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Blockchain Application in the Music Industry

In 2018, HMV, a UK-based music and film retailer,announced the wind up of its Hong Kong outlets. Some people are dismayed by theclosure, yet the falling trend of buying discs from physical stores is no surprise to HMV’s failure.

In recent years, many consumers choose to stream or purchase music and other entertainment services online. KKFARM, the investment company of Taiwan’s famous music streaming provider – KKBOX, has joined hands with Bitmark and CTBCBank to release blockchain-based music distribution platform – Soundscape, withan aim of solving copyright issues. Multinational giant Sony has also announced the use of copyright management system two months ago to protect creative content through blockchain.

The characteristics of music industry and the adoption of blockchain

Producers are at the core of the music industry.Producers earn profits through production and licensing of the produced music.Although music is widely considered as an art, there is a need for financial returns to support music producers in the commercial market.

From a legal perspective, music copyright is the basis of music production and profit distribution. From the birth of a song to its launch in the commercial market, there are many ‘rights’ holders, including composers,lyricists, post-production professionals and more. Each party has different contributions, resulting in tremendous complexity in licensing and profit sharing.

 If the costs involved in the process can be reduced significantly, music creators can retain more benefits and will have greater incentive to produce high quality content. Blockchain technology matches the implementation of music copyrights authorization in the following ways:

1. Authorization channel

The musician gives the authorization to the user and receives a fee in return. This process seems simple, but it is not the case in the music industry. As mentioned above, participants in the industry include creators(songwriters, music producers, independent musicians), property right owners (lyricists,music companies, investors), and property rights agents (music copyright companies, recording agent distribution company), users (digital music platform, audio and video production units, music event organizers, etc.),copyright holders (performers, creators), developers (application service providers, system development core team), centralized management group (record production collective management bodies, music production collective management bodies), competent authority (Intelligent Property Bureau, Ministry of Culture,Audio-visual and Music Industry Development Bureau) and so on.

The relationship between people involved in the relevant music rights is complicated, and each time the authorization needs to be approved by the rights holders. When each song or album is legally authorized, the network of authorization and profit sharing in the entire music industry is very complicated while the process is time consuming and cumbersome.

If it involves transnational authorization, the situation is even more complicated. If the music producer authorizes foreign music copyright companies to use their music, profit distribution would be difficult, particularly when the copyright is dispersed, and law enforcement in the two places is not uniform. When a user wants to get music authorized, it is difficult to find out the authorize in a prompt manner. At present, the industry standard for doing so is to firstly entrust the authorization fund. After the right holder is determined, the expenses are settled to the counter party to avoid legal problems.

2. Industry source transparency

In the industry chain of music sales, they need to go through record companies, distributes,copyright companies, music collection groups, digital music platforms, and finally to users. The stacked structure makes it difficult to realize transparency. The complicated profit-sharing process is costly, inefficient and does not directly benefit the producers at source.

By using blockchain technology, people can realize disinter mediation and reduce costs,so that music producers, that is, producers at the source of the industry, realize higher returns. Producers can get more production-related rewards, and all the data in the chain is open and transparent. Also, the benefits and profit can be automatically executed, while maintaining the trust between parties involved.

Blockchain application in the music industry

1.Fair distribution of income

The subscription fee on KKBOX is 149 yuan per month. It is very likely that the monthly fee paid by consumers is for the purpose of only listening to the top ten tracks on the leader board. It is also possible that the customer does not even play the songs on leader board at all as the entire income distribution is based on general direction on the platform. By enabling blockchain technology on music streaming platforms, customers who pay a monthly fee would be transacting through authorized smart contracts. At the time of monthly payments,the smart contract would enable distribution to the songs that you listened to.Customers can therefore support music creators directly for each track that they listen to and/or download.

2. Strengthen distribution ledger

Both the issuing company and music streaming platform would have their own ledgers,which will record transactions of both parties. Most companies currently though use a separate SQL database, or just use spreadsheets and folders to manage authorization on computers.

As the number of transactions grow, the current bookkeeping model would be extremely labor-intensive and time-consuming for processing all the transactions.If music data is directly recorded on blockchain and files are stored on a distributed platform for users to access, it will become easy for the same account book to record multi-party authorization, data submission, report verification, profit sharing etc. When all distributed nodes in the blockchain network have the same distributed ledger, only one transaction action needed is to update books of all users in the network, which can help many firms save cost sand time.

3. Creation through authorized value

Musician sat present need music companies to provide brokerage, publicity, and job opportunities. The issuing company still needs to provide authorization and assistance. When blockchain enters the industry, the intermediary’s work form will be different from today.

They will no longer carry out the value transfer role but will become more focused on helping musicians create value, while ultimately returning the surplus value created back to musicians.

The core of blockchain technology can resolve the efficiency and trust issue in the industry and reduce inter mediation costs; and the music industry is suitable for the technology. By using blockchain to handle time-consuming processes,music industry producers and intermediary companies can focus on issues such as content development, creativity, marketing, promotion, and cost controls which require high-order thinking. Producers will also be inclined to produce quality content as they can generate higher revenues.