with abused rights and less money than anyone could have anticipated. With the onset of piracy, online music sales through iTunes, and eventually streaming services, the industry had to reevaluate what rights artists have. This reevaluation is still happening even today, and although some people believe that blockchain technology can easily help fix the problems, the reality may be a bit more complicated. Before we can delve too deep into where the blockchain alone will struggle we need to understand why the music industry is so complicated; the heart of that problem lies in music, songwriter, and performer rights.

Music industry licenses

There are different sets of rights for songwriters (those who take part in the creation of a song) and performers (those who sing/perform that song).

Essentially, songwriters have far more rights than performers, and even then they are still limited to choosing from one of the four PROs (Performing Rights Organization; two are non-profit and two are for-profit). A PRO is supposed to be the artist’s best friend, a company that goes around collecting royalties on behalf of the artist while protecting their rights. But as Mary LaFrance, a professor of intellectual property law, points out, “Songwriter/Publisher concerns include:

• No way to know if streaming services report accurately to PROs.
• PROs do not precisely track radio play, and must estimate performances in public venues.
• PROs don’t disclose how writers’ individual royalty shares are calculated.”

On top of all of these artist-specific licenses, the music industry in general is governed by a few more:

1. DMCA radio streaming license
2. On demand streaming license
3. And master recording rights

The ongoing problem is that all form roadblocks and barriers that force artists and fans to use a collection of services to listen to the music they enjoy. Because of this convoluted field, artists typically pay a subscription fee to digital distributors (The Orchard, Tunecore, etc.) to have their music published on all available platforms. In some cases, artists could do it themselves (if they own the rights to their music), but most companies like Spotify require artists to go through a third-party distributor who verifies the quality of their music.

Although this may seem like the perfect place for the blockchain to step in, it should be noted that the sheer volume of Tx/s (Transactions per second) would overwhelm most standard chains. Distributed ledger technology is definitely the key here, but finding a technology that can handle the volume of music streaming (Spotify is currently streaming over 18,000 songs per second in the US alone), the fastest blockchains can only handle 1,500 Tx/s.

An agreement for a fair industry

The music industry is fragmented; artists are forced to put their music on so many different platforms and they have no easy way to track the money they should be earning since most often they have to go through a third-party service in order to get listed. Even though a band may have hundreds of thousands of streams online, they may still be forced to continue touring to make a living. In 2015, the French government released their “Agreement For A Fair Development Of Online Music,” which outlines a path to fixing the music industry by putting pressure on record companies:

1. Support the development of legal music offerings
2. Make the music industry’s economy more transparent
3. Enhance the exposure of music and cultural diversity
4. Promote contractual best practices
5. Ensure fair remuneration for artists
6. Use available resources to facilitate digital transition
7. Ensure effective and sustained implementation of the code

This code of conduct was received with industry-wide applause, clearly showing that the industry is ready for change. It just so happens that all of these code of conduct objectives can be fulfilled with decentralized technology, but in order for the blockchain to fix the music industry, it would have to be able to handle massive amounts of transactions every second at very low cost.

The blockchain or a different distributed ledger technology (DLT)?

Silvan Jongerius writes in a LinkedIn article that there are essentially four things that the blockchain can do for the music industry: provide a metadata core ledger to clear up copyright issues, allow for a faster and more fair payment distribution, create an “ICO-like” funding scheme for music projects, and help remove some of the central control from labels and PROs.

We see these solutions being implemented with many different blockchain companies already. Musicoin and Revelator, for instance, are both blockchain-based startups that offer an alternative to typical industry standards. Musicoin allows users to stream music for free and they currently have a library of over 30,000 songs, but scaling will certainly become an issue if they want to ever compete with Spotify. Revelator, on the other hand, provides a service that helps monitor copyrights, arming musicians with the ability to track how much in royalties they should be earning. MyCelia, the platform created by Imogen Heap, is a blockchain platform that allows musicians to sell their music directly to fans in exchange for cryptocurrencies.

