Follow-up article on “Blockchain in the music industry: a sign of the new paradigm?“(2019)
Originally published in Paradigm blog.
The pandemic hit many industries and the music industry was no exception: retail store closings, tour cancellations, and venues closing their doors, and the list goes on. You just can’t just buy a record from your local store. Live shows seemed like something supernatural or stories of a long forgotten time. Concerts, which used to be one of the main sources of income for musicians, are now almost nowhere to be seen (apart from e.g. a unique pair of Flaming Lips gigswhere both the band and their audience were in individual inflatable balls – as a means of defense against the virus, which was one of the few exceptions to show the trend).
Amazingly, the industry manages to grow and thrive by finding other ways to survive.
In the United States, total music sales rose more than 9% to $ 12.2 billion in 2020[[[[According to the RIAA Year-end report]]. That growth was largely driven by more money from streaming services, which had revenue of $ 10.1 billion in 2020 – up from $ 8.9 billion in 2019. 2020 marked the sixth consecutive year of this subsector growth , which had previously struggled with declining revenues for 15 years.
The major streaming platforms are expected Spotify and Apple Music were the largest contributors, generating $ 7 billion in revenue. At the same time, the average number of subscriptions rose from 60.4 million to 75.5 million in 2020.[[[[Check ‘The best online music streaming services for 2021’From PC Magazine to compare the platforms]].
When you add all of these numbers together, streaming music, both subscription-based and ad-supported, accounted for 83% of total industry revenue last year – up from just 7% in 2010.
It is known that the music industry has always been dominated by gatekeepers. The invention of the internet, Napster digital revolution, creation and diffusion of streaming platforms like Soundcloud and now Spotify have changed the landscape drastically. As it becomes more and more important to talk about streaming as a phenomenon, the users of these platforms are expressing increasing concerns about where all those billions that are made through auditions are going. Unfortunately, the major streaming platforms still only leave small percentages to the musicians themselves. Their model has long been established – a generous payment to the world’s most famous artists. Therefore, it is still difficult for small and independent people to make a living from their music.
The statistics spoke for themselves: In 2020, Spotify’s 500 best artists generated around $ 1.85 billion in royalties from the streaming service – 37% of total payouts, while the 286,000 DIY musicians released through distributors Spotify generated US $ 1.17 billion in royalties last year. around 23.5% of the total[[[[according to the new Spotify website Loud and clear, launched in March 2021]].
Some platforms have tried to address this issue, such as: Tape bearings brought to lifeBand camp FridayLast year’s initiative and every first Friday of the month, the company waived all commission fees, which means more money from users goes straight to the people who created it. What’s more SoundCloud’s new user-centric licensing system will revolutionize streaming for the music industry. As of April 1, 2021, the platform will pay artists and indie rights holders based on their number of listeners, not the number of streams.
Apparently this is just a drop in the bucket, that’s not enough. Decentralized music platforms should help here.
“I think we’re in a post-Spotify era where we’re making money. I call it the era of monetizing digital artists.” If you look at Audius, UCPS, Patreon, Twitch, and In-Stream drinking glasses, it will have a huge impact on the artists. “
– Marc Geiger, WME music director at the SXSW 2021 online conference in March 2021
DLTs and blockchain seem like the next step in bringing power back to developers and their listeners.
In short, the most important and visible DLT solutions for the music industry are:
- The ability to remove middlemen from the process of music sales and streaming. Thus, the payment of inclusive license fees, which distribute the income fairly according to each person’s contribution to the creative process, can be carried out automatically. While the skewed distribution is unlikely to be fully addressable, improving conditions for emerging artists can lead to a more diverse market.
- A database for digital rights. Large distributed databases can be implemented so anyone can interact with each other and link the underlying copyrighted material to all metadata in the digital ledger for all to see.
- Tokenized Rights Management This means providing smart contracts that actually manage rights and maximize the value of publishing, recording, performance, merchandise and all other artist rights. This includes the terms of third party engagement with record labels and distribution services.
- Complete Transparency and data protection. Transparent ledgers are distributed so that everyone can see how much sales a song is generating, when and how high the revenue streams are, and who received and what percentage.
- New sources of income for artists. Everything revolves around NFTs and crowdfunding. Music makers can earn from users by selling non-fungible tokens. There may also be dynamic auction pricing mechanisms to experiment with promotions and versioning of content.
- Financial incentives for listeners. DLT music platforms can make the entire music experience more interactive and more rewarding for fans. You can’t just reward users with exclusive content and lower prices. Some of them offer listeners rewards for curating personalized playlists (like Choon), others reward fans with their native tokens for their contribution to the database of artists, venues and events (Viberate, and other).
Two years ago, I gave a brief overview of the state of the music industry in 2019 by describing 30 blockchain projects that had the potential to boost it. To date, some of them have been successful and flourished, but many already ceased to exist without making a suitable product. Promising services like Choon, who paid artists 13 times more per day for streams than Spotify, or feedbands, whose team planted 1 tree per 100 streams, simply disappeared.