Few music composers get paid their fair share. The Copyright Royalty Board estimates that it’s a 15:1 ratio. Contracts are opaque and the proceeds have to be divided among the rights holders; agents, marketing professionals, and music studios. But now, the blockchain provides transparency so that artists can track their earnings. With the blockchain, earnings fall directly into the composer’s hands since all middlemen are removed. True, the Copyright Royalty Board recently ruled to increase songwriter rates for interactive streaming by nearly 50% over the next five years, it’s still a small amount compared to what the artists could be making on the blockchain. For the artists of today, blockchain appears the best solution for a more democratic, fair, and efficient industry.
We would like to thank the team at Choon for their contributions to the design and implementation of the research and to the analysis of the result.
During the heyday of the 1980s, hard-working artists made a living from music. Today, with copyright infringement and dismal payouts, most artists find music streaming a frustrating and distrustful process. Of the $15 billion in global recorded music revenue for sound recordings reported by the IFPI for 2014, only a small portion of that money ends up in the artists’ pockets.
More recently, campaigns like the Music Modernization Act (MMA), currently working its way through Congress, and the RightsTech Project demand larger payments for songwriters than those operating under the Consent Decree compulsory licensing scheme, namely the federal agreements that govern performing rights.
It is blockchain technology, however, that seems to provide the most viable solution by embedding both rights of ownership and usage permissions into the digital files themselves. Furthermore, by eliminating middlemen, the blockchain aims to put more money in artists’ wallets.
What’s the problem?
Listening to music is easier than it’s ever been. Music streaming platforms like Spotify, Deezer, Amazon Music, and Apple Music provide a wide selection of music on demand. All you need to do is pay a fixed monthly fee. You’d think that artists have never had it easier. But you’d be wrong. You see, today’s music streaming industry is extremely problematic, and to give you an idea to illustrate this, here’s just a few of the issues that the artists of today have to worry about:
- Music theft/ copyright infringement – In its recent annual report, the piracy tracking company MUSO showed that music piracy is booming thanks to streaming. Stream-ripping was the third most popular type of music piracy last year, beaten by illegal download sites and unlicensed streaming sites. The 2018 Global Music Report concluded that copyright infringement remained the music industry’s most important challenge, with stream-ripping the latest and fastest growing form.
- Dismal accountability – Top executives at Spotify are millionaires. Even rank-and-file Spotify employees make over $100,000 a year. The artists, in contrast, struggle since opaque contracts impede artists from tracking or claiming their dues. Music-streaming platforms, like Spotify, also refuse to disclose rate ranges, making it difficult to estimate pay rates and contest earnings. Although streaming services are becoming dominant players in the industry, data on music sales and usage is dated, often unreadable, and unclear. Several artists report they don’t understand the payments and accountings they receive.
- Monopoly – A large percentage of the money gets siphoned off by the major labels; Universal Music Group, Warner Music Group, Sony Music Entertainment, etc. Those labels have been accused of underpaying (or never paying) their artists, with secretive contracts to boot. YouTube has also been accused of not making enough of an effort to identify who is owed royalties for music streamed on the system, simply holding onto the money this music makes rather than distributing it properly.
- Lost metadata/Multiple standards – The metadata within the tracks contain information such as who the right holders are. However, this data is often incomplete and easily stripped away. Significant funds are often paid to the wrong party. Furthermore, right holders often define their own standards for data reporting from digital services, meaning there is still no common output standard and dozens of different services end up reporting in multiple formats, resulting in gross inefficiencies. Incorrect or missing data results in an artist not getting paid for their work.
- Middlemen – Labels have multiple other expenses to pay for. Rights holders like music labels, producers, musicians, vocalists, and so on, all claim their share of the revenue. By the time money dribbles to the artists’ end, there’s little to nothing left in the coffers. Batman producers Michael Uslan and Ben Melinker, for instance, finally received an out-of-court settlement of “two popcorns & two cokes” despite the franchise grossing over $2 billion. In another example, songwriter Rodney Jerkins’ stake in Justin Bieber’s “As Long As You Love Me,” generated $146,000 in performance royalties by 2013. During that same period, his streaming revenue garnered only $278. Artists usually have low royalty rates to begin with, and this with multiple deductions, followed by recoupment of costs, ends in little or no royalties landing in the artist’s hands.
Is blockchain technology the solution?
With the blockchain, artists receive the following:
- Transparency – Artists get access to real-time royalty information. Like streaming platforms, the blockchain also works on P2P technology. The big difference is that details like ownership, timestamp, and names of artists and producers are embedded in the smart contracts. These smart contracts also detail the digital distribution terms. The results? Artists know and fully comprehend their contract terms. They can monitor their payments and trust the system. The blockchain gives the music-streaming industry accountability.
- Payment – Whenever someone plays a particular record, its legal owner gets paid. Payments are instant, complete, predictable, and smooth. The company profits in that there are no disputes and that it can attract more users because of its accountability and efficiency. Artists can hope to make good money this way.