These individual technologies are great, but they still create the issue of a fragmented music industry where artists and fans are forced to participate in a large collection of platforms in order to access the different music they want to hear. The bottom line remains that the blockchain can’t handle the overall needs of such an industry as well as other distributed ledger technology because of its physical limitations.

Distributed Ledger Technology (DLT) for music industry.

Hyperledger Fabric is a functional alternative that is currently working with the American Society for Composers, Authors and Publishers, the Society of Authors, Composers and Publishers of Music, and PRS for Music in order to create a more efficient copyright data management method. There is, however, the small problem that Hyperledger Fabric isn’t designed as a currency exchange, so this DLT could never be used for streaming services.

Of the other major DLT’s, the only real contender is the Hedera Hashgraph because of its high Tx/s, graph instead of block structure, and its ability to guarantee transaction security without needing a proof-of-work or proof-of-stake consensus. Hedera explains in their white paper that “a blockchain is like a tree that is continuously pruned as it grows — this pruning is necessary to keep the branches from growing out of control. In hashgraph, rather than pruning new growth, it is woven back into the body.”

There is a platform being launched on the Hedera Hashgraph that is targeted specifically at helping the music industry, and when comparing it to the seven items outlined in the Agreement For A Fair Development Of Online Music it offers quite a promising solution. Hearo.fm is built on the Hedera Hashgraph platform and not on the blockchain, because it needs to take advantage of certain key aspects in order for its JAM token to function properly:

• It has the capability of performing hundreds of thousands of Tx/s per shard
• Has nano fees (since the platform doesn’t require heavy mining principles like the blockchain, the overhead and participation costs are far, far lower)
• Asynchronous Byzantine Fault Tolerance (the ability to achieve consensus even when there are bad, malicious, or lying nodes participating in the system)

https://www.youtube.com/watch?v=LEAR4pEDCZg

Hearo.fm is designed to be a streaming service that pays artists their fair due, and it does this by offering a hybrid music license that hits items 1–4 on the Fair Development list. This license is an agreement between artists and the platform, and will allow the platform to stream, sell, publish, and broadcast the music while accepting payments in fiat and cryptocurrencies on behalf of the artists. The key part of the license is its non-exclusivity, meaning that the artists who are already signed on to labels and publishing deals can still participate. Hearo.fm has created a license that is a combination of a performing, mechanical, synchronization, download, and streaming license and is available worldwide, meaning that artists from anywhere can promote their music and get paid fairly.

The pay they receive won’t be heavily cut into either, since artists can set their own rate and earn 90% of the money their music generates on Hearo.fm, quite a heavy difference when compared to the ~12% they make now. This fair pay for artists fulfills item 5, and the fact that Hearo.fm will be available to artists worldwide fulfills item 6. Lastly, given that the code for their JAM token will be written with open source ERC20 protocols, the community will be able to ensure that Hearo.fm has the best interests of the musicians in mind, bringing them in line with item 7.

Will it be enough?

An extensive report by Citigroup explains that “Artists’ share of music revenues is small. In 2017, artists captured just 12% of music revenue with most of the value leakage driven by the costs of running a myriad of distribution platforms — AM/FM radio, satellite radio, Internet distributors — augmented by the costs (and profits) of the record labels.” This would mean that artists should be earning around $208,000, but are losing $183,000 somewhere along the way.

The music industry desperately needs reform. Artists, who are the sole creators of the industry, are far from enjoying the fruits of their labor; instead they are starving while record labels and licensing agencies take all the profit. It is a simple answer when a platform like Hearo.fm enables artists to earn 90% of everything they generate through streamed music, sales, merchandise, and more. It all boils down to the simple question of “Do artists deserve fair compensation for their work?” Because no matter how you present it, 12% is hardly a step up from highway robbery when 90% is possible right now.

About the author:

Kirill Shilov — Founder of Geekforge.io and Howtotoken.com. Interviewing the top 10,000 worldwide experts who reveal the biggest issues on the way to technological singularity. Join my #10kqachallenge: GeekForge Formula.