Blockchain For The Music Industry: 9 Possible Use Cases

  • 6 November 2018
  • Sam Mire

Between 2012 and 2021, the music industry’s revenues are projected to grow from $1.4 billion to $17.2 billion dollars. In 2016, global industry revenue was up by 5.9%, streaming revenues had increased by a remarkable 60.4%, and digital revenues were up 17.7%. These numbers can ring a bit hollow, though, considering that the industry had experienced years of decline before streaming platforms breathed new life into a market that has been at the epicenter of the fight against piracy.

Still, physical forms of music continue to see marked declines (down 7.6% in 2016), and the industry’s shift away from effectively selling entire albums at $10–$15 a pop has substantially deteriorated annual revenues. Plus, rising revenues do not always lift all boats, and overall growth in music industry revenues tends to shroud the reality that many artists struggle to gain recognition or make a living. The median income for musicians in 2017 was $26.96 per hour, which is meager when you consider the likes of Beyoncé (who had a pre-tax income of over $100 million dollars), Adele ($69 million), and Taylor Swift (who earned $170 million in 2016).

This disconnect between top earners and hustling up-and-comers represents the focus of many blockchain use cases for the music industry. Smart contract technology will be aimed at making royalty payments and rights management more equitable by removing intermediaries and automating payment calculation processes. Also, creating a more secure platform for creatives to share their content, fighting piracy, and even establishing new ways for users to stream music are some other proposed ways that the music industry can take advantage of blockchain tech.

Blockchain for the music industry - Practical use cases

Better Royalty Systems

Blockchain use cases in the music industry - Royalty Systems

Spotify’s $30 million legal settlement over unpaid royalties serves as evidence that the adoption of digital music streaming services has not rid the industry of an issue that has persisted since music was monetized. Royalty payments are not cheap for streaming platforms either, with 2017 costing Spotify $1.9 billion in royalty fees. Many believe that an industry-wide adoption of a blockchain-based royalty tracking and payment system will create more transparency and value for all parties — talent most of all — while also reducing the overall cost of royalty fee payments. Compensating rights holders as quickly as songs are downloaded is one of the capabilities of blockchain smart contracts, and the automated payment structure will create greater revenue retention by those who most deserve it.

Companies Trying to Solve This Problem

  • Ujo – Automating royalty payments to help artists get paid more fairly.
  • Vezt  Using blockchain to build more fair royalty solutions for artists.
  • Bjork – The artist famously launched her latest album giving away Audiocoins to help drive better outcomes for artists and fans. 

Greater Revenue Shares for Talent

Blockchain use cases in the music industry - Revenue Shares for Talent

Clever industry standards like the 360 deal have led countless artists to give up critical rights — to their master tracks, ownership rights, and musical freedom — in exchange for the chance to “make it big.” A Citigroup report found that even with the music industry doing quite well, artists received only 12% of the industry’s $43 billion revenue in 2017. This figure actually represents a rise in the share that artists are receiving, considering that in 2000 they received only a 7% cut of the pie. For example, when Adele’s smash hit “Rolling in the Deep” sold for $1.29 on iTunes, she would have likely taken home approximately 20 cents.

While it’s true that labels and distributors take on much of the financial risk, the revenue split still seems disproportionate. Peer-to-peer platforms built on the blockchain seek to minimize the number of players with the precise aim of allowing artists a greater share of the revenue they generate, which will hopefully result in greater creative freedom and better, cheaper music for consumers’ ears.

Companies Trying to Solve This Problem

  • Musicoin –  Creating better revenue share for musicians on the blockchain. 

Making Music Cheaper For Listeners

Blockchain use cases in the music industry - Affordable Music Platforms

Don’t let anyone tell you that cheaper is never better. There is a reason why music piracy is “more popular than ever,” growing 14.7% between 2016 and 2017. Whether due to convenience, cost, or the limitations of legal digital catalogs, 35% of music buyers still get at least one song from an unsanctioned source. There are plenty of people, especially the youth, for whom the current music pricing model is too expensive, and they find themselves boxed out through no fault of their own. The blockchain ledger can plausibly eliminate the number of middlemen — and their middlemen, and their middlemen — who stand between the producers and consumers of music. Ultimately, as with any industry where means of greater efficiency are implemented on a broad scale, the consumers will see a price reduction as a result.

Companies Trying to Solve This Problem

  • Choon –  Currently in Beta, Choon is a blockchain powered music platform encorporating crypto payments.
  • Musicoin– To help provide better revenue for artists, Musicoin has a blockchain powered streaming platform.
  • Voise  Post-ICO decentralized music platform.

Creating a Universal Musical Elements Database

Blockchain use cases in the music industry - Universal Musical Elements Database

Studio time has become far more affordable than it used to be, with sites such as Studiotime offering smaller-scale venues that begin at roughly $30 per hour. However, for higher-end studios, as well as the processes necessary to create and distribute a track, the price tag can ultimately reach the tens of thousands of dollars range.

And if artists cannot collaborate in a single studio, they may use services such as Dropbox, Google Drive, or OneDrive to transmit sound elements or entire tracks. This method is not as secure as it should be, as a mistake as simple as leaving your email open on the wrong device could plausibly result in a leak. While sites such as Tunedly have evolved to help foster online collaboration between artists, it would be ideal to have a more secure, accessible alternative that utilizes private blockchains, passkeys, identifiers, and permissions. Right now, if one artist decides to extract and leak a song on social media or elsewhere, other collaborators can fall financial victim to one collaborator’s impulse. This has to change.

