by Michael Laws. The end of the music tech gold rush is upon us. Apparently. While an elite handful of streaming services (Apple, Spotify, Tidal, YouTube, Soundcloud) have calcified into the dominant market players, smaller more-fan-focused products have been imploding, showing entrepreneurs and their deflated investors alike the limits of mainstream-market demand for niche or fan-focused music services.
Why? Money… Always, the money
As a starting point, when there’s an oceanic supply of free content, it’s ‘mad difficult’ to get people to pay; however, even more challenging, even if someone wanted to pay, the digital payment mechanisms we currently have don’t connect with the endless ways we may consume music through digital means. There are basically only two ways to get users’ cash: charge their cards/PayPals or show them an ad. Throw into the mix that the major labels and rights-holders have cooled on their issuing of licenses to startups and, all of a sudden, it looks like the bus is full for consumer-facing music-tech products.
But stress not; there is enormous room to innovate behind the curtain in how the music industry acquires, administers, distributes and collects remuneration for musical works. Notwithstanding the possibility of VR renaissance, my bet is that the next major phase of music-tech development will not happen in the ‘frontend’ of how fans consume music, but rather in the structural ‘backend’ of how the underlying business itself works. Why? Because the backend of the music industry may be the very definition of a clusterfuck.
Music’s backend: a burning dumpster fire
As a starting point, it’s worth revealing what anyone who works in music regards as obvious: the system of rights-licensing and -administration is a hot mess. In one song, you may be looking at up to six layers of rights that could be owned and controlled by completely different people, who will all have to sign off before usage may occur. And these rights-controllers will often transfer their rights or outsource the administration of said rights to a myriad of third-party institutions. They, in turn, will sub-license to third-party institutions in other countries to administer the rights in the territory they operate in. Which will be thrown into an enormous mix-bag of other songs to be managed and negotiated en masse. In short, an already-complex intellectual property product (thanks to copyright law) enters a system of rights-management institutions which is fragmented, uncoordinated and highly inefficient (thanks to the music industry).
And this mess is a problem because rights-licensing and -administration is the music industry. Literally, the core value-exchange in the music industry is some people paying other people to acquire an IP right or permission for use.
We’re stuck with an awfully quaint analogue backend in an era of universal, multiuse, high-volume digital consumption. Clearly, music copyright itself has a UX problem.
Glimpsing the ‘Fütch’
It needn’t be this way. The way value is remunerated should (obviously) mirror the way value is consumed.
Imagine a system wherein artists and rights-holders could easily upload a track and control their rights, issue licences for live performances (including DJ sets), sync opportunities, remixes or derivative uses from one neatly indexed and centralised space, where individual users or larger intermediaries wanting to license rights could easily pay and show that they have necessary licence to use the music. Such a system would minimise waste, ensure clear transparency for rights-holders and would remove obstacles and checkpoints, creating a much-easier user experience for not just those on the business backend of music but consumers who want to attain rights for uses other than just listening.
But how? If this were so easy. surely we’d have this up and running already? Let’s not get it twisted; creating such an underlying infrastructure would be incredibly complex, requiring work and buy-in from multiple stakeholders. But we may well be standing at the cusp of a potentially enormous revolution in technology which could open the space to make such a system possible for the first time…
The blockchain and smart contracts
If you read any tech writing at all, you’ll know that the levels of hype around the blockchain are reaching critical heights. The technology which empowers bitcoin is being hailed as “the next internet” and while, sure, a lot of the hype will deflate over the next couple years, the development of these decentralised, uncrackable public ledgers is extremely exciting. (If this is the first time you’re hearing about the blockchain, read this, this and this).
In short, the blockchain could create two key elements: flexible yet granular rights-management control and integrated micropayment mechanisms. Jargony. yes, but exciting nonetheless.
Let’s start with the former, in the basement of rights management.
Part of the justification for middleman institutions (such as publishers and collecting societies) in the past was rooted in that monitoring and controlling the exploitation of certain rights was an incredibly difficult task. How could an artist (let alone a label managing a whole roster) follow up on every use of the music it had the responsibility to control? It made sense in such an age for artists and labels to outsource this work to professionals who they could trust to track the usage of their work and claim the fees owed to them. The irony here is that these third-party institutions aren’t particularly good at doing this.
In between opaque accounting practices, rough-as-hell remuneration calculations, paper-based submissions and collections techniques, Kafkaesque bureaucracy, anti-competitive dominance and heavy-handed compliance demands (bordering on authoritarian, in some cases), they seem to be begging us to put them out of their misery.
Fundamentally simpler and transparent
From a technical perspective, though, the blockchain could radically obviate the need for such institutions: In short, we will be able to register the copyrights emanating from a song on the blockchain and then, with the power of smart contracts, automatically manage the administration and transfer of rights to third parties. Combined with fast-improving content ID technology, following the paper trail of music usage will become fundamentally simpler and transparent. Instead of trained experts roughly working out where and for how long a work was used, we will soon be able to easily trace and target for monetisation where works are being digitally consumed (covering both exact copies and UGC-derivative works).And this is important because it will make the use of music (both by consumers for passive listening. as well as by commercial entities such as clubs, broadcasters, or other creatives) far more flexible, user-friendly and transparent. This would lower barriers to entrance for consumers and artists alike, enable greater music usage and would trim wastage and inaccuracies.
