“There are many reasons why the blockchain is way before its time. It is much too early to think it’s the saviour of the business for a whole ton of reasons.”
Bill Colitre, VP & general counsel at Music Reports, is not blown away by blockchain technology, despite the current buzz about this technology’s potential for greater transparency and swifter reporting and payment for music usage.
“The simplest way to look at it is that from our perspective blockchain doesn’t solve a problem that needs to be solved. It solves a problem that Music Reports is already more than adequately solving, which is how one efficiently allocates royalties from a pool of royalties to the various owners,” says Colitre.
Given his role, he might be expected to be defensive about any technology that claims to brutally expose incumbents in the music-rights space as sluggish dinosaurs in an age of billions of micropayments.
Colitre argues, however, that Music Reports has been preparing for this challenge for some time, having been running for 20 years in the US providing music licensing, royalty and data services to more than 500 clients.
Its latest product chimes with at least part of the fundamentals of blockchain – allowing publishers to search for unmatched tracks and, if a match is made, Music Reports will verify that track and release the related royalties.
“What it [blockchain] depends on is an efficient registry of music rights information and Music Reports has the leading registry of music rights information,” says Colitre. “For us it is not a problem that needs to be solved.”
He adds that a focus of blockchain is having a complete registry of all rights relating to compositions and recordings – including precisely who played on which track (an issue that becomes fraught with complexities when session musicians or samples are used as is relating that all back to the relevant PROs and publishers).
Music Reports claims to have solved this issue at the start of the year. “We launched [our registry tool] in February and it is publicly available,” says Colitre. “No problem. Any publisher can log into it and put their data there.”
He does accept, however, that there is an education gap at the creator level that is exacerbating this metadata conundrum.
“The artists are not familiar with why metadata is important to them being paid in the long run,” he proposes. “They tend to think of it as some wonky bullshit that they don’t need to pay attention to because they are creative and they need to be focused on creating great art. Of course we all want them to be focused on that; that is the thing that benefits all of us.”
He continues, “It is also a fairly small thing to ask publishers and composers to sign the painting. If Dali didn’t sign his paintings, how would you know they were Dali paintings? You would think the artist would be compelled to sign their work when they are finally finished with it and believe that it represents their best efforts. We need to teach artists to sign their work; and if we do that, then the rest of the administration is extremely rapid and transparent at this point.”
Beyond blockchain, Colitre suggests that tackling big data issues were built into Music Reports from the off and that it is merely adapting to the reporting context – jumping from broadcast in the 1990s to Pandora and Spotify today.
“The programme licence administration structure was effectively a big data problem before anyone was using the term ‘big data’. We built a system in a rudimentary computer language called Clipper that is one layer above machine language,” he says of the company’s origins.
“That was the appropriate mechanism to use in 1994 when it was built. Today people would look at that application programming language and think it was silly. One of the benefits of using such rudimentary language is that it is extremely fast as there are very few layers to the software. It can process huge quantities of data rapidly.”
The company is also partnering with Pandora, which was partly a legacy of Music Reports being the back-office service provider for Rdio (Pandora bought Rdio’s assets at the end of 2015), stating that Pandora is “planning some interesting services for the fall” (i.e. on-demand streaming).
“They hired us to manage their music publishing administration,” he says of the Pandora partnership. “We are helping them get ready for what they are going to be doing in the fall. Among those things was a very sincere intention on the part of Pandora to work as directly and as voluntarily with the music publishing industry as possible. Some services rely 100% on the compulsory licences. Some rely 100% on voluntary licences. Some services rely on a combination of direct licence with some publishers and compulsory licences with other publishers. But Pandora wanted to give the entire publishing industry the opportunity to have a direct relationship with them if the publishers were interested in that.”
Transparency is another buzz term in the industry that he argues his company has been addressing for a long time. “’Transparency’ is one of those words like ‘patriotism’ that, when you drill into it, becomes an incredible difficult word to work with,” he says. “I would not be shy about saying that we are the most transparent thing that has ever come along in the music business. That wasn’t particularly by design necessarily. It was by requirement.”
He does, however, propose that calls for transparency have to overcome certain modes of entrenched thinking and acting that define – and restrict – the business around licensing.
“The [digital music] services never know who owns what,” argues Colitre. “The collection societies hold that information close to their chests. They use the informational deficit to extract super-competitive rent. That is just a natural part of being a collective bargaining agent. That is very frustrating for the DSPs. Meanwhile what you normally hear about is not the frustration of the DSPs for that reason. Much more frequently you hear the whining of the rights owners that they don’t have any transparency into what is being used or what rates are being charged to blah, blah, blah.”
He proposes the Music Reports platform can resolve many of these issues through Songdex, its proprietary database of over 70m sound recordings and related composition information.
“Both sides are remedied by this platform that gives both sides complete transparency and a neutral transaction platform upon which to agree,” he says. “Nothing can compel the publishers to accept the terms and so the DSPs are motivated by market forces to make the best offer that they can make to the publishing industry through this platform. Meanwhile the publishers know exactly how their data is being shown as we show them in their dashboards what their catalogues look like in Songdex. They can make any changes they want.”
Colitre continues, “They also know exactly how Music Reports is going to account to them because we are already accounting to them for dozens of services on a regular basis and providing them with a very high level of royalty services. It is the best of both worlds for both sides. The DSPs know exactly what is going on and the publishers know exactly what is going on. And everyone can act in a free market and frictionless environment that is very novel in the music business.”
Colitre argues that the coming years will see accelerated consolidation in rights management and administration. He cites examples like US publishers extracting themselves from ASCAP and BMI to form GMR (Global Music Rights) as well as SOCAN acquiring both Audiam and MediaNet.
“The trend I am describing here is one in which smaller groups of rights owners are forming to provide more active administration globally and simultaneously offering rights services to the DSPs,” he says of how the sector is transitioning.
“Another trend is the consolidation of back office services. Every collective in the world cannot possibly bear the expense of the enormous machines and personnel that are necessary to do big data processing in relation to administrating rights in the digital environment. Rather than everybody having a computer system to digest their own individual Spotify accounts, instead you will see the smaller societies grouping together.”