Blockchain Revolution (updated)

by Don Tapscott

  Rich Databases that can interface with one another and associate the core copyrighted material—lyrics, composition, and recordings—with all their metadata, the liner notes, the artwork and photographs, the individual tracks, the rights that the composer and the performer are willing to license, the terms of licensing, contact information, and so forth—in the digital ledger for all to see. No more incomplete databases of rights. Rights availability at your fingertips! Rights holders would be easy to find.

  Usage Data Analytics in the hands of artists at last, to attract the right advertisers and sponsors, organize tours, plan promotions and crowdfunding resources and future creative collaborations with other artists. The model could capture “so much of this lost data around the world, like where are your fans, how old are they, what are they interested in,” said Heap. “With that information, we could really tailor-make tours, we could connect up with brands and initiatives that resonate with us, or promote artists, products, or charities we love and support. I’m not talking names and e-mail addresses type of info, a bit more zoomed out but still vitally useful data. We could cross-reference it with other bands’ data for all kinds of interesting uses for fans and artists alike!”21

  Digital Rights Management, that is, a means of managing digital rights, not the anticonsumer DRM software wrapper that was all about restricting usage. We’re talking about the deployment of smart contracts that actually manage rights and maximize the value of publishing, recording, performance, merchandise, and all other rights. This includes terms of third-party engagement for record labels and distribution services: labels and distributors could decide whether to opt into an artist’s terms of use and expectations for service. If artists don’t want advertising to interrupt the music experience, then they can forbid it. If they want a certain cut of ad revenue, then they can insist on it. If they want one of these large firms to handle licensing, distribution, and copyright enforcement in certain territories such as China, then they can do that. They can also set term limits. If the firms don’t deliver a certain level of revenue, then the contracts can automatically terminate. Artists also need automated subsidiary rights management, wherever possible or desired, where prospective licensees either accept or reject the artist’s terms of use and payment. The contract itself enforces each deal and can notify the artist of any breaches and terminations.

  Auction/Dynamic Pricing Mechanisms to experiment with promotions and versioning of content, even peg subsidiary rights royalty percentages to the demand of a song. For example, if consumer downloads of a song spike, then an advertiser who licensed that song for a commercial automatically has to pay more when the commercial runs.

  Reputation System that culls data from a bitcoin address’s transaction history and social media, to create a reputation score for that address. Artists will be able to establish their own credibility as well as that of prospective partners in deal making, whether among artists as collaborators or between artists and consumers, labels, merchants, advertisers, sponsors, licensees, and so forth. Using multisig smart contracts, artists could refrain from doing deals with entities that don’t meet certain reputational standards or don’t have necessary funding in their accounts.

  The key point of this new fair music industry is that the artists are at the center of their own ecosystem, not at the edges of many others. “I see a place for Spotify and YouTube. I see a place for curation, and I see a place for user-generated content,” said Heap. “I see a place for record companies because we still need people to sift through the hundreds of millions of hours of music, or billions of bits of music and art all over the planet being created every day.”22 With software templates, they can engage creative collaborators, the big music labels, the big distributors, and the many smaller intermediaries as they see fit on the blockchain.

  The Self-Launched Artist: Signs of the New Music Paradigm

  One of Imogen Heap’s friends, Zoë Keating, Canadian-born cellist and composer, has always controlled her own music. She owns all her publishing rights and the masters to her recordings. She carefully orchestrates her own marketing, sales, licensing, and distribution strategy. Given all the complexity mentioned above, we’re hugely impressed. “An artist like me couldn’t exist without technology. I can just record music in my basement and release it on the Internet,” Keating told The Guardian. For her, the Internet has leveled the playing field for independent artists, but her experience with the big online music distributors has not differed greatly from Imogen Heap’s with the traditional labels. “This is not just an excuse for services to replicate the payment landscapes of the past. It’s not an excuse to take advantage of those without power,” said Keating. “Corporations do have a responsibility not just to their shareholders but to the world at large, and to artists.”23

