Envoke Blockchain Pilot

Introduction

The Envoke Network is an open global alliance of record labels, publishers, artists, technologists, educators, and academic researchers that proposes a blockchain solution to registering and communicating music rights and metadata.

The global recorded music industry is worth USD$23 billion per year, predominantly increasing through digital revenue, however an estimated USD$2.5 billion of the revenue generated is unattributable to the rights holders. This is because the music industry manages its assets through highly fragmented, analogue systems and processes. Additionally, inaccurate and incomplete metadata holds payments up in collection societies and DSPs. Unattributable revenue is then divested to music companies with the largest market share rather than the rights holders themselves. Metadata is siloed in proprietary databases that are not interoperable, making music licensing, payment systems, and intermediary processes slow and costly. Inaccurate or incomplete metadata also means that adjacent industries such as film, TV, games, and advertising find it difficult to license music.

Envoke’s blockchain technology approach simplifies this complex, historical problem for the industry. It registers music at the point of creation, enabling it to be monetised accurately through a frictionless, efficient, and transparent process. The combined mechanics of smart contracts, advanced data security, and collective ownership creates the perfect solution for an industry that is not able to fully monetise and realise the value of its digital assets.

Transparent and co-created governance and dispute protocols are also critical in an industry with overlapping rights, historical disputes, and metadata errors. The Envoke Pilot will develop a robust and human centered governance structure as part of the solution. The Envoke Pilot’s approach is collaborative and inclusive, it has strategic partners and relationships across music and technology industries. Its culture of international collaboration and co-creation in the solution from the outset, creates an engaged network and the trust essential to music industry adoption.

The independent and artist direct sector is at least 30% of global market share and grew by 27% in 2020. While Envoke originates in the independent music industry, the broader creative industries stand to gain from a solution that increases efficiency and financial sustainability. Envoke’s simple and driving aim is to create a scalable solution that ensures music rights holders are paid accurately, transparently and on time.

What is blockchain?

Blockchain, or distributed ledger technology, enables a fundamental transition from an “internet of knowledge” (web 2.0) to an “internet of value” (web 3.0). The combined mechanics of advanced security and cryptography, automated smart contracts and collective ownership creates the perfect mix for an industry frustrated by too many analog processes.

This new paradigm has practical and useful applications that are currently being rolled out across the world. Blockchain is useful anywhere that provenance, identity, ownership and data control are important.

At its most basic level, blockchain is a consensus-based, decentralized ledger. It creates the ability for multiple parties to co-own information together. This pilot focuses the impact of this technology on one key issue – the assertion of ownership rights, starting with metadata as a fundamental building block.

Independent Record Labels

Record labels are often the origin of music metadata. They assign a unique number identifier, such as an ISRC number, to a song or piece of music when it is first written or recorded. This ISRC number is registered by the label, along with the rights holder’s details and as much information as is available. Once the writing splits have been verified with the artists, this metadata must be communicated to many different parties – through email, phone, online forms and various spreadsheet formats. Some are intermediaries and some are end users. Information and income returns to the label, and sometimes the label is an unnecessary intermediary. It is an analog process for a digital system.

This process is inefficient and error prone. It results in unfair, inaccurate accounting and uncollected income; it’s estimated that 20-50% of metadata is incomplete or inaccurate. It also reduces the ease of licensing, as many third parties are never able to correctly identify who the rights holder is for a particular piece of music.

Blockchain creates an opportunity for metadata to be published once, to all parties, directly, whilst the rights holder maintains ownership of their data.

It can be published on a granular or total level. For example:

  • Rights holder data would be useful for licensing by film, radio, TV or adverts
  • Writing splits information is required by the publisher
  • Format, title and release date are useful for press and radio
  • Dealer price and units manufactured are needed for physical mechanical royalties

As the technology develops, blockchain can be used to set permissions, and transactions can occur in both directions through smart contracts. Smart contracts enact processes and payments immediately when criteria are fulfilled, for example:

  • Sales data results in payments made directly to artist and publishers as mechanical royalties, without a lengthy and inefficient back and forth processes.
  • Royalty on sales can be paid directly to artists at the point of sale, at variable and flexible rates.

