web3 services panel

Our Sandbox Summit Web3 Special conference yesterday spent the morning focusing on NFTs and DAOs, but the afternoon began with a further broadening of its horizons to look at music services.

The biggest music streaming services, from Spotify to YouTube, were born in the Web 2.0 era, although in various ways they’re dabbling with web3 technologies in 2022.

What will a ‘web3 music service’ really be, though? Could brand new streaming services from the web3 space have a shot at disrupting the big established DSPs? And how might the format of music itself change in this new era?

A panel chaired by Dan Fowler, director of open source projects at HIFI Labs, sought to answer these and other questions. The panelists were Sophie Goossens, partner at ReedSmith; Con Raso, MD at Tuned Global; and Roneil Rumburg, CEO of Audius.

Rumburg kicked off by noting that there isn’t a universally agreed definition of what a web3 music service is, which he saw as a positive in terms of sparking experimentation.

“Our definition is a tool, or set of tools, for artists to use to engage their fans that allow them to have sovereignty over that audience. Primarily that the artist is able to exfiltrate their data if they choose to, and use that in different contexts… not platform lock-in that you would traditionally think of in a web2 context.”

Tuned Global’s business is based on helping other companies to launch music services, and Raso said he’s seeing a growing number of inbound enquiries in a web3 context, from streaming services wanting to work with NFTs and tokens, to metaverse companies grappling with music licensing.

“The difficult question is how to have commercial music in that space,” he said. “Also interoperability: seeing clients trying to do something in the metaverse, but how do they take that experience to a web2 experience, so people can take that with them throughout the day?”

Goossens zeroed in on one key common trait for web3 music services: decentralisation, and “giving back more control to the users of the service… almost more of a political concept: this new way of thinking about the dynamic between the service and the user, or the people using the service on the supply side (musicians and rightsholders) and the people who are consuming the service.”

What are the advantages of building a web3 music service? Refreshingly, Rumburg kicked off his answer to that question by listing the disadvantages.

“It’s harder, it takes longer, it takes more engineering effort, it takes more capital, it takes more energy to take these products to market. There are a lot of good reasons not to build here!” he said.

“There’s one really good reason to build here… that can potentially overshadow all of those very negative things. That one big value is decentralisation… allowing your users to carry their data away with them, not having this platform lock-in.”

“Really the only way to build confidence in that capability is by being decentralised. Our users have to vote on any and all changes made to the network. It’s not possible for me or my co-founder to say ‘Oh, we’re gonna change Audius, you can’t take your data out any more’. We’d have to run that through a community governance process.”

The conversation moved on to copyright and web3 music services, with Goossens making it clear that “the law hasn’t changed because web3 was invented”, and that web3 startups should not assume they sit outside that existing legislation.

“The copyright laws of the world have not changed since web3 was invented, so you would look at a web3 music service in the same way as web2. What is happening, where is the music hosted, is an act of copying taking place, is an act of communication taking place? Who is responsible for that act, so who is responsible for clearing, for licensing etc,” she said.

“If you’re hosting decentrally there are different question arising from a copyright perspective than if you’re hosting centrally, where it’s easier to know who’s responsible. But the underlying thinking will remain the same.”

Goossens also pointed to the legal issues around tokens and NFTs, which web2 music services have not needed to deal with. Not least the financial regulations.

“Is it a security? Is it not a security? The legal topics are not new: they were already existing and other industries are very familiar with them, but of course they may be new to people working in the music industry in that respect.”

Raso talked about another trend he’s seeing from Tuned Global’s clients: those in regions like Africa, South East Asia and Latin America who think web3 technologies could help local artists.

“Often they are coming to us wanting to put more dollars in the local artists’ pockets, so [want to] create a system and infrastructure that will enable those artists, rather than all that money going offshore. I think web3 is really interesting for them to be able to do that,” he said.

