BERKLEE SCHOOL OF MUSIC ’ S GEORGE HOWARD associate professor of music business / management at the Berklee School of Music and former president of Rykodisc , which was one of the largest indies in the 1980s and early- ‘ 90s as the first CD-only record label . Howard also co-founded digital music distributor TuneCore and has written extensively about blockchain ’ s implications for the music industry for
Forbes and other publications . He is part of the disrupter camp .
“ If we want to utilize blockchains and the smart contract component of that , we need to have a limited number of if-thenthat rules ,” says Howard on the other reason he believes blockchain is currently not equipped to transform the music industry , though he ’ s still hopeful about its potential .
Essentially , he says , like all machines , blockchain is good at dealing with simple two-way , binary scenarios . The problem is that music rights are often not binary . It ’ s great if one person owns all the rights to a song – the music and composition – and wants to licence that song to one other person . That ’ s a simple binary transaction and blockchain can accommodate that ; however , most licensed songs involve multiple writers and performers , plus a label , publisher , and PRO . This makes the transaction too complicated for current blockchain technology , according to Howard . “ Then under that you might have derivative work samples and you might have co-writes and all these other layers . While it ’ s super intriguing to try to use technology to solve the things like derivative works and co-writes , I tend to not believe the technology is sufficient to do that yet . That ’ s a problem and companies who are out there trying to do that , I think , are going to be frustrated for a while until the technology catches up .”
If Howard is right , then the current best use for blockchain is for licencing independent music with just one rights holder ( i . e . a writer / performer with no label or publishing deal or PRO affiliation ). This allows for simple two-way transactions ( i . e . artist to consumer ). But this also creates an obvious market problem referred to as “ network effect .” “ Network effect is , simply put , the more users of a system , the more valuable the system is . So if you think of something like Craig ’ s List , people continue to use Craig ’ s List because other people use Craig ’ s List and so you get this marketplace . Creating marketplaces on platforms is very , very hard and it requires scale or mass ,” explains Howard . “ So the people that have the necessary rights who might be able to create that scaled marketplace are the ones who are least likely to enter into it , and by that I mean the major labels and the major publishers . They have yet to see , and I don ’ t think they will , a real compelling argument to say , ‘ Sure , we will put our works up on a blockchain and essentially disintermediate ourselves .’”
So , essentially , there isn ’ t enough consumer demand for independent music to make a blockchain-based market viable . That is , unless consumers are incentivized to become more than passive listeners ( like with Spotify ) and become active promoters . Blockchain can help with this and it ’ s already taking shape .
“ There is a role for the fan that ’ s related to blockchain and I think it ’ s one of organization and incentive ,” says Howard . “ The majority of people who love a band don ’ t want the band to say , ‘ Hey , if you spread the word about my music , I ’ ll pay you .’ They want the band to say , ‘ Hey , if you spread the word about my music , which you ’ re predisposed to do because you ’ re my fan , you will be rewarded with access and other things .’ So being able to trace that as a sort of customer relationship and management tool , and reward those power users or influencers … and create architecture for participation , blockchain is exceedingly well structured for that .”
There are a few examples of what Howard is referring to , including Imogen Heap ’ s Mycelia , PeerTracks , and Musiconomi . These services propose using blockchain to set up artist-to-consumer marketplaces that use crypto-currencies , or “ tokens ,” to incentivize listeners to become promoters .
“ I don ’ t ever want to see guys and girls who are super talented and working really hard to then get down the road , like I am going to be 43 in January and have four kids , and go , ‘ Ah , I ’ m not sure how I ’ m paying rent this month ,’ even though you ’ re out doing shows for 2,000 to 4,000 people ,” says Brian Byrne , former frontman of Canadian alt-rock band I Mother Earth , who co-founded Musiconomi as its artist ambassador . “ There is something very wrong . Something is broken , and people can either choose to be arrogant about it and not admit these problems and pretend like they ’ re rock stars , or they can all stand up together and say , ‘ There is something wrong and can we fix it ?’”
Byrne and the Musiconomi team envision blockchain being that fix . Musiconomi , which will begin rolling out features in 2018 , is a blockchain-based marketplace where music fans are incentivized to take an active role in sharing and promoting the music of indie artists , and where artists – not labels , publishers , and PROs – have control over the distribution of revenues . A token ( i . e . crypto-currency ) called MCI “ is designed to make this type of system possible . The new suite of features , including playlists , streaming radio , virtual merchandise / ticket storefronts , and others , will be available to token holders , enabling them to generate and earn rewards ,” according to Musiconomi ’ s website . Fans acquire tokens through an exchange and then spend them ( what ’ s referred to as “ locking them up ”) when they share the music on social media , blogs , etc . When people play the music , an artist-determined portion of the token revenue would go back to the user who referred the music . That is a simplified version of the incentive design .
“ So the goal is that the artists will have a sort of dial that they can turn up [ to increase the token portion shared ] so they get more promotion , or they can turn it down once they feel like they can promote themselves at that point and have enough followers that the natural growth from their base would be good enough and they want to take a higher cut on what they ’ re getting per play ,” says Dan Phifer , Musiconomi co-founder and chief technology officer .
To get songs legally into blockchain-based systems like Musiconomi , of course , requires the approval of all rights holders , which is why it can only work for unsigned artists , at least initially . “ When I think about the big picture , I would love for everybody to be able to work together and use all the expertise and resources we can to make it a good , nice transition for everybody ,” says Byrne thinking about a blockchain-based music industry . “ But I don ’ t think that everybody is going to be along for the same ride . I ’ ve encountered this a lot when talking to some older musicians , some producers , some record label guys , and all across the board . I have some guys who get really , really upset with me where they don ’ t want to talk about it and then I have other people who are really interested and into it and I am already working with those people on developing a few projects . I am talking about people who are actually in the industry and have been there for a long time .”
And while he is not certain what role publishers and labels have in a blockchain-based music industry – it ’ s still early – Byrne says those intermediaries have expertise and provide valuable services that shouldn ’ t be discounted . But by giving artists more control over their careers , they have more power to not only do business with people who bring value , but also cut out those who don ’ t .
Musiconomi ’ s vision of an artist-controlled music industry is a noble one , but Byrne and Phifer concede that there are significant barriers to entry , not least of which is the network effect , as well as the public ’ s mistrust of crypto-currencies . Most people don ’ t understand what they are or how they work .
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