Data Analytics

Importantly, because blockchain communicates back to the source, all data associated with what happens to the music returns to the rights holder. This streamlines the process of collecting and interpreting data, meaning the rights holder is empowered to collect and analyze all of the data associated with the use of the music they own or control.

The Pilot

Seeing the opportunities that arise from the existence of a single repository for metadata rights, the Envoke pilot project seeks to align the global independent music industry with this single source of ingestion and licensing for labels. Initially, this is to resolve the never-ending issue of inaccurate and incomplete metadata, but ultimately will create an independent federated blockchain that is an origin source of bi-directional communication and transactions.

Partners

Kendraio Foundation, Stolen Recordings, Resonate, RMIT University, University of the Arts, London and dozens of independent labels

  • The pilot is a safe, closed system.
  • It is a practice run with real data to test process and scalability.
  • Each initial partner label will contribute between 10 – 30 releases of metadata
  • The pilot is realistic, and uses a correct-by-construction approach, to build a robust solution correctly the first time.
  • The demo will use Resonate’s streaming service as the test connection.
  • Data can be accessed by other DSPs without the need for those organizations to also be “on blockchain”.

Ideologies

  • This is a flexible system for catalog management with advanced security, cryptography and automated smart contracts that enables a new model for “commons-based” data and access.
  • This is not a strictly commercial venture, but will likely create efficiencies, leading to greater profitability for all parties.
  • It will be built with open source technology for third-party auditing.
  • The project is intrinsically structured for transparency, fairness and accuracy.
  • Using blockchain technology, without ownership, the Envoke pilot is about taking the best actions for the greater good.

Motivations

Collectively, the motivations of the partners in this pilot are:

  • Increasing revenue collection and creation in the independent sector.
  • Fair and immediate payment to artists.
  • Transparent artist rights.
  • Scalability structure for larger amounts of data being licensed in hugely varied ways.

Broad technical overview

  • Inclusive, beginning in the independent sector.
  • Federated means not ‘in the wild’, dramatically reducing complexity.
  • The federated blockchain has between 15-20 appointed stewards that are custodians of that blockchain.
  • The stewards are comprised of independent label associations, non-profits, educational institutions and other organizations. These bodies would not be owners of the data and their identity would be public.
  • Publishing via authorized access through appointed nodes, then synced across the network, creating one single point for licensing.
  • Enacted with permissions and smart contracts, resulting in frictionless, trustless transactions.

Organizational design

  • A new “digital commons” wherein each rights-holder sets their own access permissions, but no single partner node “owns” the entire database.
  • Each partner node has a single seat on the board of a new global co-operative, acting as steward for the whole system. Nodes/Stewards to be Independent Music Associations, Universities, Technology Partners (such as Resonate) and Artists Representative groups (such as Mycelia).

Governance

Vital components of a federated independent system are processes and guidelines for resolving inevitable conflict around rights ownership in a collective system. Governance is one area where blockchain’s inherent transparency is powerful, but this is not something ‘decided by computers’. Ultimately it is for the stewards of the federated network to decide their own processes and guidelines for dispute resolution and to adapt over time. Key suggestions are:

  • Using the system’s inherent transparency so third parties can easily audit the disputed data.
  • Processes can be set up that assess proof of ownership.
  • Committees could be created to explore more complex disputes.
  • The board, comprising of the stewards/nodes of the system, could mediate after third party auditing and evidence has been provided.

Phased rollout

  • Each stage evolves as/when technology is ready.
  • Controlled read-write permissions in early stage strictly via chosen partners.
  • Evolves into fully open, decentralized system only after detailed risk/benefit analysis and design of comprehensive token model.

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