- Loyalty rights – Smart contracts organize and encode metadata. Once smart contracts become the accepted industry standard, data is less likely to be incomplete and stripped away. These smart contracts are also immutable, meaning no one can alter them without your permission, pirate your invention, monopolize your creation, or shortchange your terms.
- Control – As a copyright owner, the blockchain allows artists to program their contracts so that anyone involved in the creation of the work – like singer, guitarist, bassist, drummer, manager and distributors – gets paid too, according to the percentages stated in the contract.
- Artist-Fan Connection – The blockchain creates an unprecedented connection between fans and artists, since each can communicate with the other via the ledger. At the end of the day, where the blockchain is most revolutionary for the artist is that it’s a”bottom up” concept. Payment starts with the artists themselves and backtracks to other parties. Millions of aspiring artists share their music with the public, and those who resonate the most get the chance to proceed to radio and charts.
Examples of blockchain services for music streaming
Choon, Resonate, and Voise are examples of blockchain-based music services that are not only as usable as Spotify or Deezer, but they’re also financially more beneficial to the artists and far more transparent.
Blockchain music streaming service Choon not only eliminates the middlemen (thereby giving artists more money), but they also provide increased artist-fan interaction. Choon uses smart contracts, called Smart Record contracts, to distribute automatic payments according to encoded agreements. Smart Record Contracts simplify agreements between all parties and make payouts transparent and immediate.
How it works:
- Choon distributes its payment in NOTES tokens through its Smart Record Contracts, with artists and other parties paid for their streams by the end of each day, every day.
- Artists use NOTES to promote tracks, tap into various promotional platforms, and sample and license tracks – providing numerous additional ways to make an income from their music.
- Listeners use NOTES for platform activities like downloads, private concerts, and chats with artists, as well as the sale of non-digital items.
Music streaming platforms are notorious for their low payouts. Choon not only gives its artists their stipulated fair amount in NOTES tokens, but they also pay them for their work instantly, as opposed to artists waiting for months or years to receive a questionable and miniscule percentage of the overall revenue. Music streaming platforms tend to be opaque; Choon, in contrast, provides 100% transparency. Artists get paid more fairly than standard platforms and from a daily distribution pool that is not skewed in favor of the major labels. In a service that no other blockchain platform offers, Choon promises to distribute half of the total overall NTS token supply directly to artists over the next five years through a system called streaming for mining, plus an ambitious 80% return for artists from streaming package revenues that is higher than the standard 70%.
Berlin-based startup Resonate differentiates itself as a co-operative. It describes itself as “a blockchain-based streaming music company owned by artists, fans, labels, managers, agents, and anyone else… all as equals.” Resonate promises to pay artists up to 2.5 times more than its competitors, while also offering better data and management tools.
How it works:
- Resonate charges people an annual membership fee of $5, which enables them to vote on key issues with the platform, nominate and elect its board members, and get cash bonuses.
- Unlike its competitors, the Resonate blockchain works on a “stream to own” model.
- Resonate users pay 0.002 credits for the first stream of a track, while the cost doubles with each play until it reaches 1.022 for the ninth stream – at which point the listener owns the track.
In today’s music-streaming world, a monopoly tends to control the industry, with most of the money going to top executives and artists receiving the least. Resonate executes a co-operative, where all get paid “as equals.” In contrast to streaming platforms, Resonate uses its blockchain to provide direct-to-artist payments and a pay-as-you-listen model. These two systems means that artists get paid far more than they would with the middlemen situation of platforms like Amazon Music or Spotify.
The decentralized music platform Voise lets artists set a price, of which they receive 100% of the revenues when users stream their music. Smart contracts securely encode contract terms and ensure that artists automatically receive their money when users play their songs. Artists can set a price for their works, provide free sample tracks, and seek support from music enthusiasts and users on the platform.
Voise uses VOISE tokens for instant and cheap payments.
How it works:
- Artist uploads content on the decentralized Voise P2P network.
- Voise recommends relevant content to users, so users see music they like.
- The user pays with VOISE and the transaction is visible to everyone on the blockchain.
In contrast to standard streaming platforms, artists receive the transactions directly from the user without intermediaries or fees. The P2P blockchain ledger also prevents the music content from being taken down or hacked; a situation that is all too common in streaming. Unlike standard music-streaming platforms, artists are in full control of their work; it is the artists, not the labels, who are in control. It is the artists who engineer their terms and receive the brunt of the pay.
Between piracy and dismal payouts, artists are between the rock and a hard place. Music streaming is filled with stories of opaque contracts, no accountability, lost data, and rock-bottom payouts to artists. The blockchain seems to provide some sort of solution with its transparent ledger, unprecedented fan-artist contact, smart contracts that encode records, and data management systems. More importantly, with its removal of middlemen, the blockchain pays artists their dues in an automatic and timely manner.
In short, blockchain-based music services are not only as usable and as widely applicable as Spotify, Deezer, Amazon Music, and Apple Music. They actually help artists make a living.
We’ve created an infographic to better explain this idea to you: