Blockchain technology will save the music industry and recover from "disruption"

In May, some media published an article listing 187 problems that blockchain should solve, including everything from curing cancer to making cheap pornography. However, this list is not exhaustive. For example, there is no mention of the music industry, although many companies have sprung up, claiming that they will use this technology to save the music industry.

Of course, this argument is very attractive. The record industry has never really recovered from the "disruption" of the past 20 years and is in desperate need of a new economic model.

This industry has a long history of obtaining works from artists without paying corresponding remuneration. Blockchain has made artists stronger and helped them receive reasonable remuneration in the industry. In this industry, the income is often by the top level of the food chain. The company is swallowed up, and the artist himself earns pitifully.

Many companies have created blockchain applications for music distribution. Although some of them seem to have failed and will never see the day they went live, the project content on the social media pages slowly disappeared, and others have little hope of starting (some are essentially "This is Bandcamp, but you can pay with Bitcoin!") .

However, blockchain can provide some benefits. The most obvious is for tracking royalties. The recent history of streaming service provider Spotify highlights the need for improvement in this area.

Last year SpoTIfy acquired the blockchain company Mediachain, which described itself as a "peer-to-peer decentralized database for sharing information between applications and organizations."

This acquisition was followed by a $43 million royalties lawsuit that SpoTIfy failed to pay. The company said it didn't know who should pay the royalties. SpoTIfy claims that the acquisition of Mediachain will bring new ways to help solve the royalty dilemma.

In a blog describing Mediachain, founder Jesse Walden explained:

Platforms such as SpoTIfy and Soundcloud are motivated to find reliable long-term solutions to solve the problem of data fragmentation and avoid future litigation. Spotify seems to have encountered the allegations first, and it recently promised to'solve the global problem of poor publishing data once and for all.'

This statement implies that Mediachain does not want to replace the existing dominant music delivery platform. It provides solutions for those mainstream platforms. Therefore, Spotify now has Mediachain. Has the "global problem" of royalties been solved "once and for all"?

In January of the second year of the acquisition, Spotify was sued again for unpaid royalties, this time amounting to $1.6 billion.

Spotify's business model is remarkable in many ways. Although it stands to reason that it destroys the art form itself and accelerates the reduction of artists' income, (if the lawsuit means) the company often discounts itself and forgets to pay for the music released, the company still managed to make itself completely unprofitable.

Spotify released a quarterly report last week, announcing a loss of $100 million. This is the third consecutive quarter of losses for Spotify. What's more noteworthy is that these losses occurred during a period when Spotify continued to increase the base of listeners. It's not just Spotify that continues to grow. A Nielsen report pointed out that in 2017 Americans listened to music more than 5.5 hours a week compared to last year.

The value of Americans’ perception of music as shown by this statistic is certainly questionable. Perhaps all this listening means that the love of music is at the highest point in history. Or maybe music is now being warmly welcomed, similar to the love usually reserved for wallpapers, though not deep, but always there, gently appearing in the background. But no matter what this increased music "consumption" means, the question remains: If people continue to listen to more music, why does it seem that no company can turn a profit?

An article in Fortune magazine attributed Spotify's failure to profitability to record companies. The contention is that no matter how many subscriptions the service sells, record companies continue to squeeze revenue. As evidence, the article cited the latest federal legislation, that is, the extension of copyright to 144 years. (According to the article again) Spotify can only be truly profitable if it is allowed to play other people's works almost for free; unfortunately, the record company is full of aggressive lawyers and charismatic stars, and they will obviously prevent this from happening.

Spotify (and other "disruptors") has created a business model in which content can only be profitable if it is almost free; therefore, content should be free. In the Fortune magazine article, the absolute oddity of this argument was completely unmentioned.

Digital music, perhaps the longest-lived streaming music service, has reached a similar conclusion. According to the company's recently released white paper, the problem that musicians face is that the revenue from the middleman is so huge that the musician cannot make a living. One of the graphs shows that artists usually receive only 10% of revenue, while publishers, record companies, and retailers receive the remaining 90%. The solution to this problem is (perhaps you have guessed it), blockchain.

According to the white paper, through the use of blockchain, digital music will be able to change the above-mentioned division into a simple five to five. Half to the service provider and half to the artist/record company. Because the blockchain allows the automatic payment of royalties, publishing companies no longer need to be involved.

The plan seems to be trying to create a comprehensive platform that allows artists (and record companies) and service providers to connect more directly and redistribute money previously flowing to publishers to service providers, including but not limited to digital music. The white paper acknowledges that it may be difficult to involve other service providers. Which writes:

We have no illusions, thinking that it is easy to persuade existing service providers such as Pandora or Spotify to join our blockchain platform.

So, why are these other service providers who appear to be digital music competitors interested in joining?

By advocating fair profit distribution, artists who distribute works by digital music have stronger negotiation capabilities, can get publicity support, and have more weight in the profit-oriented algorithm that drives music recommendation by mainstream retail platforms.

By using blockchain to exclude publishers, artists can pay more for streaming services, giving these services the incentive to play more of the artist's music.

This is essentially a bribery. This plan does not increase the power of the artist, but is like a way to increase the gains of the controller, which is very different from the situation described in the more optimistic forecast. Such as this:

For independent artists or newcomers, this technology will effectively reduce costs. Music companies will have to re-adjust their business models, because blockchain will become the center of power transfer from large companies to artists.

The statement about the potential of the blockchain is strangely similar to the statement that also predicts the increase in decentralization in the future. This statement believes that independent artists can gain more power:

It is no longer about a superstar performing to a group of listeners... but a group of specific listeners picking what they want at any time.

But the second argument has nothing to do with blockchain; it comes from a 2005 New York Times article about how the Internet creates a starting opportunity for the development of independent music labels. For the music industry, blockchain now promises some of the same benefits that the Internet promised more than a decade ago but did not realize: artists’ greater control over the industry, and freedom from the domination of a few giant companies.

Some of us are old enough to remember the first time the word "email" appeared. When we hear these statements about the potential of the blockchain, we may feel familiar. When told that new technologies are about to overturn the control of billion-dollar companies, many of us may be skeptical.