Blockchain for Creative Industries: Report from Middlesex University, Part 1
Much has been made of the potential of blockchain technology and its immutable transaction ledger. While larger institutions – mainly financial – have expressed cautious interest and support in blockchain’s possibilities, it is the many different corners of the music industry that have lauded blockchain as the answer to its many long-standing woes.
Here at the 4.5 Blog, we’ve looked extensively at how blockchain might address issues of transparency and reporting in the music industry. We’ve run Music 4.5 seminars in both London and New York to explore the business and political barriers to the adoption of a blockchain solution.
A year ago we interviewed Marus O’Dair, who said the barriers to a blockchain solution for music was “one of business and economic models, not technology.” As convener of the Blockchain for Creative Industries research cluster at Middlesex University, at the time of our interview Marcus was in the midst of a cross-departmental academic report on blockchain’s potential for music.
The cluster has now published that report, focusing on how blockchain might be applied within the music industry. Music On The Blockchain aims to answer some of the important issues around blockchain’s viability against the industry’s backdrop of challenges, including:
– where does blockchain technology have “transformative potential” for music?
– which previously lauded benefits of blockchain are unrealistic?
– And what are the barriers to adoption?
In Part 1 of the 4.5 Blog’s review of the report, we’ll look at the four areas of “transformative potential”. In Part 2, we’ll detail the report’s view on what blockchain cannot solve, explore what the research has identified as “significant barriers to adoption”, and summarise the cluster’s agenda for future research.
(NB: Quotes from the report are in italics.)
Four areas of “transformative potential”
The report identifies four areas where blockchain has the potential to revolutionise the music industry. However, revolutions can be slow to build, requiring mass participation and cooperation to bear fruit. So is the case with blockchain.
1 As a networked database for music copyright information
Blockchain technology is potentially transformative in functioning as both database and network, says the report, but is contingent on a number of factors and interventions. While copyright information could be stored on the blockchain, the stumbling block remains the lack of a single database that documents ownership of all song and recording rights. It would require, at least in the first instance, that the array of different databases which track rights and ownership be contacted in order to correct any errors, with the varying stakeholders entering in their own data. Citing the failure of the Global Repertoire Database, the proposal here is that blockchain technology could by contrast allow the process to occur incrementally.
Once again the issue of legacy data rears its head. The question of who would enter the data is key, as is the question of how the data would be verified.
2 Facilitating fast, frictionless royalty payments
This is where blockchain – as an enabler and carrier of cryptocurrencies – really comes into its own. Many artists have frustratingly posted photos of royalty checks with multiple zeros after the decimal point, months after their music was actually streamed or played. Because cryptocurrencies run at a low cost with a large denomination range, it could improve and accelerate royalty payments.
The effect of introducing blockchain technology could also have an instant effect on income relating to performing rights from the song copyright (via PRS For Music, in the case of the UK) and equitable remuneration on performance rights income from the recording copyright (via PPL in the UK).
In addition, smart contracts could make these payments instantaneous. Rather than passing through intermediaries, revenue from a stream or download could be distributed automatically between rights holders, according to agreed ‘splits’, as soon as a track is downloaded or streamed.
3 Offering transparency through the value chain
The blockchain utopia for many artists is having access to where their music is being played and by whom, providing a unique view into the habits and proclivities of fans. Imogen Heap’s Mycelia project aims to create a two-way transparency whereby both the artist and fan can access this data. On the Mycelia model…artists and their managers would also be able to gain access to data on those listening to their tracks at home or playing them on radio stations on the other side of the world.
‘Transparency’ is a term that is much bandied about as the ultimate goal of blockchain, but for some it is anything but. From the perspective of a label or publisher, some information could clearly be commercially sensitive; adoption would require, for instance, a belief that increased transparency would make companies more attractive to artists or, indeed, users. For different reasons, fans too may be unwilling to share data. Even for artists, transparency can bring challenges.
4 Providing access to alternative sources of capital
Crowdfunding by far gets the most press, but that doesn’t mean it’s the best and only route for musicians and artists who are releasing their music independently. Access to capital for artists attempting to operate without a record label remains limited…is in part because of the difficulty of understanding a clear pathway to profitability for some artists.
Blockchain can bring transparency to both crowdfunding and other investment routes, in a way that benefits all the relevant stakeholders. The transparency inherent in delivery of music via the blockchain could improve investor ability to monitor activity and investment outcomes, facilitating the modelling of likely returns and potentially affecting the pricing of capital.
Funding models traditionally reserved for start-ups – such as accelerators – could also be applied to music via blockchain. The possibility for fully automated monitoring of artists throughout their careers, via smart contracts, could make this ‘accelerator’ model relevant to artists, opening up the sector to new sources of capital seeking high-risk and highly scalable businesses for seed or venture capital.
Part 2 of the 4.5 Blog’s review of Music on the Blockchain will be posted next week. Follow us on Twitter and Facebook to get updates. For more information on the Blockchain for Creative Industries research cluster at Middlesex University, visit their website.