Blockchain Could Be Music’s Next Disruptor

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Fortune | | Sep 22, 2016

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Anyone who follows the music industry knows of the tussles between artists and those who rely on their creative output. The traditional food chain is a long one: between those who create the music and those who pay for it—music lovers, concert goers, advertisers, rights licensees, and corporate sponsors—there are publishers, producers, and talent agencies, and countless others with a stake in the industry. Each of these intermediaries takes a cut of the revenues and passes along the rest, the remainder of which eventually reaches the artists and musicians somewhere between 6 and 18 months.

Many thought the Internet might help democratize the industry, but the opposite has occurred. “In the latter part of the 20thcentury, if a song of mine sold a million copies, I would receive about $45,000 in mechanical royalties, and I was awarded a platinum record,” Eddie Schwartz, head of the Songwriters Association of Canada (SAC), told members of the International Literary and Artistic Association in 2015.

“Today, a major music service pays me an average of $.000035 per stream, or about $35 for a million streams, thus reducing a reasonable middle class living to the value of a pizza.”

We have swung from one extreme to the other. Now it’s time for the whole industry to collaborate on a healthy, sustainable, and frictionless ecosystem that benefits everyone in the value chain, not just the relative few.

Big technology companies and streaming audio services have taken an additional piece of the pie, leaving most artists with even fewer crumbs, not to mention less control over their work and little knowledge of those who interact with it. The business has become so complex and powerful, so concentrated, that musicians like Taylor Swift and Jay-Z have taken themselves off of Spotify. For most artists, that’s not an option.

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This could all change under blockchain-based platforms — clever pieces of code called smart contracts, and their capacity to link and act upon data. The new technology runs on millions of devices, from desktops to smartphones, and is open to anyone, where not just information but money and anything else of value can be transferred and stored securely and privately. Trust among participants is established not by powerful intermediaries like record labels, streaming services, or credit card companies, but by the collaboration of those whose devices are running the software.

Toronto’s industrial rock band 22Hertz has already embraced the blockchain, creating hashes of whole songs—the lyrics and the melody—as proof of ownership for a fraction of the cost of registering only the title of the song in Canada. The band’s online store is currently running a promotion where fans pay half price for CDs and t-shirts if they go direct and pay in Bitcoin . Fans can also tip the band in Bitcoin and download song files for free. Canadian-born cellist and composer Zoë Keating, a friend of Imogen’s, plans to use the blockchain not just for registering and promoting digital rights but for cultivating direct relationships with her fans, offering them special privileges, and providing even greater transparency to prospective clients or partners.

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Various companies are already teaming up with forward-thinking musicians to develop a fair and sustainable music ecosystem for artists to turn a song into a business that feeds its creators and those who enable others to interact with it, simultaneously. For example, one of us—Imogen’s—song, “Tiny Human,” was released on a beta blockchain-based platform, UjoMusic, along with all credits and terms of licensing. In exchange for the digital currency Ether, people could download the song itself or all the vocal and instrumental stems of the song for commercial or non-commercial use. Via a smart contract, all the musicians were paid immediately to their personal Ether wallets.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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