How Blockchain can change the Music Industry
Updated: Jan 4
Since the 1999 launch of Napster's music-sharing platform, the music industry has been in near-constant turmoil, its timeline marked with dipping revenues, lack of transparency, piracy problems, and feuds over the fair distribution of dividends.
Music companies hate streaming services. Streaming services hate file-sharing services. Most of all, artists and content creators hate virtually everyone else to make vast sums off their toil and feed them the crumbs.
There seems to be no one service or business model with so many conflicts of interest that can work in a fashion that satisfies all the parties involved. But now, after years of suffering from a complex and complicated relationship with the tech sector, the music industry might finally find a chance to head in a positive direction by leveraging the blockchain. This technology powers the bitcoin cryptocurrency.
Anyone who follows the music industry knows the tussles between artists and those who rely on their creative output. The traditional food chain is a long one: between those who create the music and those who pay for it—music lovers, concert-goers, advertisers, rights licensees, and corporate sponsors, there are publishers, producers, and talent agencies, and countless others with a stake in the industry.
Intermediaries cut the revenues and pass along the rest, which eventually reaches the artists and musicians between 6 and 18 months.
Many thought the Internet might help democratize the industry, but the opposite has occurred. "The traditional way of doing things is if a song sold a million copies, I would receive payment in mechanical royalties.
"Today, a major music service pays an average of $.000035 per stream, or about $35 for a million streams, thus reducing a reasonable middle class living to the value of a pizza."
We have swung from one extreme to the other. Now it's time for the whole industry to collaborate on a healthy, sustainable, and frictionless ecosystem that benefits everyone in the value chain, not just the relatively few.
Big technology companies and streaming audio services have taken an additional piece of the pie, leaving most artists with even fewer crumbs, not to mention less control over their work and little knowledge of those who interact with it.
The business has become so complicated and powerful, so concentrated, that musicians like Taylor Swift and Jay-Z have taken themselves off Spotify. For most artists, that's not an option. Change under blockchain-based platforms bright pieces of code called smart contracts.
The new technology runs on millions of devices, from desktops to smartphones, and is open to anyone, where not just information but money and anything else of value can be transferred and stored securely and privately.
Trust among participants is established not by powerful intermediaries like record labels, streaming services, or credit card companies, but by collaborating with those whose devices are running the software.
Artists who embraced the blockchain created hashes of whole songs, the lyrics, and the melody as proof of ownership for a fraction of the cost of registering only the song's title. An artist using the blockchain is not just for registering and promoting digital rights but for cultivating direct relationships with her fans, offering them special privileges, and providing even greater transparency to prospective clients or partners.
Various companies are already teaming up with forwarding thinking musicians to develop a fair and sustainable music ecosystem for artists to turn a song into a business that feeds its creators and enables others to interact with it simultaneously.
They released on the blockchain platform, along with all credits and terms of licensing. In exchange for the digital currency Ether, people could download the song itself or all the music's vocal and instrumental stems for commercial or non-commercial use. Via a smart contract, musicians are paid immediately to their Ether wallets.
It works like this. Artists register their intellectual property by linking all elements—lyrics, musical composition, liner notes, cover art, licensing information. Audio and video performances of the work to the blockchain for all to see or sample, thus contributing to the much-needed peer-to-peer database of global, verified, inclusive, and current music non-existent.
Smart contracts are setting terms of service and usage for fans, distributors, sponsors, and licensees and templates for directly and immediately distributing. Revenues to contributors, collaborators, and promoters of the work artists would decide who could interact with their work, how, and how much each type of interaction would be worth with a lot less paperwork.
Each of these parties, the artists, managers, musicians, producers, record publishing labels, could see all the transactions associated with the work on the blockchain and track who was paying what amount for which right and who was receiving what proportion of revenues.
There would be no opacity in accounting, no delay in payment, and no confusion over who owned or controlled which rights to the work.
Through a set of technical, ethical, and commercial standards, the ecosystem would enable an entirely new marketplace for music and services to flourish, eventually holding all music-related information ever recorded, all linked to a distributed blockchain network of personal computers.
Those wanting to do business with the artists and musical works in the ecosystem would be able to do so without institutional friction, from sharing skill sets and finding collaborators to commissioning new works, booking shows, and hiring a tour manager or a local artist.
What about the labels, collection societies, and distributors, such as Spotify and YouTube? Does the blockchain completely disintermediate them?
If they adopt and embrace change, they will also greatly benefit from this database. As with all new technology, blockchain creates a shift in skill sets and opens new opportunities. There is an ever-greater need for curation and marketing. Record companies could better help music lovers sift through the hundreds of millions of music hours and, along with the publishers and existing collection societies, verify that the data are correct.
At some stage, artists will invariably need to work with these and other parties. Artists will be sustained at the center of their ecosystem, not starving at the edges of many others.
That is the promise of a fair and sustainable music ecosystem, catapulted into action by adopting blockchain technology.
Source:, Imogen Heap, Fortune Magazine & Lawrence Cummins