How Blockchain Technology is Cutting Out The Middleman in Music Distribution

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When audio platforms like Spotify, YouTube, BandCamp, and iTunes first emerged, they presented an opportunity for artists to divorce themselves from the clutches of labels. Ostensibly, these platforms would democratize distribution, giving artists more direct access to revenue from their music. But today, artists are still distanced from the revenue their songs generate — which is why blockchain is becoming increasingly appealing. 

While anyone can publish on streaming platforms, the actual outcome has been the democratization of access to music. On average, artists earn far less than one cent per play — between $.006 and $.0084. For an artist to earn minimum wage through their music on YouTube, they need 4,500,000 plays — a target that only .5% of users hit. On Bandcamp, this number is more reasonable (the artist must sell 148 albums at $10 each), while on iTunes artists must sell 1,126 albums at the same price as on Bandcamp to make a livable wage. Compare this to the fact that an artist only had to sell 818 CD’s while signed with a label on a royalties contract to make the same wage. If anything, the majority of these streaming platforms have distanced artists from earning money off of their music even more than labels did during the heyday of CD’s.

According to a NewtonX panel of 17 former senior executives at BTC Media, Hearst, Conde Nast, Disney, MTV Networks, Ethereum, and other large media and cryptocurrency companies, it is precisely this distribution problem that has made blockchain such an appealing alternative for musicians and artists.

Blockchain Promises Distribution Control and Digital Rights Protection — But Barriers to Adoption Are High

The most prominent musician to begin distributing on the blockchain was Imogen Heap, a grammy winner who released the first song ever on Ethereum. Using a service called Ujo, she released her single on blockchain in order to have full rights to all money exchanged for the album. Via smart contracts, Heap had full control over how she was compensated for streaming, remixes, downloading, etc.

“Using Ethereum and making cryptocurrency exchanges has become much more commonplace and accessible in the past year,” noted a former founding member of the Ethereum team, now a frequent NewtonX expert for financial institutions. And smart contracts — automatically enforced and recorded contracts without the use of a middleman — are appealing to artists who have seen their profits get eaten up by labels and/or platforms. Blockchain also eliminates transaction fees, which for musicians who don’t make much off their money, is extremely appealing.

Other artists, such as RAC, for instance, have begun using Blockchain for music distribution. RAC used Ujo to launch his own webstore where he sold his album for Ether coins. Several new blockchain-based music services have also cropped up — companies such as Musicoin and Revelator are simplifying digital rights management, and thus promoting micro-payments to the artists directly — a win-win for fans and artists.

Blockchain can also simplify digital rights issues. The recent media storm over Ke$ha’s legal battle for the rights to her own songs have sparked a dormant debate over digital rights in music. Often, contracts strongly favor the record label over the artist, and the artist is completely beholden to numerous and complicated rights contracts that are difficult to navigate. But blockchain eliminates the need for a central authority to control the contract, and thus allows the artist to maintain control over how their music is used, and what people pay for it. Blockchain also makes it easy to spot copyright infringement on the ledger — ensuring that artists are credited properly for their work.

In a recent NewtonX podcast, Cristina Dolan, Co-Founder & COO of iXledger explained that “Blockchain enables people to interact in a peer to peer way without an intermediary. In a shared economy, you need a place where everyone can participate in a trusted way. You need regulatory visibility, more data, compliance, and comfort in transactions. Participating in this type of network gives you control over your particular environment.”

Unfortunately, despite blockchain’s numerous benefits, there are serious drawbacks. For instance, when Imogen Heap released her music on blockchain, because it was 2015, the barriers to purchasing the song with Ethereum were so high (this was pre Robinhood Cryptocurrency) that she ended up earning only $133.20 (now $1563 due to the increases in Ether coin prices since then). This massive increase in ethereum prices since 2015 brings to light another issue with blockchain: the prices of cryptocurrencies fluctuate to such a great degree that buying and selling in cryptocurrency is difficult to maintain. Furthermore, despite the hype around cryptocurrencies, many people are still wary of it — stories about cryptocurrency heists, huge drops in value, and the associations that still exist between cryptocurrency and crime (the dark web, ransom, etc.) have all made cryptocurrency adoption too low distribution on blockchain to work on a large scale. Currently, only .3%- .5% of the world’s population owns Bitcoin, the most popular cryptocurrency.

Cristina Dolan identified accessibility for non-tech savvy people as a key barrier to blockchain at the moment: “There aren’t enough people who understand how to implement or develop blockchain solutions right now. This can make the whole operation seem intimidating to the average person.”

Another Solution: Streaming Platforms Investing in Blockchain to Bring it to the Mainstream

72% of the NewtonX blockchain panel said that if blockchain becomes more popular as a distribution platform, music streaming/downloading platforms will either create proprietary blockchain protocols or integrate their products with existing blockchain (like Ethereum). Working with these platforms on a blockchain would benefit artists in that they would have direct access to smart contracts and visibility into how their music is being used — while still making it accessible to the average person.

While a former SVP at BTC Media (the world’s largest bitcoin media group) said that “blockchain has immediate applicability for data storage and smart contracts internally, it won’t reach consumer adoption for streaming and downloading media until it is as accessible as Spotify currently is.”

That said, if more artists begin using blockchain technology for contracts and distribution, mainstream platforms will feel pressure to become involved. As Dolan said, “Of course decentralization is threatening to established organizations — but eventually it will be even more threatening to not get on board with what consumers want.”

The data and insights in this article are sourced from NewtonX experts. For the purposes of this blog, we keep our experts anonymous and ensure that no confidential data or information has been disclosed. Experts are a mix of industry consultants and previous employees of the company(s) referenced.

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