The idea of blockchain technology is something very new in our industry, David Balfour considers, but its potential impact could hardly be more transformative or wide-reaching.

21 August 2015 - Editorial

There’s never any shortage of blue-sky thinking about how the music industry can or should fix its apparently broken business. Whilst we tend to instantly discount any suggestions which start from a perspective of thinking that the music industry is a single, cohesive business – or indeed a broken one - a number of recent think pieces have stimulated some really interesting debate.

Chief amongst these thought-provokers was Berklee ICE’s recent ReThink Music report.

This report, whilst by no means perfect, probably did more to accurately address structural problems within the music industry than any work we’ve seen for years. We won’t go over the findings again here – check our magazine from July 16 for details. Whilst many of the report’s findings and proposals seemed obvious, there was one proposal which, to us at least, was fundamentally new: the idea of using blockchain technology to address issues around licensing.

We won’t pretend that we’ve properly got our heads around blockchain technology yet. But we do understand what it seems to offer: a technology-based system that could potentially track every single use of music and apply comprehensive and accurate rights information to it, ultimately ensuring that the right people get paid in a quick and transparent fashion.

Blockchain technology does apparently offer possible solutions to some of the industry’s biggest problems. Chief amongst those would be the lack of a centralised database of rights information. Whilst previous attempts to collectivise the industry’s efforts in this area have failed, blockchain technology apparently offers an opportunity to build this database in a decentralised way, piece by piece. An excellent recent article in Billboard goes deeper into these possibilities, highlighting a company called Ujo – which is aiming to provide just such a rights database facility. It certainly seems possible that blockchain technology offers an opportunity to finally build a proper rights database, without the barrier of the database having to be complete before it can be usable.

There’s a serious potential snag with a blockchain-created database however: this rights information would be publicly visible and not controlled by any single entity. The large music rightsholders would therefore have to buy in to blockchain and the standards of transparency that it gives. In some respects, this would be logical – who doesn’t benefit from being able to claim full transparency and accuracy in rightsflow? Therein lies the rub: the people who benefit most from the status quo are often the large rightsholders. ReThink Music correctly identified that they are often the parties that benefit most from inaccurate rights information and unattributable income. Are they really motivated to change for the better?

Some fascinating thoughts on the potential future model of large rightsholders were recently provided in a leaked memo to Sony Music bosses from the late Dave Goldberg – former boss of SurveyMonkey. Goldberg had a music industry background which make his thoughts well worth reading. He envisioned a radically slimmed down corporate structure for major labels – with far lower headcount and marketing spend – together with a fundamentally reimagined approach to licensing of digital services. Whilst we tend to stop short of publishing leaks, we don’t feel that his one does any harm: Goldberg’s proposals were not especially critical of current practice at Sony. Instead, they were an attempt to imagine how Sony – or indeed any large music company – might adapt to changing circumstances. Tellingly, what he describes sounds rather close to the model espoused by some of the new kids on the block such as BMG Rights and Kobalt. Whether a major music company could – or would even want to – perform this kind of transition, is something for them to address.

The blockchain proposals have considerably more to offer reshaping the systems for rights ownership. This technology also offers potential solutions to two of the industry’s other major current talking points. A Billboard piece this week addressed growing concerns around streaming playlists: especially those controlled by third party creators rather than the services themselves. These concerns include the ideas that the largest players will increasingly be able to buy visibility on streaming services by acquiring or partnering with influential curators. Further to this is a concern that playlist owners are increasingly being offered financial incentives to profile tracks. Whilst there is nothing illegal in this, it raises a spectre of an increasingly unbalanced market where money can buy success. One way of avoiding us tipping into a mire of payola would be to find a better way of cutting in influential playlist owners to the revenue streams they boost on services such as Spotify and Deezer. Again, blockchain technology could offer some real solutions – whereby playlist owners could potentially be incentivised with a share of revenue created, rather than via unattributed financial bungs. We wonder however, whether this could be achieved without the precise deals struck with the owners becoming public? There are many questions to be answered, but the possibilities are tantalising.

Finally, blockchain technology could be used to establish a streaming model where artists are compensated according to a user-centric revenue model. This is another debate which refuses to go away. Many artists and indeed users would prefer to see a more direct financial relationship between the revenue contribution of individual users and the payouts which artists and labels receive, rather than the ‘pool of streams’ model which is now currently employed by the vast majority of services. Whilst there are some doubts about how fundamentally such a system would change the fortunes of artists, as MusicAlly explored this week, it’s hard to disagree that this model ultimately sounds fairer for all. And, once again, blockchain technology offers a potential solution.

Whilst most of us don’t fully understand how blockchain works, the potential solutions that it can offer for our industry are staggering in scope…potentially even as transformative as Napster, or the wider adoption of the streaming model. Can a technology which offers ways to reshape our industry so fundamentally be warmly embraced by the industry itself? Are the incentives strong enough? It’s definitely a story worth following.