  Keating was alluding to the new contract that Google’s YouTube presented to her. It was wrapped in nondisclosure. For several years, she’s distributed her music on YouTube and monetized third-party uploads of her material using Content ID, a program that automatically alerts rights holders to instances of potential copyright infringement. Keating wasn’t concerned about piracy, file sharing, or royalties. To her, commercial streaming was a means of promotion, reaching new audiences, and analyzing usage data. The music aggregators and the hit makers were the ones who made significant money by offering complete catalogs through on-demand services. Not her. The largest share of her revenues had always come from hard-core fans who’d pay from twenty dollars to a hundred for a new album. She would release new work on Bandcamp first, then upload it to iTunes, and finally make selections available elsewhere—YouTube, Spotify, Pandora. That windowing strategy—making content available exclusively in a particular channel for a period of time—had proven itself effective for her and her hard-core fans. She could thank her existing supporters and cultivate new relationships.

  YouTube was launching a new subscription service, Music Key, where users would pay a fee to avoid advertising. If Keating wanted to continue monetizing her work through YouTube, then she would have to agree to YouTube’s terms: include her entire catalog, and stop windowing elsewhere. It was all or nothing. She knew that the independent labels weren’t happy either about the new licensing terms, but they were more upset by the financial repercussions. Keating wanted to maintain control over her music, on her terms.

  She saw the potential of the bitcoin blockchain as a technology that could ensure that goal, starting with its transparency. “I just believe in transparency in everything,” she told Forbes. “How can we build a future ecosystem without knowing how the current one actually works?”24 For example, on YouTube, Keating estimates that there are fifteen thousand videos—dance performances, films, TV shows, art projects, gaming sessions—that use her music as soundtracks without her authorization. She should be able to leverage all that enthusiasm for her work, but only YouTube knows exactly how popular her music is. Nielsen’s SoundScan is only one facet of a multidimensional picture.

  Like Heap, Keating wants to register copyright and leverage copyright metadata on the blockchain. That way, people could more easily track her down as the copyright holder. She could then track derivative works through the blockchain. A distributed ledger of music metadata could track not only who created what, but who else was materially involved. She imagines visualizing usage and relationships, calculating the real value of a song for dynamic pricing, and enabling ongoing micropayments to collaborators and investors without third-party black boxes like ASCAP or BMI.25

  Again, we’re not saying that there is no role for labels or technology companies, and that artists could just make it on their own in a purely peer-to-peer ecosystem. Rather we’re talking about a new kind of music ecosystem centered on the artists, where they control their own fate and receive fair compensation for the value they create. Blockchain technology will not create a new standard for how artists get compensated. Instead, it will liberate them to choose and customize an infinite array of solutions t
hat work for their specific needs and beliefs. They can give it away for free, or micromonetize everything—but it’s their choice, not the label’s or the distributor’s.

  Other Elements of the New Music Ecosystem

  Basic Copyright Registration

  There are two fundamental dimensions to music copyright. The first is the worldwide right to the underlying composition—the musical notes and the lyrics—in all forms and languages, and that’s usually held by the composer-lyricist. The music and the lyrics can be copyrighted separately. The composer-lyricist makes royalties whenever someone records or performs the song, buys the sheet music, adapts it into another genre (e.g., elevator Muzak), translates it into a foreign language, or includes the music in an anthology or textbook. The second is the worldwide right to the sound recording, a performance captured and preserved in some medium like a digital file or music video. The recording is usually copyrighted by the performer or band members, who earn royalties when the recording is played on the radio, television, or the Internet; synced with TV shows, commercials, or video games; streamed, downloaded, or purchased in some hard medium such as vinyl, CD, or DVD.

