Blockchain technology has evangelists and sceptics galore in and around the music industry. Is it really the answer to the music business’ infamous problems with transparency and efficiency?
A conference panel convened by Music Ally at the by:Larm festival in Oslo today was the latest chance to answer that question – or at least to argue about why it can’t be answered yet.
The panel included producer and entrepreneur Kevin Bacon; NMP director of online services Hans Peter Roth; Blokur founder Phil Barry; and Fuga CEO Pieter van Rijn. Music Ally’s Steve Mayall moderated.
Barry started with an overview of what the blockchain has to offer for music, but also the definition of what a blockchain is.
He hailed the definition provided by The Economist: “A shared, trusted, public ledger that everyone can inspect, but which no single user controls.”
“If you think about the traditional financial system, you usually have some kind of central entity, some kind of clearing house, which sits in the middle monitoring all the transactions,” added Barry.
In a distributed-ledger system, there is no central entity or clearing house. “Instead of having a central entity with one record of the transactions and balances, we have a ledger that is copied and distributed to all the entities in the network,” said Barry.
“Everyone can see what’s going on here: if I have $2 and I try to spend $3, the system will not let that happen, and everybody will be able to see that I’m cheating!”
Barry also talked about smart contracts: “a computer program that runs in the blockchain, is subject to all the same rules of consensus and transparency, and it runs without oversight and human intervention,” he said.
“You have the capability to automate really complicated business processes, not just within an organisation, but between different organisations.”
What does this mean for music? Barry cited a University of Middlesex report that outlined four. First: a networked database for music copyright information. Second, facilitating fast, frictionless royalty payments.
Third, offering transparency throughout the music industry’s value chain. And fourth, providing access to alternative sources of capital.
Barry said he’s optimistic. “Over the last 15 years we’ve seen over and over again linear flows of information and content being broken up into peer-to-peer systems,” he said.
“What we haven’t seen is an equivalent for the way value flows around the systems… I believe that blockchain can enable that same transformation that we’ve had for information and content for value.”
Barry spent eight years as an artist then five running a small label. He then worked on Ujo: “the first piece of working technology that was publicly known about in this space” – and a collaboration with musician Imogen Heap, using one of her songs to show how the blockchain might be used as an infrastructure for rights and royalties.
Now he’s working on an evolution of that with Blokur. “We’ve been working with a music publisher on the way that information is shared with PROs around the world,” he said. “We’re also working with a PRO to make that connection… and also on a project with a music service, which is about identifying the underlying rights in recordings relating to compositions.”
Fuga’s van Rijn spoke next, as a music distribution company that is already working with another blockchain startup, Dot Blockchain, and thus has experience in the field.
“We are already involved in many of those processes that were just explained here, but outside of the blockchain: I guess in the real world. What we think is really interesting in the dot Blockchain initiative, or looking at blockchain in general, is it tries to provide a very transparent overview for all rightsholders,” he said.
“It’s just starting, so the real work has yet to be done. We want to take an active part in that, so we are providing data from our customers – labels mainly, if they want to be part of that.”
NMP’s Roth is also involved in the blockchain world from a rights management side, with his company involved in managing publishing rights.
“We love transparency. Transparency is a good thing, but from where I’m sitting, there’s nothing to look at. I’m looking out of a window with no view! And that’s because the data we get is very, very flawed,” he said, before outlining the scale of the problem, as NMP found when it scrutinised its data.
“We had composer/author data on less than 40% of recorded assets. In the offline world it was 98, 99 per cent. So we tried to work on that, and now we are up to a whopping 60%! It’s still a far cry from being sufficient. Data cannot come out of telepathy: somebody has to put it in there.”
Bacon recently made headlines with his criticism of blockchain hype, although he stressed that he is not a cynic – this former artist, producer and startup founder actually owns a company that works with the technology.
He talked about the same problem of “people’s rights disappearing” when the music industry started to go digital. “There’s a lot of talk about how technology is going to fix and repair. I’m not optimistic that blockchain is a good way of dealing with that… as a thing that’s going to fix or even create transparency,” he said.
“Technology doesn’t drive transparency. People’s attitudes need to change. The stakeholders? Technology isn’t going to make them become transparent.”
Bacon said that he sees some great applications for blockchain within music, but that he thinks a lot of the discussion about the technology “fixing” the industry is distracting people from those positive aspects.
The panel were asked if they were more optimistic about blockchain technology shining new light on some of the mysterious black boxes of income within the music industry.
“It depends what you mean by transparency, I suppose. We are talking about the quality of data and the quality of matching different data sources,” said Barry. “I happen to know that for one of the biggest music services in the world, only for 20% of all the recordings on that platform do they know who the publishers are. It’s 80% by value, but 20% by recordings.”
Bacon criticised the notion of introducing a transparent “super-technology into an industry that hasn’t yet mastered Microsoft Excel: we can still do more with Microsoft Excel and get people paid.”
van Rijn agreed that sharing data and becoming more transparent is a noble goal. “But one of the problems is the incentivisation of, for example, the rights organisations… Will they open up and be open to these kinds of sources? That’s a challenge.”
Bacon suggested that collecting societies will welcome the technology because they have a clear interest in getting money in and paying it out as efficiently as possible. “I’m not so sure about record labels, publishers, managers etc.”
Roth came back to the idea of defining transparency. “There is transparency of data… and then there is commercial transparency. We all know that if you’re a business, the bigger you are, the better the terms you will get. If everybody gets paid the same, is that what creators want? Equality for all?” he said.
Barry wondered if there is a significant amount of evidence of collective negotiations paying off for creators.
“It is difficult to argue that we’ve had a massive surplus of money going to songwriters because we’re negotiating en masse. I’m not arguing against that,” he said. “But I don’t know if songwriters are making more money than they should be.”
The conversation turned to the idea of a networked database of copyright information. Could blockchain be the answer to that where past efforts – like the ill-fated Global Repertoire Database (GRD) – have failed? “The GRD failed for various reasons. It wasn’t necessarily a technical failure,” said Bacon.
Barry wondered if the dynamic will be to create a single GRD equivalent using the blockchain. “Maybe in 100 years, in my opinion!” he said. “What blockchain has, we can avoid that: avoid saying everybody has to participate. You don’t want to have that enormous hurdle of GRD-style things where we need everybody to agree on the first step of the process before it can even begin.”
“It has to come from the bottom up. It has to be effective for a few, and then hopefully it can grow,” agreed van Rijn. “We need a breadcrumb to follow,” added Roth.
Barry said that it is encouraging that a group of startups are trying to get off the ground with these ideas, including Blokur and dot Blockchain. Bacon recommended Aurovine, which has been running a label for two years using blockchain technology, complete with its own cryptocurrency and crowdfunding features.
“You can go and experiment and you can work with this company: distribute your music by blockchain and be rewarded in cryptocurrency,” he said. “It’s there now.”
Barry warned that “I don’t think it represents what for most people is the value of blockchain for the music industry” but he praised the fact that “it’s real, it’s working and you can interact with it”.
One audience member offered their own thoughts on why the music industry hasn’t leapt onto the blockchain bandwagon yet. “Change the name! It’s just got a branding problem. Call it Sex Chocolate or something!” he said. “I’ve already got a business called that!” joked Barry.
“I think blockchain is just a clever database! And the problem is that the music industry is crap at using databases,” concluded Mayall, although he hoped that as the concepts become more demystified, there could be some progress on that front.