Three Startups Trying to Transform the Music Industry Using the Blockchain
Music was once scarce. Before the days of MP3 and P2P file sharing, you didn’t have the ability to hear songs whenever you wished unless you bought them.
Today one does not even need to download songs, as platforms such as VEVO and YouTube host many of the most popular songs of yesterday and today.
The industry was faced with a definitive problem in an age of liberal copy and distribution technology: finding new ways to monetize digital music files that lacked scarcity.
A gang of computer programmers – united by the Bitcoin technology – are trying to revolutionize an industry after 15 years of disruption which began with Napster and was cemented by BitTorrent.
Bitcoin’s blockchain – a decentralized system powered by a network of computers – serves as the transparent backbone of the Bitcoin network. The blockchain, which functions as a public ledger, maintains the accounting of the Bitcoin network, timestamping each transaction and assigning a unique ID.
Numerous individuals and companies are excited about the future of the blockchain and the music industry. Three companies, PeerTracks, Bittunes and Ujo Music, each claim their business model will liberate musicians from being under the thumbs of overbearing music labels and streaming services.
Peertracks, strives to use the blockchain technology to develop an artist equity trading system. Bittunes, strives to create an independent music market. Ujo Music, seeks to design a system to fix global royalty distribution and licensing problems faced by the industry.
These entrepreneurs believe that in the future when an artist creates a song it will be stored on the blockchain with its own unique ID, just like bitcoin is today.
The music industry has attempted to solve some of these problems before. But projects such as the Global Repertoire Database (GRD) never came to be. Still, the music industry has needed a new revenue and business model in the wake of Napster and peer-to-peer file sharing.
Peertracks strives to become the perfect music streaming and retail platform that propels peer-to-peer discovery. Peertracks depends on the creation of “artist tokens,” a sort of Bitcoin alternative, the value of which depends on the popularity of the artist who created the coin. As in basic economics, the higher the demand, the higher the worth of the artist token. The less demand, the lower the worth.
“Our goal is to enable new ways of monetizing music and not be forced to rely so much on royalties coming from the sales of nonscarce digital files,” Peertracks CEO, Cedric Cobban, tells Bitcoin Magazine .
Peertracks introduced MUSE at the Fair Music Public Forum, held by Berklee’s Rethink Music on October 2 in Boston. The MUSE blockchain purports to be an open, global ledger, specifically engineered and tailored for the music industry. MUSE seeks to not only manage copyrights but also the payment mechanism itself.
“No need for legacy banking to pay out royalties earned from music streams/sales,” Cobban says. The system revolves around Muse_USD, “a cryptocurrency that tracks the purchasing power of the U.S. dollar.”
MUSE will also allow artists to create their own “Notes” – a limited edition, cryptographic token that acts like a VIP pass into the artist’s career. Notes initially allow artists to crowdfund and know who their most engaged fans are.
“For the artist, there is great value in knowing who exactly is supporting him financially and enabling him to continue making a living from music,” Cobban said.
MUSE isn’t the only such project. Bittunes seeks to use peer-to-peer file-sharing technology with the latest technology in digital payment systems “to radically change the way the technology has been applied so that ordinary people actually earn money by becoming the new distribution channel for digital music,” Bittunes managing director Simon Edhouse told Bitcoin Magazine .
“In this way, Bittunes deals directly with the music piracy problem, with a carrot not a stick, rewarding artists fairly, and allowing users to potentially earn 5-to-10-times profits on song purchases,” Edhouse said. “To achieve this will not be easy, but the end result could be nothing short of revolutionary.”
Then there is Ujo, a proposed new shared infrastructure for the creative industries that aims to return more value to content creators and their customers. Built in collaboration with the Grammy-winning artist Imogen Heap, Ujo was released last month, and is headed by Phil Barry, who led a team advising Thom Yorke on his BitTorrent strategy for his solo album, Tomorrow’s Modern Boxes. Barry also advised Radiohead on its digital strategy for the band’s ninth studio album.
Ujo’s model is different, focusing on creating an open-source rights database and payment infrastructure. Ujo, like Peertracks, wants to revolutionize how money is distributed to artists and rights holders.
“Our open platform uses blockchain technology to create a transparent and decentralised database of rights and rights owners, and automates royalty payments using smart contracts and cryptocurrency,” said Phil Barry, founding partner at Edmund Hart, which oversees Ujo. “We hope that it will be the foundation upon which a new more transparent, more efficient and more profitable music ecosystem can be built.”
For Barry, the heart of the music industry is the content creators.
“The most important participants in the music industry are artists and writers,” Barry says. “They create the raw material upon which everybody else is dependent.” He acknowledges the music industry is 15 years into a major transformation and disruption.
“The pattern that I see emerging is that the purpose of a record company is becoming increasingly focused,” Barry said. “Major music companies no longer add value through ownership of chains of record stores or manufacturing plants, but they still finance and market the majority of hit records.”
Barry believes this will change over time.
“I think we will see a big reduction in the share of revenue record labels command as compared with artists and writers,” Barry said. “Handing over copyrights will become increasingly rare.”
What’s more, he believes the industry is watching the changes.
“Many companies and performing rights organizations share a really quite bold vision of what the future might look like if blockchain is widely adopted,” he said. “I think everybody can see that sooner or later blockchain is going to bring about change in not just music but all creative industries.”
Therefore, players in the creative industries have a duty to understand the technology.
“Nobody wants to repeat the mistakes of the Napster era,” he said.