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What Is Bitcoin, Blockchain’s Future in the Music Industry?

What Is Bitcoin, Blockchain’s Future in the Music Industry?

“Blockchain technology is coming like a tsunami,” says Dot Blockchain CEO Benji Rogers. “Every business in this space needs to start thinking about a Blockchain strategy.”

A specter is haunting the music business — the specter of Bitcoin. To be more specific, it’s the Fear of Missing Out on Bitcoin, which is only natural given the digital currency’s climb from a value of about $1,000 to more than $19,000, before it settled at about $15,000. Suddenly, a business that has spent the last decade making it more convenient to pay for its products is experimenting with digital cryptocurrencies that are technologically innovative, mathematically secure and actually fairly inconvenient to use. What is to be done?  

In November, Bjork began selling her album in Bitcoin and three other digital currencies. (The first major artist to accept Bitcoin seems to be — go figure — 50 Cent.) Ghostface Killah got involved in issuing his own cryptocurrency, which seems uncomfortably close to the Chappelle’s Show‘s “Wu-Tang Financial skit that shows the hip-hop group offering investment advice. In early December, a team involved with the cryptocurrency Monero announced Project Coral Reef, which allows consumers to buy merchandise from Mariah Carey, G-Eazy, Fall Out Boy and other artists who have deals with Global Merchandising Services. Now the DJ Gareth Emery plans to release, sell, and pay royalties for music using both digital currency and the blockchain technology that it often runs on.

Digital cryptocurrencies like Bitcoin could be transformative and they’re rising in value so fast that they’re impossible to ignore. (Even J.P. Morgan Chase CEO Jamie Dimon turned around.) At the same time, the only person I know who has ever actually bought anything with Bitcoin is my former neighbor in Berlin, who ordered LSD by mail from the online Silk Road marketplace for illegal drugs. It’s not clear how much this will help the music business, however, since rising Bitcoin transaction fees are making the currency so impractical that even a bitcoin conference stopped accepting them.

As cool as cryptocurrencies are, it’s still not clear what problem they solve. Consider Monero, which offers users even more privacy than Bitcoin by obscuring the identities of payers. That has potential and it makes sense for businesses to accept whatever currency their customers want to use. “It’s what we want to do,” says Christopher Drinkwater, Global Merchandising Services’ head of e-commerce. “Make things as easy as possible.”

The customer is always right and Drinkwater says purchases made with Monero are increasing. Once the novelty wears off, though, isn’t it just easier to buy things with a credit card? Sure, anyone who’s embarrassed about their love for the Backstreet Boys can now buy a T-shirt in secret. Wearing it will still be a giveaway, though.

So far in the music business, there are more serious discussions about the blockchain technology that Bitcoin is built on, since it can store information on a database that’s distributed widely online — and thus both open to read and impossible to alter in secret. “The blockchain is real,” Dimon said recently. Dot Blockchain Media wants to use this to replace the industry’s many, old, incomplete rights-holder databases with a music file format that contains rights information along with recordings. Theoretically, at least, this would solve the problem of streaming services not being able to identify or find the rights owners for the songs they use. Which some say has the potential to change the business. Theoretically.

“Blockchain technology is coming like a tsunami,” says Dot Blockchain CEO Benji Rogers. (Why are digital technologies always compared to destructive weather events?) “Every business in this space needs to start thinking about a Blockchain strategy.”

Some have. In April, ASCAP joined with SACEM and PRS for Music in a venture to explore the potential of the technology to track rights ownership. “The same real-time update and tracking capabilities that make blockchain attractive to the financial industry also make it an attractive option for the music industry, where accurate, real-time ownership data will grease the wheels for the money to flow to songwriters and copyright owners with less overhead,” says ASCAP CEO Elizabeth Matthews. “It is not a panacea to solve the music industry’s problems, but we see potential in the future as one of many data initiatives the industry should be exploring.”

