Spotify has about 140 million active users worldwide, a database of around 30 million songs and over 20.000 songs added each day. Last year, the company made about 2,9 billion euros of revenue. As anyone can tell from these numbers, Spotify is doing well in the music industry. Still, less well-known artists are struggling to make ends meet. For these artists, the world is about to change. Blockchain has the potential to disrupt the music industry.
What is blockchain?
For those of you that are not familiar with the blockchain, here is a short introduction. The blockchain has the potential to replace all the intermediaries in business transactions. Typically, intermediaries are take part in transactions to establish trust. With the development of the blockchain, the system will establish trust and with that make all intermediaries unnecessary.
How is this done?
The blockchain is the technology behind Bitcoin. It is a decentralized, digitized, public ledger of all transactions. In this ledger, transactions are recorded and added as blocks, which allows market participants to keep track of transactions. The blockchain consist of nodes (computers connected to the network), which automatically download copies of the blockchain. This makes it impossible to change the ledger, because one would have to hack all the nodes at the same time.
How could the blockchain erupt the music industry?
Currently, there is no verified global registry of music. This is a big problem, especially for smaller artist. The blockchain could help build such a registry. Artists can upload their music, including metadata, on the blockchain. Companies and consumers can search the blockchain for music and play it off the ledger. The owners of the content will automatically be paid through smart contracts. This means that the blockchain could change the way music is published and money is made.
What are the advantages of blockchain?
First, the blockchain can solve the piracy problem. Because music can’t be downloaded, copied and modified at the leisure of users, piracy will be very difficult. Second, users can play the songs they want and immediately reward the artists with cryptocurrency. This revolutionizes the way money is made in the music industry. Lastly, the system enables artists to get in touch with the people that are playing their music. This results in intermediaries becoming (partly) irrelevant.
What will Spotify do?
Currently, Spotify experiences extreme difficulties to find out who owns the rights of a song. Most of the songs don’t have the proper metadata to ensure that the correct artists or rightsholders get their money. What will Spotify do if blockchain hits the market? In April of this year, the company acquired Mediachain, a blockchain start-up. It is not clear if Spotify will bet big on blockchain or do something else.
What do you guys think? Will blockchain take over the music industry? And, what should Spotify do if this happens? I’m curious to know what you think!
Nice article Rink!
I wanted to raise a couple of questions I had.
You made the point about reducing intermediaries between musicians and end users through blockchain. While I understand this might help reduce the interference of record labels and distribution companies, how do you think it will change the exposure of small time artists? Will a global registry of music help these artists get discovered, or actually bury them further under the volcano of content?
I am also interested to know your viewpoint on whether artists would like to be paid in cryptocurrency, given its volatility and lack of widespread adoption.
Thanks!
Thanks for the reply Niraj! You address some important points!
In the past, the distribution of music cost a lot of money: making CD’s and selling them all over the world. Big labels operated as a bank for musicians: investing in artists to make a profit. Since big labels controlled the distribution channels, they were of big influence in determining which artists became successful.
This has changed with digital music. With digital music, control over the distribution of content has shifted from a selected few, to everyone. It has empowered artists and individual creators. So, why do we still have record labels? The labels still curate music, but are mainly involved on the marketing and promotional side. Big labels have direct deals with digital service providers like iTunes, Spotify and Beatport. Since they have a bank full of money, they are able to secure featured placements on iTunes and make sure songs are in Spotify playlists and plugged to the radio. This is where the blockchain will make a change.
A global registry of music will not be influenced by parties that have a lot of money. It gives smaller artists the same chance as more popular ones. It is true that there will be a, as you describe it, volcano of content. But that is also true for the current situation, since artists are already producing hours of music each day.
In short, the global registry of music will not be influenced by big labels. This means that the blockchain will give smaller artists a fairer change of discovery.
In response to your last point, I’m not sure whether artists would like to be paid in cryptocurrency. It is true that the currency is very volatile, which enhances the risks of using the currency. Since making music is also about making money, this could be an obstacle for artists. This is something that needs to be addressed properly by blockchain music start-ups.
Interesting post Rink. I agree and think that blockchain will have a significant impact on the music industry by making ownership rights more clear. Furthermore, with blockchain there is an undisputable ledger which shows how often a song was listened to, which makes royalty distribution more transparent for music producers. I think this could have a significant effect on other industries as well that make use of streaming services such as video-streaming (Netflix, YouTube) to go against piracy and improve view-transparency.
Thanks for your reply Shaffy. I agree with you that the blockchain could have a significant effect other industries.
I’m curious to know what you think about the question Niraj stated above: would artists like to be paid in cryptocurrency, given its volatility and lack of widespread adoption? What is your opinion about this?