Blockchain Could Be Music’s Next Disruptor

 

by Imogen Heap , Don Tapscott for Fortune Magazine

Artists can finally get what they deserve.

Anyone who follows the music industry knows of the tussles between artists and those who rely on their creative output. The traditional food chain is a long one: between those who create the music and those who pay for it—music lovers, concert goers, advertisers, rights licensees, and corporate sponsors—there are publishers, producers, and talent agencies, and countless others with a stake in the industry. Each of these intermediaries takes a cut of the revenues and passes along the rest, the remainder of which eventually reaches the artists and musicians somewhere between 6 and 18 months.

Many thought the Internet might help democratize the industry, but the opposite has occurred. “In the latter part of the 20thcentury, if a song of mine sold a million copies, I would receive about $45,000 in mechanical royalties, and I was awarded a platinum record,” Eddie Schwartz, head of the Songwriters Association of Canada (SAC), told members of the International Literary and Artistic Association in 2015. “Today, a major music service pays me an average of $.000035 per stream, or about $35 for a million streams, thus reducing a reasonable middle class living to the value of a pizza.”

We have swung from one extreme to the other. Now it’s time for the whole industry to collaborate on a healthy, sustainable, and frictionless ecosystem that benefits everyone in the value chain, not just the relative few.

Big technology companies and streaming audio services have taken an additional piece of the pie, leaving most artists with even fewer crumbs, not to mention less control over their work and little knowledge of those who interact with it. The business has become so complex and powerful, so concentrated, that musicians like Taylor Swift and Jay-Z have taken themselves off of Spotify. For most artists, that’s not an option.

This could all change under blockchain-based platforms — clever pieces of code called smart contracts, and their capacity to link and act upon data. The new technology runs on millions of devices, from desktops to smartphones, and is open to anyone, where not just information but money and anything else of value can be transferred and stored securely and privately. Trust among participants is established not by powerful intermediaries like record labels, streaming services, or credit card companies, but by the collaboration of those whose devices are running the software.

Toronto’s industrial rock band 22Hertz has already embraced the blockchain, creating hashes of whole songs—the lyrics and the melody—as proof of ownership for a fraction of the cost of registering only the title of the song in Canada. The band’s online store is currently running a promotion where fans pay half price for CDs and t-shirts if they go direct and pay in Bitcoin . Fans can also tip the band in Bitcoin and download song files for free. Canadian-born cellist and composer Zoë Keating, a friend of Imogen’s, plans to use the blockchain not just for registering and promoting digital rights but for cultivating direct relationships with her fans, offering them special privileges, and providing even greater transparency to prospective clients or partners.

Various companies are already teaming up with forward-thinking musicians to develop a fair and sustainable music ecosystem for artists to turn a song into a business that feeds its creators and those who enable others to interact with it, simultaneously. For example, one of us—Imogen’s—song, “Tiny Human,” was released on a beta blockchain-based platform, UjoMusic, along with all credits and terms of licensing. In exchange for the digital currency Ether, people could download the song itself or all the vocal and instrumental stems of the song for commercial or non-commercial use. Via a smart contract, all the musicians were paid immediately to their personal Ether wallets.

Nick Mason of Pink Floyd recently wrotein a paper published in July by Middlesex University London, “If blockchain technology is going to be the future, we need to dig in and make it happen.” How? We see its working like this. Artists would register their intellectual property by linking all elements—lyrics, musical composition, liner notes, cover art, licensing information, audio and video performances of the work—to the blockchainfor all to see or sample, thus contributing to the much needed peer-to-peer database of music, that is global, verified, inclusive, and currently non existent.

Using smart contracts—essentially templates for setting terms of service and usage for fans, distributors, sponsors, and licensees and templates for directly and immediately distributing revenues to contributors, collaborators, and promoters of the work—artists would decide who could interact with their work, how, and how much each type of interaction would be worth with a lot less paperwork.

Each of these parties—artists, managers, musicians, producers, record and publishing labels—could see all the transactions associated with the work on the blockchain and could track who was paying what amount for which right and who was receiving what proportion of revenues. There would be no opacity in accounting, no delay in payment, and no confusion over who owned or controlled which rights to the work.

Through a set of technical, ethical, and commercial standards, the ecosystem would enable an entirely new marketplace for music and services to flourish, eventually holding all music-related information ever recorded, all linked to a distributed blockchain network of personal computers. Those wanting to do business with the artists and musical works in the ecosystem would be able to do so without institutional friction, from sharing skill sets and finding collaborators to commissioning new works, booking shows, and hiring a tour manager or a local cellist.

What about the labels, collection societies, and distributors, such as Spotify, and YouTube? Does the blockchain completely disintermediate them?

No, if they adopt and embrace change, they would also greatly benefit from this database. As with all new technology, blockchain creates a shift in skill sets and opens up new opportunities. There is an ever-greater need for curation and marketing. Record companies could better help music lovers to sift through the hundreds of millions of hours of music and, along with the publishers and existing collection societies, verify that the data are indeed correct. At some stage, artists will invariably need to work with these and other parties.

Our point is that artists, as the source, will be sustained at the center of their own ecosystem, not starving at the edges of many others.

That’s the promise of a fair and sustainable music ecosystem, catapulted into action by the adoption of blockchain technology.

Imogen Heap is a Grammy-winning British recording artist and founder of myceliaformusic.org, a collective of creatives, professionals, and lovers of music. Don Tapscott is author of 15 books, most recently with his son Alex, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World.

First appeared at Fortune