Blockchain for Creative Industries: Report from Middlesex University, Part 2
Music On The Blockchain – authored by the Blockchain for Creative Industries research cluster at Middlesex University – was published last month as an in-depth, multi-disciplinary academic analysis of blockchain’s potential applications for the music industry. In Part 1 of the 4.5 Blog’s review of the report, we looked at blockchain’s 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: Direct quotes from the report are in italics.)
What blockchain cannot solve
The term ‘blockchain’ has gained traction as a panacea to the music industry’s various woes. But blockchain-enabled solutions – in many cases – are neither straightforward nor a cure-all. The report has identified three areas where blockchain’s supposed benefits are either unfeasible or require that extensive considerations be made:
“Transparency” is perhaps the most used word for how blockchain might revolutionise the music industry. Artists (claim to) want transparency over where their music is being played and by whom, as well as a better view into where they are accruing royalties and when to expect payment. In addition, artists like Imogen Heap envisage a blockchain-enabled landscape whereby musicians themselves have control over where their music is played and can set their own pricing structure, much to the dismay of record labels and rights organisations who fear they will be cut out of the process. Some have suggested that artists could use smart contracts to establish the pricing of tracks.
However, like many things, it is not a completely straightforward proposition. For example, if artists remove themselves from the existing distribution infrastructure, they may find themselves short-changed in other areas. Flexible pricing would present challenges, for instance in terms of chart eligibility.
-A ‘fair trade’ music ecosystem
A Fair Trade movement has sprung up in the music industry, with artists forming a coalition to help consumers identify which streaming services give what musicians consider a fair deal. Blockchain has been seen as both an enabler and disruptor in this area, making it easier to promote the same kind of ‘fair trade’ business practices that we’ve seen in – for example – the coffee business, as well as underpinning a transparent system that offers artists and songwriters a greater share of value.
However, it is not yet clear that blockchain technology is intrinsically more ‘fair’. Private, permissioned blockchains, for instance, might have a number of advantages but ‘fairness’ would not necessarily be one of them.
Any while the Fair Trade movement is gaining momentum and signatories, it is uncertain to what extent users would respond to the notion of ‘fair trade’ music; their support would be important in encouraging adoption.
-Taking out the role of record labels and performance rights organisations
Imogen Heap’s Mycelia – for example – aims to give artists the ability to sell directly to fans, a concept that doesn’t sit well with rights organisations and labels. But this report still sees a role for such intermediaries while still leveraging the idea that artists can get more in royalties from their works.
Music publishers, for instance, might concentrate on data verification and the resolution of disputes; even if their administrative function is replaced by blockchain technology, their role in negotiating payments is likely to continue. Perhaps most significantly, royalty payments could be split almost instantly according to agreed percentages and paid directly to artists and songwriters; though third parties could still take a cut, they might occupy a different position in the value chain.
“Significant barriers to adoption”
For all of the possible applications of blockchain for the music industry, there are still many issues that the report optimistically position as yet to be resolved. These are:
-Issues with cryptocurrencies
It’s all well and good to herald cryptocurrencies as the future of business, but the fact remains that at present they embody a number of unresolved issues:
–alternative currencies often survive for only brief periods,
-a number of issues remain, from the legal and regulatory to the environmental
-scalability also remains a big question.
Blockchain technology and cryptocurrencies are, for the moment, notoriously lacking in user friendliness. More widespread adoption may be dependent on blockchain technology becoming ‘invisible’, affecting the back-end of music transactions rather than the user experience.
– Governance, regulation and integrity of the data
As we mentioned in Part 1 of our summary, the success of any music industry database will be down to the integrity of the data entered into it. Human error remains an enormous liability, especially when entered onto a supposedly immutable system. Governance and regulation could have consequences for the integrity of the data, given the obvious danger that erroneous information is entered, accidentally or otherwise, onto an immutable ledger. Corrections to such information would be possible – they too would be stored on the ledger – but the vital issue of how disputes would be resolved remains unclear. And while such issues are less relevant for the open blockchains proposed by Imogen Heap and Benji Rogers of Pledge Music, it is also very possible that powerful corporations will set up private, permissioned blockchains, [which] would affect the ability of newcomers to gain access to the network.
-Reaching critical mass
At the moment, blockchain solutions are seen as most beneficial for independent and emerging artists not associated with a record label. However, for blockchain to become modus operandi for the wider industry and reach critical mass it would have to be adopted by larger players, who may be resistant to the transparency that blockchain enables. If it is relatively easy to at least imagine how blockchain technology might be employed by an emerging artist yet to sign a record or publishing deal, for instance on a platform such as Bittunes7, it is much harder to see how it would be employed in the context of back catalogue owned by major labels.
This leads us back to permissioned versus open blockchain databases. Big labels are likely to prefer permissioned, but is that counterproductive to the transparency that many artists say they want? However, it is adoption by these larger (and better funded) players that may influence blockchain’s application through the industry. Adoption by large corporations will depend on a clear value proposition: as a means of dealing with the volume of data from on-demand streaming, for instance, or a way to monetise derivative works and user-generated content.
The agenda for future research
The report concludes that although blockchain has been touted as a cure-all for the music industry, some claims have at the very least been premature. It is also worth remembering that whatever changes blockchain enables, they will be slow to pass.
However, where this report has excelled is in exploring where blockchain’s potential applications and benefits have been overlooked against the hype. The agenda for future research, argues the report, should be to look for blockchain’s applications across other creative industries, and how it might change how specific tasks are performed instead of focusing on the unrealistic idea that it solves high-level issues.
For example, with the latter, there would appear to be considerable potential for smart ticketing, for instance, at the point blockchain technology converges with the Internet of Things. Other possible applications include the transfer of assets, cataloguing and transferring digital images, and a secondary market of music rights.
What the technology offers is far from one-size-fits-all, it concludes, and what is clear is that the potential of blockchain technology is only just starting to be explored.
This report should reframe future discussions about blockchian. The barriers to adoption listed in the report as surmountable should be a call-to-action for the music industry and those who support it. Instead of focusing on the utopian notion of an industry-wide, transparent database of rights and royalties, research needs to be extended to potential applications of the technology in those music industries not directly related to recorded music – and, indeed, in other creative industries entirely.
Part 1 of the 4.5 Blog’s review of Music on the Blockchain can be found here. 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.