“We are starting to enter testing in that space, enabling with a few clients over the next month or so that artists can actually mint NFTs in those countries; those NFTs can come into a web2 platform and be consumed alongside audio; and the revenue will flow back through a smart contract.”

If you’re still getting your head around the distinction between web2 and web3 music services, here’s something else to ponder: Web 2.5! Which in this context refers to ways of bridging the gap between the established streaming and social services, and the new breed of web3 offerings.

“There is such a vast amount of audience already aggregated on these platforms, it would be foolish for folks building in that web3 context to ignore that,” said Rumburg. “That should be explored to its fullest. Whether or not existing web2 platforms would want to open that data up is another question, and that’s where the rub lies.”

“This ethos of open, permission-less, liquid access to data and other things runs qiute counter to the philosophy that many legacy platforms follow, which is to lock people in,” he said.

“Over the last five years, all the major DSP APIs have become more and more limited in what they allow people to do, and certainly the data that they make available too, even as they have built better BI [business intelligence: i.e. analytics] tools for understanding it,” continued Rumburg.

“This [web3 music] will happen with or without the legacy platforms, but it could happen a lot faster with participation from the legacy platforms – if they are constructive in the process.”

Later, Goossens talked about her optimism about the potential for web3 technologies as the basis for building new music experiences, once we get beyond the current debates around tokenisation and NFTs as financial speculation.

“What excites me is really more the part of web3 which is this infrastructure which is going to be the foundation to build so much more on top of it. It’s that one little brick that you put in the sand, then you build all this utility on top of it,” she said.

“And if you are talking about being an investor in the sense that you own or are able to make decisions about the platform through these governance tokens, this doesn’t necessarily mean you will be looking at it in a speculative way. It may just be that you are participating, and I find that exciting.”

Talking of building, Rumburg talked about another challenge of web3: the risk of early decisions made when building new services and platforms becoming set in stone.

“What I’ve seen happen across the crypto community the last two to three years is an unwillingness to change. People see these initial, arguably-random decisions – made just because some random parameter had to be chosen – as a gospel truth,” he said.

So something that “had to work some way in v1 so some engineer somewhere along the way arbitrarily decided” is seen as unchangeable, holding back progress later.

“Communities need to be more comfortable with the level of control that they’re being given by these platforms. It’s a new role for a user of a network to play,” he said.

As the panel closed, a question from the audience focused on whether web3 music services work better for established artists with big fanbases who they can bring over from the existing streaming and social platforms. Fowler thought the opposite.

“I’d probably argue it’s easier to do so as a developing artist, because you don’t have the same baggage of representatives,” he said, while noting that this does not mean (for example) labels cannot also play in this world.

“As a label, it’s an opportunity for you to give them [artists] freedom to be able to experiment in this new world, and to support them in the stuff you can do really well,” he said.

Fowler also compared the web3 space to a local music scene, in terms of artists needing to immerse themselves in that scene to build networks and succeed.

“It’s a case of going feet-first into this community,” he said. “Like a small local scene, you’ve got to know who the promoters are, who the other bands are…”

The panel concluded with a question for Rumburg about the future competition between (or cohabitation of) web2 and web3 music services. He thinks that the models will be able to co-exist in the long term.

“They tend to serve different use cases. Broadly what we’ve seen is that on these web3-native music networks, the average fan is monetising at a far, far higher level, but they are a small segment of the typical fanbase,” he said.

“Which is super-different from the mass-scale, mass-audience approach that web2 platforms typically take… I still think if you’re trying to build a user base at scale, that is the best place to do it.”

“If you’re trying to make as much money as possible and have as much control of your fanbase as possible, crypto’s a great place to do that. If you want to be Drake and be selling out Wembley, I don’t think in today’s web3 ecosystem there’s a path for you to do that in a fully web3 way.”

Music Ally’s Sandbox Summit Web3 Special was held in association with Cirkay, Fanaply and Global Rockstar, and supported by Tuned Global. You can read all our coverage of the sessions here.

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