The music industry is in crisis, outpaced by the digital revolution and unwilling to innovate and adapt. With all but the top-earning musicians struggling to get paid, the promise of a new technology that could support artists at both ends of scale seems almost too good to be true. Josh Hall finds out how the blockchain could upend the industry.

SoundCloud is starting to look like the first dead unicorn of its generation. ‘Unicorns’ – tech start-ups with a valuation of a billion dollars or more – are rare and precarious beasts, and no company sums up that precarity better than the Berlin-based streaming giant. Attacked on all sides by legal challenges, licensing issues and excessive downtime, the company is now frantically looking for a buyer to pull it out of the quagmire. Google is the latest suitor, rumored to be mulling a purchase for around $500 million – about half what the SoundCloud founders were demanding just a few months ago.

SoundCloud is emblematic of a music industry that is, as it has been since the advent of Napster, in a quiet existential crisis. For the best part of two decades it has been on the back foot, buffeted by technologies that it doesn’t understand, that it has refused to engage with, and that, ultimately, have driven down margins for all but the biggest players. SoundCloud spent years trying to convince the major labels to get on board. At the same time, those same labels saw their revenues decimated by the very technologies SoundCloud was built on.

Of course, it’s not just the labels who are suffering – artists’ bottom lines are also struggling to keep pace with shifting patterns of music consumption. We’ve all seen the Spotify revenue statements showing that artists are paid just a fraction of a cent per stream, but what about YouTube? The video platform is the first port of call for many fans, but more often than not, a play on YouTube delivers nothing to the artist. Contrary to conspiracy theory, though, that’s not entirely YouTube’s fault. The blame often lies either with incomplete or absent metadata (few fans uploading a Rinse FM radio rip would bother with proper credits) or with opaque deals done by labels years before they really understood what streaming meant for the industry. Often, YouTube and their rivals simply don’t know who the rightsholders are, and therefore don’t know who to pay – and, as a result, there are huge sums of unpaid royalties sitting in so-called ‘black boxes’, doing little but generating interest.

So how can we fix it? According to some, the answer lies with the technology du jour: blockchain.

Blockchain is a distributed ledger system, but that doesn’t really mean anything unless you’re an accountant, a cryptographer or a Bitcoin investor. In practical terms, a blockchain allows people to connect and transact on a ‘peer to peer’ basis, as opposed to through a third party like a bank. Those transactions are then kept on a distributed database, or ‘ledger’: everyone on the blockchain has a copy of the database, which is also available to everyone to view, and every record that is kept on it is immutable.

Most people know about blockchain because of Bitcoin, the press-friendly but notoriously volatile cryptocurrency that runs on the technology, but the two don’t necessarily come together: while Bitcoin needs the blockchain, you can have a blockchain without Bitcoin.

Bitcoin, however, shows what can happen when blockchains achieve scale. It is, theoretically at least, incredibly secure: it’s estimated that in order to successfully hack the Bitcoin blockchain, you’d need about 525 times the entire computing power available to Google.

Benji Rogers is the founder of dotBlockchain, a new company aiming to apply a distributed ledger system to music. He thinks this could solve some of the industry’s most pressing problems, a conclusion he came to as founder of PledgeMusic, the direct-to-fan music platform. “I looked at the metadata of some of these albums we were being sent,” he says, “and suddenly I realised that artists don’t have a way to digitally express their rights into anything tangible. And the reason that’s important is: what’s more fundamental to the work itself than who owns it, and how to pay them?”

His dotBlockchain project is wildly ambitious. It aims to develop a new standard for music content, called .bc – think of it as an alternative to .mp3 or .wav. But unlike those existing formats, .bc will contain not only the music itself, but also a host of information connected to it: rightsholder details, terms of use, licensing restrictions – basically, anything that you can express in a machine-readable format.

MP3s, AACs and the rest, are laughably insecure when it comes to metadata. As Rogers points out, it is the work of seconds to strip out artist data from a file of this kind. But, he says, “the persistence of information on ownership is going to become really important. The bass player who played on a track that’s sampled 600 times and then played on a platform that makes money – how does that money get back to the bass player?” By hard-wiring the rightsholder information into the file, he thinks he can help to eliminate the black boxes being sat on by YouTube and their like – and, by building a system whereby rightsholders, labels, licensees and streaming platforms all transact on a blockchain, that information can be rendered immutable by anyone but the parties with the right to change it.

