Blockchain in the music industry

Marcus O'Dair

Marcus O’Dair is Convenor of the Blockchain for Creative Industries at Middlesex University

Following the publication of Middlesex University’s ‘Music on the Blockchain’ report, Marcus O’ Dair, Convenor of the Blockchain for Creative Industries, explains how this emerging technology is set to improve the music industry.

What is blockchain? Simply put, it is the infrastructure that underlies a digital currency such as bitcoin, so named because it comprises ‘blocks’ of confirmed transactions that form a chronologically linked ‘chain’.

It is at root, a ledger, but a ledger that is distributed rather than centralised: an exact copy is maintained in a large number of independent locations, meaning there is no central point of failure. The other key feature of a blockchain is that the data written to it is immutable: it cannot be modified.

Blockchain is being used across a variety of industries, including music

Blockchain is being used across a variety of industries, including music

What can a blockchain do? Although this is new technology – first used with bitcoin in 2009 with the broader potential only recognised more recently still – there are already use cases emerging across the creative industries, from fine art to fashion. My focus is on the potential impact of blockchain on recorded music, which can be divided into four main areas.

Networked database

Firstly, blockchain technology could offer a networked database for music copyright. There is at present no single database that documents ownership of all song and recording copyrights. Instead, there are numerous databases, none entirely comprehensive. Blockchain technology, by contrast, would allow information to be available to all users rather than stored in discrete databases.

Metadata embedded into every piece of recorded music could include terms of use and contact details for the copyright holders, making it far easier to locate the owners of a piece of recorded music and to obtain a license to use it. The gradual placing of copyright data on the blockchain could lead incrementally to the creation of a single, comprehensive copyright database for music.

Blockchain could help create a single, comprehensive copyright database for music

Blockchain could help create a single, comprehensive copyright database for music

Frictionless royalty payments

Secondly, the blockchain could facilitate fast, frictionless royalty payments. At present, royalty payments can take months or even years to reach the rights holders. ‘Friction’ is an issue because, often, more than one performance rights organisation may deduct administrative fees.

By contrast, the low transaction costs of digital currencies make micropayments feasible, which is particularly useful given the small size of typical payments in the streaming era. Smart contracts; contractual agreements built on computer protocols whose terms can be executed automatically on the blockchain, could allow music royalties to be administered almost instantaneously, according to agreed ‘splits’ rather than passing through intermediaries.

Bitcoin could help bring transparency through the music industry’s value chain

Bitcoin could help bring transparency through the music industry’s value chain

Bringing transparency

Thirdly, the blockchain could offer transparency in terms of royalty payments. Currently, some royalties remain beyond the reach of artists in ‘black boxes’, while the specific details of many streaming deals are hidden behind non-disclosure agreements, making it difficult for artists (or their managers) to assess whether payments are being processed efficiently. The great innovation of bitcoin is to achieve consensus without requiring a central trusted authority or intermediary to verify transactions, bringing transparency through the value chain.

Providing capital

Finally, the blockchain could provide artists with alternative sources of capital. The transparency inherent in delivering music via the blockchain could make music more attractive to investors, by allowing them to monitor invest­ment outcomes more easily, and to model likely returns.

Blockchain technology could also bring about the emergence of ‘artist accelerators’ with smart contracts, making it easy for early supporters to take a small cut of future earnings. It could also have a significant effect on crowdfund­ing, with artists issuing their own shares or tokens and smart contracts guaranteeing that no pledge contributions would be taken if funding targets were not met.

Click here to read the ‘Music on the Blockchain’ report

Click here to read the ‘Music on the Blockchain’ report

Certainly, there are significant barriers, both with the technology itself and in terms of its adoption. Some see blockchain technology as a disruption on the scale of the World Wide Web and, like any disruption on that scale, it’s too early to see the full potential. We will initially look towards such developments to solve existing challenges, but its true value lies in creating entirely new opportunities.

Some banks and governments are already exploring the potential of blockchain technology, and the World Economic Forum estimates that we’ll store 10% of the global GDP on blockchains within a decade. If the barriers to adoption are overcome, the four areas outlined above may be only the beginning of its true potential.

You can read more about blockchain’s impact on music by reading Middlesex University’s ‘Music on the Blockchain’ report.

Marcus O’Dair is the Convenor of the Blockchain for Creative Industries research cluster at Middlesex University. You can follow him on Twitter @marcusodair. Don’t forget to follow us too @DigiCatapult.

Working with blockchain? Join us on 15 August for our Smart Contracts and Blockchain Working Lunch. 

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