This makes sense. So far, though, the music business is more interested in a tsunami that may never appear. (And if it does, wouldn’t it actually make sense to hide? Does anyone ever look at a tsunami and think, “Hey, I’d like to incorporate that tsunami into my business strategy”?) Gareth Emery, who will soon launch Choon, wants to pay performers and songwriters accurately and immediately by transferring digital currency into their online wallets as soon as their songs are streamed. His idea is that blockchain technology can help musicians run their own careers, without so much money going to “intermediaries and middleman.” It’s a compelling vision, rooted in the kind of techno-utopian optimism that has fueled the rise of Bitcoin, but, like most music business blockchain ventures, it reflects a fundamental disconnect from what the technology can and can’t do. Apparently, when you have a technologically innovative, encrypted hammer, everything looks like a nail.

Blockchain ensures the integrity of information by keeping records of it that are distributed online. That’s awesome, but it only matters if the information is actually present and correct in the first place. And the main problem with music business record-keeping isn’t that rights ownership information gets changed without authorization (although that does happen occasionally) — it’s that it’s simply not there in the first place. As an example, think about Spotify’s failure to license mechanical rights to the compositions it streamed, because it couldn’t identify or find rights holders. The problem isn’t protecting the integrity of information — it’s gathering and getting it right it in the first place.

The idea that blockchain will transform the music business is full of this kind of magical thinking. Dot Blockchain’s new file format could help solve some of the music industry’s problems going forward — which could improve efficiency in several ways — but it won’t magically fill in information that’s now missing. (Rogers says the project could solve that in another way that wouldn’t involve blockchain.) In a blog post about Dot Blockchain Music, Rogers writes that songwriters now have no way to say that they don’t want their compositions used to soundtrack objectionable videos — white nationalist rallies for example — and this technology would allow them to express this as a series of permissions that travel with a song. Cool! Except that in almost all these cases, the makers of such videos already need to get permission — that’s the law. The problem isn’t that creators can’t assert their rights — it’s that they can’t enforce them. If Dot Blockchain gave them a way to do so, would YouTube implement it?

Choon is even more disconnected from the current reality of the music industry. The reason businesses don’t pay right away isn’t usually because they don’t know where to send a check — it’s because they’d rather delay doing so in order to preserve their cashflow. Blockchain won’t change that. Sure, it could eventually help eliminate some of the middlemen who divide up pools of revenue, but be careful what you wish for — some of those same middlemen negotiate on behalf of right sholders to expand the overall amount of revenue to split. Without them, individual creators don’t have much leverage.

So far, blockchain is still a solution looking for a problem — it hasn’t fundamentally changed a single business, except for conferences about blockchain technology (which, to be fair, are enjoying an unprecedented boom). “Blockchain is about solving problems that only exist because the people trying to do so have a fundamentally weird view of the world,” says David Gerard, a technology consultant who wrote the book “Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts.” (How’s that for a B’accuse?) “Here they’re trying to use it to keep track of the data but the problem is that the data is crap.”

In the long run, cryptocurrencies and blockchain technology probably will change the music business — just a lot less quickly and glamorously think people think. In 2014, years before Ghostface went crypto, the singer-songwriter Tatiana Moroz issued “TatianaCoin,” digital tokens, not unlike Bitcoins, that her fans could exchange for memorabilia or access to exclusive events. It’s an interesting idea, and Moroz was in the process of helping the company Tokenly make the technology available to other artists, but the SEC crackdown on initial coin offerings put those plans on hold. For now, at least, any artist experiments with crypto-tokens will be overshadowed by the SEC’s efforts to prevent investors from being deceived by “initial coin offerings.”

Blockchain could also change the way the music business tracks rights ownership, much as ASCAP’s Matthews suggests. But it will probably do so in ways that aren’t especially cool — or even, perhaps, visible. The idea that rights holders will get paid the instant consumers stream a song just isn’t realistic — blockchain technology simply can’t process that much data fast enough. But it could be used to compare rights databases in real time, flag conflicts for examination and improve back-office efficiency for collecting societies in all kinds of ways. This is a bigger deal than it sounds — more efficiency for collecting societies means more money for creators and rights holders. But it’s not much of a tsunami — more of a steady, gentle wave. It only makes sense for music companies and creators to test the water — but anyone who dives in expecting big waves might be surprised at how shallow it still is.

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