The blockchain technology also offers the opportunity to conduct transactions virtually in real time, circumventing an industry that, according to Rogers, still routinely conducts its business on paper. In a blockchain model, an artist might set out the terms on which they want to license a track, and any restrictions on use. A potential licensee could then use a ‘smart contract’ function to do a deal instantly, without weeks of paperwork.

Mat Dryhurst, founder of self-hosting framework Saga and Holly Herndon’s visual and musical collaborator, also sees the potential for smart contracts from the rightsholder perspective. “An artist could choose to attribute and automatically pay anyone who has contributed to the production of a record,” he says, “which could lead to all manner of interesting, principled distributions of money through music, transparent to the public and the archive.

“I’ve also heard of interesting examples where the blockchain can be used in combination with music identification technology to automatically distribute funds to people whose music is being played by DJs.” With smart contracts, this can all be achieved without human input.

But while dotBlockchain is coming at the problem from an infrastructure perspective, Dryhurst is primarily involved in Resonate, a new blockchain-based streaming platform founded in Berlin by entrepreneur Peter Harris.

“Resonate is a platform co-operative built on the blockchain,” Dryhurst says. “The basic idea is that everyone who participates in the platform is a co-owner, allowing for democratic decision-making about the future of the platform.” Resonate, he claims, is able to deliver significantly higher streaming rates for artists, and was conceived “as a way of putting the means of production and distribution back into the hands of artists and audiences as a collective entity.”

Resonate promises to offer artists new freedom to dictate the terms of their own streaming deals. They suggest, for example, that an artist could specify that they want to give away 100 free plays, that they want their music heard in public venues, and that they want to limit plays from outside the Resonate app to just their own website. Or, in fact, they could choose to do none of the above – the limitless parameters offered by the blockchain should, in theory, render possible virtually any combination of requirements.

But blockchain has implications beyond artists and the industry. It doesn’t take much of a leap to suggest that this new paradigm, in which records of ownership are decentralised rather than siloed in individual private databases, could herald a major change in perceptions of intellectual property (IP).

“The ability to track all activity around a song, give artists access to that information and the ability to act on it, could have big implications,” says Dryhurst. “I think we are beyond the point of catch-all DRM [digital rights management] logics.We need to develop toolboxes for individual artists to make these calls for themselves, which in turn will unearth a number of competing ideologies on IP.”

Lars Holdhus, who records as TCF, is another blockchain advocate. He also sees changes ahead for intellectual property, but not all necessarily good. Blockchain solutions are good for artists, he says, because “they don’t need agencies with heavy bureaucratic models to collect royalties.” However, while there are obvious benefits, he warns of limitations on creativity, particularly in genres founding on sampling and mixing: “It could also create a more difficult climate for mixing culture as you would need to pay for every song or sample you use. The laws around fair use of copyrighted material might change, and that would make it difficult for artists who cannot afford to pay royalties.”

The major problem, however, is more simple and immediate: how does the upstart blockchain movement persuade an archaic music industry to take a leap? Rogers is optimistic. “We’ve had extraordinary help and support from massive majors and tiny indies,” he says. “They’ve got us together with their technical teams and they’ve helped by guiding the process. They’ve been unbelievably giving. Nobody wants to put their neck out as far as I have yet, but we do have three, potentially five companies that are going to publicly agree to sponsor development.”

For Dryhurst, though, the challenges for adoption come as much from the listening public as they do from the industry. “Many people quite like the music-on-tap logic of the dominant platforms,” he says, “as it has been designed primarily for the interests of a small overclass of artists and their audiences that generally just want to hear something while they cook for the evening. As a result it’s increasingly hard to convince the majority of casual listeners that alternative approaches are vital to the health of music communities.

“Another massive hurdle is a conceptual one: as people are so unfamiliar with the technology, the language and possibilities inherent to it can seem overwhelming and abstract. That’s why at the very least it’s important to be vocal about the importance and potential of alternatives.”

Blockchain itself remains in its infancy. Bitcoin grabs the headlines, but the major finance and tech players are already scrambling to grasp the implications of the technology that lies behind it – the Financial Times even has a blog series dedicated to blockchain advances. It’s early days yet. But it seems unarguable that the industry must change, not only for its own sake but also for the sake of a public who value, and increasingly demand, a healthy arts ecosystem. It’s here that the blockchain might yet shine. “This goes far beyond music,” Dryhust says, “and yet the musical community has the opportunity to play a pivotal role in setting things in a better direction.”

Josh Hall is on Twitter

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