The independent music industry accounts for around 30% of all recorded music. This total excludes the long-tail of self-released works, which would augment that number to an unknown size. Currently this sector has no simple licensing framework, employing traditional analog processes instead of a fully digital licensing system. Blockchain technology presents an opportunity to create a system whereby any entity could easily access licensable works via simple smart contracts with clear payment methodologies.
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, in a UK example, at least 20 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.
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.
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.
Stolen Recordings, Resonate, RMIT University 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”.
- 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.
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.
- 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).
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.
- 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.