It’s not financially feasible for every collaborator to hop into the same studio space when creating a song. But music needs to be made, which means that the transmission of beats, verses, and technical expertise must often be handled digitally. Blockchain databases tailored to the transmission of musical elements could potentially remedy issues such as insecurity and poor sound quality. With multi-step authentication methods, including passkeys, leaks would be more difficult to come by. In addition, the ability to access the same store of information would help minimize quality issues that arise from transmission of files between centralized servers. Some have even envisioned the incorporation of artist metadata and usage rights into such a platform, making it a first-of-its-kind station for artist discovery, collaboration, and payment. 

Micropayments for Global Collaborators and Smaller Artists

Blockchain use cases in the music industry - Micropayments for Artists

The top 1% of musicians earn 77% of the recorded music income, an indication of an industry in which the big fish gobble up virtually all of the major contracts, air time, and fame. The music recording industry was valued at $15.7 billion in 2016 and total music streaming revenues were up 41.1% in 2017, totaling 176 million paid music subscribers globally. Yet the average musician saw only 6% of their revenues stemming from actual sound recordings.

While many streaming services and record labels now accept micropayments, artists and collaborators see too little a cut of these payments, often because intermediaries take significant cuts of the revenues. Several services built on the blockchain are linking song and album sales — and even plays — directly to artists’ and collaborators’ digital wallets, reducing intermediary pie-slicing, as well as the cost of international transactions,  ensuring that creatives earn a proportionate share of their sales. 

Companies Trying to Solve This Problem

  • Mycelia  Founded by artist Imogen Heap, Mycelia aims to leverage blockchain to create an industry more fair for artists.
  • Vezt  Micropayments stemming from new digital rights platforms.

Fair Trade Music Database

Blockchain use cases in the music industry - Fair Trade Databases

Spotify pays about $0.006 to $0.0084 per stream to the holder of music rights, a measly figure which is then divided between several rights holders, typically including the artist. Artists received only 12% of the $43 billion in sales generated by the music industry last year. A fair trade music database essentially represents an ideal that will be extremely difficult to translate into a reality: a public database upon which artists can upload their music, represent themselves, and receive a majority of the cut from music sales. Rights info would be contained within the metadata of these music files, and both record companies and consumers could rely on this database to purchase music and discover artists and musical talents to sign. This use case remains highly theoretical, due to the difficulty of going back through established music deals and catalogs, existing stakes in the status quo, and concerns about creation and ownership of such a database. But hopefully a middle ground between this blockchain-based ideal and the current system can be found.

Companies Trying to Solve This Problem

  • AudioCoin Removing the middlemen between artists and fans.
  • Ujo Rights database on the Ethereum blockchain.

Fighting Piracy

Blockchain use cases in the music industry - Fighting Piracy

About 70,000 jobs are estimated to be lost per year due to the financial damage music piracy inflicts on the industry. Since 1999 — when file sharing was introduced — music sales have dropped by more than 50%, a drop that has translated into an estimated $2 billion drop in annual wages and salaries within the industry. It’s not a niche issue, either — an estimated 35% of users access music on the internet in copyright infringing ways, tallying nearly 108 billion visits to sites hosting pirated music files. Blockchain platforms seek alternatives to the traditional punitive approach to piracy, offering users rewards for sharing music between peers in a way that will still garner revenue for the artists and others in the industry.

Companies Trying to Solve This Problem

  • Custos – Using the Bitcoin blockchain to secure digital files from piracy. 

Making Digital Rights Management More Flexible

Blockchain use cases in the music industry - Digital Rights Management

Digital Rights Management (DRM) systems are so limiting that, when recording company EMI stripped back their DRM anti-copying protections in 2007, sales went up by more than 10%. Call it the sample effect: the ability to expose more people to new music through sharing led to a more than 30% jump in sales for albums that had previously not been particularly hot sellers.

Instead of instituting blanket policies regarding the ability for music to be copied and shared, a creator-managed approach could become possible with the adoption of blockchain-based digital rights management platforms. Lesser-known artists would be wise to make their content shareable, according to the data, while already hot-selling albums would have less incentive to remove anti-sharing parameters. A system that establishes these rights accurately and allows them to be altered on an artist-by-artist and even album-by-album basis would be far more desirable than the current binary policies put in place by streaming services and other distributors. 

Companies Trying to Solve This Problem

  • Vezt Leveraging blockchain to make it easier and more affordable to get rights to individual songs.
  • Jaak “Smart content” licensing on the blockchain.

Securing Digital Songs, Albums, and Catalogs

Blockchain use cases in the music industry - Securing Digital Music

In May 2018, Jay-Z’s streaming platform Tidal announced it was investigating a possible data breach that could leave its reported 3 million subscribers at risk. In 2016, a list of hundreds of Spotify user accounts and passwords appeared on the website Pastebin, in response to which management urged users to change their passwords. A similar incident occurred again in December 2017. For an eventual $34 billion streaming industry, such reliance on outdated security measures ensures that hacks will continue, and resetting one’s password is about as useful as banging one’s head against a concrete wall. After all, owner-driven digital rights, streaming, sharing, and other music industry-related platforms are little good if they remain vulnerable to hacks.

To solve these security concerns, the immutable timestamps and unique cryptographic IDs of the blockchain ledger serve as an unalterable indicator of ownership, while the multilayer security protocols that any hacker must bypass makes any blockchain music platform — and the information contained within — a safer bet than the centralized systems that most artists, labels, and distributors continue to rely upon.

About Sam Mire

Sam is a Market Research Analyst at Front Lines Media. He's a trained journalist with experience in the field of disruptive technology. He’s versed in the impact that blockchain technology is having on industries of today, from healthcare to cannabis. He’s written extensively on the individuals and companies shaping the future of tech, working directly with many of them to advance their vision. Sam is known for writing work that brings value to industry professionals and the generally curious – as well as an occasional smile to the face.