This gets particularly interesting when married to the latter feature, micropayments. Up until now, digital services have been stymied by two issues: the challenge of receiving payments that are below a certain size and the inconvenience of payment. Think about buying something more substantial online like a sound-system: Our payment systems work well enough here because, not only is the monetary transaction big enough that the bank will be prepared to process the payment but, from a user-experience perspective, it is not a jarring break in the process but a natural endpoint that we’re used to: checkout.
The same cannot be said for many other goods and services we consume online, especially creative content such as images, text or music. Chiefly, we consume these goods at too high a volume to be dragged into an onerous payment process every time we consume and, even more problematically, the monetary value of these transactions (possibly as little as a cent or less) are too small for a bank to bother processing.
Bitcoin, Ether and other digital currencies, however, may attend to both of these problems. Because these digital currencies inherently exist and are entirely processed online, they need not go through “real-world” banking institutions and thus users may quickly and easily transfer tiny amounts of digital currency right there in the browser or on an app.
This capacity for micropayments, when combined with the flexible rights-management of smart contracts, means that artists could set the remuneration conditions for access or usage of a particular right beforehand; such usage or access would then automatically be granted should a consumer meet the conditions set (ie paying a particular price in bitcoin). And this, by the way, is the more-onerous version of the transaction. This could be smoothed over even more substantially if an existing platform (such as YouTube) would tap into the underlying public blockchain and integrate these technologies into its larger user experience of content indexing and payment, where such consumption would naturally follow from the artist’s original upload of their work. Such an integration, apart from hiding the slightly more janky backend wiring from the consumer, would accelerate our ability to jettison a separate specialised industry of mediocre middlemen that do this work with rough back-of-the-envelope calculations.
Bringing it home: blockchain, music consumption in sub-Saharan Africa
As a rule of thumb, avoid ‘think-pieces’ that have “Africa”, “leapfrogging” and “unde-served” in the same paragraph. Mea culpa. However, if one were to look at the machinery of the music business in sub-Saharan Africa (outside of South Africa and Nigeria in particular) and compare it to the amount of consumption and creation that goes on, this general point about the potential of the blockchain to radically improve the music business is even more pertinent.
When thinking about the music industry, it’s important to remember that, at its core, you’re looking at a high-volume consumable goods market. On one side, you have product distribution (music goes out) and, on the other, revenue collection (money comes in). Especially with the advent of the internet and digital distribution, the former side is relatively easy; it’s the latter part that is the pits, requiring complicated formal collection institutions and procedures.
And here’s the thing: setting up the machinery of collection is capital- and human-resources intensive. As a result, the music industry as an industry is biased towards big artists and big labels in big markets who have the necessary business structures, market-revenue incentives, expertise and third-party relationships to effectively create or tap into these collection mechanisms. The obvious, simple observation is that this capital threshold is exacerbated in markets where there are a lack of existing collection mechanisms; simply put, many African musicians will not be connected to these structures like their American or EU counterparts may well be. In short, there are a lot of African musicians making music, and a lot of people consuming their music but, because of the immense challenge of tapping into institutions which can collect those royalties on their behalf, the value they have created is being unrewarded.
The benefit of the blockchain in these markets would be direct. Artists would no longer be reliant upon these formal collection mechanisms to be able to collect royalties and they could monetise their works at relatively low administrative cost without being dependent upon a third party gatekeeper.
Looking forward/wider
If you’re in music, this should excite you. If you’re not in music this should excite you even more. My old boss had this great line that “music is the canary in the digital goldmine”: what happens in the music industry first will tend to happen to other information producers, and the market more generally, down the line.
If that’s the case, what we may extrapolate more generally is that we are not at an innovation horizon event but rather at a point of inflection. And that inflection will be a shift, or a rebalancing, from the frontend to the backend, where the underlying infrastructures and institutions which structure our industries (and perhaps societies) are fundamentally changed. And because we’re looking to change such fundamental systemic conditions, now more than ever we will have to be aware of the policy and legal aspects it affects and is affected by. Copyright law itself will need to shift to accommodate these changes and it’s going to take a long hard slog to get the major stakeholders to buy in and open the gates. In this way, the “blockchain revolution” (if/when it happens) will need people not just coding and developing the technology but on the ground, sometimes dry, legal types, pushing and pulling for uptake to happen.
Consumer-facing music startups and tech developments will continue happily along. But the predominant vibe of music tech as sexy and edgy may will shift to the heavy lifting needed in the backend. The future of music tech in this way is not sexy but it may well be radical.
Michael Laws is an information and media law specialist who focuses upon the intersection of law and technology. He has a special interest in understanding the impact information technology has upon the market, political governance and culture. Michael believes the future of African legal frameworks will be deeply rooted in technological innovations and that the key to unlocking Africa’s potential lies in a combination of code and legislation.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.
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