Blockchain technology can’t write songs or play instruments – at least not yet. But, it might be able to ensure that those who do get the proper credit and compensation, a problem that has always bedeviled this $15bn industry.
Since the start of the 2017 alone, both The Three Degrees and The Carpenters have brought cases against their record companies for alleged unpaid royalties.
And the modern move towards streaming services, like Spotify and Jay Z’s Tidal, has brought a plethora of cases where artists said they have not been adequately compensated for the use of their music.
In 2015, for example, Spotify was sued for $150m by a group of artists who claimed that the service had reproduced and distributed their music without permission. Tidal, too, has been hit with law suits over the issue.
The Open Music Initiative (OMI) is a newly launched consortium that seeks to leverage blockchain technology to solve disputes like these, but it’s far from the only one.
There are a number of companies dedicated to building a blockchain solution for music, including dotblockchain Music (dotBC), Mycelia, MusicChain and UjoMusic, said attorney Jason Epstein, a partner in the Nashville office of Nelson Mullins, where he co-leads the technology and procurement industry group.
OMI is being led by the Berklee College of Music Institute for Creative Entrepreneurship (BerkleeICE) in Boston, in collaboration with the MIT Media Lab and IDEO, and with support from a number of major music labels, media companies, streaming services, publishers, collection societies and nearly 100 other founding entities.
Panos Panay, co-founder of OMI and founding managing director of BerkleeICE told CoinDesk:
"The objective behind the initiative is to use our academic neutrality and research abilities to advance the process of creating an open protocol."
If that sounds dense or unfamiliar, you’re not alone.
Stuck in the Middle With You
To understand how the blockchain could benefit the music business, it’s important to first understand a bit about that industry, Panay notes.
For one, it’s a complex mesh of many players, most who stand between the artists and musicians who create the music and the consumers who listen to it.
All of these players – record companies, publishers, streaming service providers – have their own separate databases to keep track of who owns the rights to the music and who is owed what money.
But none of these databases talk to each other. On top of that, ownership of the underlying assets – the composition of the songs as well as the sound recordings of the music – change hands all the time.
Another problem is the "dynamic and conflicting nature of the metadata itself", Epstein said.
"One company’s data will have identifiers for works, contributors, recordings and artists as one thing and another company may have different identifiers altogether. Often, there are even conflicts with the data in the same company," he continued.
For example, Chuck Berry, Charles Berry and other variations on the name could all be the same person, but might have different identifiers. This makes it very difficult to identify the works and who to pay, Epstein said.
"This lack of interoperability, coupled with the complexity of the way music is being both created and consumed, has created an issue where hundreds of millions of dollars are not really sent to their rightful owners," Panay said in interview.
He sums up the problem, and the opportunity for blockchain, succinctly:
"Just about every lawsuit you hear about in the music industry is ultimately the result of this lack of uniform way of identifying ownership."
Ball and Chain
Panay took his argument a step further, suggesting that this design also holds the industry back from its own ability to innovate. The cost of starting a new streaming service, he said, is prohibitively expensive, largely because of rights and licensing.
"Right now if your music gets played on the radio or in a restaurant or on a streaming service, it takes a minimum of 18 to 20 months to get paid, and when you get paid you have no idea if that is the right or wrong amount,” Panay said.
Panay argues a blockchain-type system could add oversight – a subject he knows about as the founder of Sonicbids, a leading platform for bands to book gigs and market themselves online.
OMI, he said, "is an attempt that uses the underlying technology of blockchain to effectively create a distributed ledger that enables all of these different databases and applications to interoperate."
Indeed, the distributed nature of blockchain tech, he said, is "catalytic" to making music industry participants excited about joining OMI.
"The technology is proving critical to getting the players to the table to advance this," Panay said. "For me it’s all because of the nature of the underlying technology."
For example, it sidesteps the past issues that have become apparent when central authorities have entered the equation, Panay said, adding:
"At its core, this is a distributed ledger where they are able to share data and validate transactions without having to give up their individual sovereignty."
Nevertheless, blockchain isn’t necessarily a panacea, said Epstein.
"Tracking royalties and licensing rights is only as good as the metadata associated with the data," he explained, suggesting that the solution may lie in combining blockchain with other technologies.
For example, one of his clients, Dart Data, uses machine learning to resolve the dynamic nature of data conflicts, which would facilitate the use of blockchain in the music industry.
The exploration, while still in its infancy, has also attracted some major players who you might not associate with the finer arts.
For example, OMI is using Intel’s Sawtooth Lake, an active open-source project within Hyperledger, as its reference platform.
Sawtooth Lake is a modular platform for building, deploying and running distributed ledgers. The platform supports customizable data models to capture the current state of the ledger, transaction languages to change the ledger state, and consensus methods to validate transactions.
While that might not sound like the perfect match with OMI’s initiative, Reed argues the opposite.
"We have been encouraged by the banks and the music providers who have collaborated with us," he said. "Both collaborations have informed requirements that will increase the robustness and the versatility of Sawtooth Lake in the future."
Still, OMI is admittedly a bit of an oddity in comparison to Intel’s other work. Intel is a founding member of Hyperledger and is working across its more than 100 members, Reed said.
In addition to starting work with OMI, the company has had success with a bond-trading proof of concept with R3’s banking consortium.
But how soon until all this becomes reality?
Panay notes that OMI is still in its early stages of development and acceptance. The entire coalition is planning to hold its third technology meeting in New York in the next few weeks to discuss the progress.
"I would expect between now and the end of the summer we will be able to demonstrate some early prototypes of what this can do," Panay said, but noted that it will take a few years to fully implement.
Epstein of Nelson Mullins notes that there are many different data standards for blockchain as well as various and emerging blockchain business models, factors he said will make development slow.
"It will take some time for those standards and models to develop before enterprises are willing to go all in," he said. Over time, however, "change is inevitable and it is merely a function of how all stakeholders in the industry adopt".
If the music initiative succeeds in this process, it could have wider implications for other similar creative and entertainment fields, such as book publishing, movies, television and the like.
"The implications are tremendous for efficiency in terms of payment flows, cutting out intermediaries, the ability of these companies to monetize content," Panay said, adding:
"In most places right now, that’s virtually non-monetizeable."
DJ-music image via Shutterstock