  Zoë Keating’s level of autonomy was what motivated Toronto’s industrial rock band 22Hertz to turn to the blockchain. In Canada, registering copyright for one song costs fifty loonies, and the certificate contains only the title of the work. The band’s founder, Ralf Muller, didn’t think that’d be helpful in court, if anyone ever used the lyrics or melody. So he decided to go the hashing route, by creating a hash of the whole song using something called an OP_RETURN feature—and encoded it into the blockchain instead. If anyone ever used his words or music, he could simply demonstrate his ownership by pointing to the transaction on the blockchain, doing another hash of the song, and comparing the second hash with the hash on the blockchain. They would be identical. “Once you encode a hash in the OP_RETURN and block upon block get written on top, it is basically impossible to go back and change anything. This, to me, is incredible.” When asked why the band’s online store was accepting bitcoin and offering discounts to bitcoin users, Muller responded emphatically, “I’m not into ‘business as usual.’”26

  Digital Content Management System

  Nor is Colu, a digital content management platform based on bitcoin blockchain technology. It provides developers and enterprises with tools for accessing and managing digital assets including copyright, event tickets, and gift cards—much of what a truly distributed music industry would need. Colu has partnered with music technology leader Revelator to build a rights management application programming interface (API). The goal is to realize what Imogen Heap and Zoë Keating were imagining—the demystification of rights ownership, digital distribution, and actual usage. The API will also provide incumbents a means of providing the much-called-for transparency and efficiency. “We are very excited about the potential for Colu’s platform to simplify the management of music rights, starting with those associated with songwriters and their compositions,” said Bruno Guez, founder and CEO of Revelator. “Colu has made the complex technology of the blockchain accessible for integrations into platforms like ours, and we’re looking forward to exploring all the ways it can improve service to our clients.”27

  The New Artists and Repertoire (A&R)

  Finally, a key aspect of any creative industry is talent scouting and coaching. Musicians naturally embrace mentoring and play an “artists and repertoire” role in such competitions as The Voice. The blockchain supports this type of A&R with usage algorithms. Consider PeerTracks. According to its landing page, it is “the ultimate one stop music platform” for both music lovers and artists. PeerTracks attaches a smart contract to every song that an artist uploads, and the contract automatically divvies up the revenues according to whatever deal the performer made with the lyricist, the composer, and other members of the band. Artists create their own tokens, bearing their name and likeness similar to a virtual baseball card. Tokens are collectibles. The artist sets the number of available tokens. So there could be limited editions, so to speak. The concept is simple: create a store of value, the valuation of which correlates to the artist’s popularity.28

  Users get full access, on demand, to the entire PeerTracks music catalog for free without advertising interruptions. They can save songs and playlists for offline use and download any song or album from the catalog. Unlike with Spotify or iTunes, users can also purchase tokens of artists and trade these tokens like baseball cards. As an artist’s star rises, the value of the tokens rises, and so users could potentially benefit financially from supporting artists before they become famous. Loving an artist translates into VIP treatment, perquisites, and freebies from artists. This incentive turns people who would be passive listeners on Spotify into active promoters and builds a long-term, engaged fan base. PeerTracks intends to pay artists more for streams and downloads—specifically 95 percent of revenues—and to pay them instantaneously on the blockchain. Artists can set their own price for music downloads and merchandise. PeerTracks claims that “swarms of profit driven talent scouts/curators looking for the next hot star/token” will hear a new artist’s song because PeerTracks users will vote them to visibility.29

  ARTLERY FOR ART LOVERS: CONNECTING ARTISTS AND PATRONS

  The traditional art market is notoriously exclusive and opaque. A relatively small number of artists and collectors represent an incredibly large percentage of the market, and there are very few, narrow, and sometimes circuitous paths for emerging artists to enter the art world. Even so, the openness and generally unregulated nature of the art market encourages experimenting with new concepts and new media, democratizing the art market on one hand, and democratizing capital markets on the other, with both hands on the transformative and disruptive power of the bitcoin blockchain.

  Artlery describes itself as a network of artists who have agreed to share some of their earnings with patrons and peers who engage socially with their works.30 Artlery’s goal is to mint an art-as-asset-backed-currency on the blockchain by engaging art lovers as partial owners and stakeholders of the art with which they interact. Its approach is to provide the right incentives for all sides of the market—artists, patrons, curators, and venues such as galleries, museums, studios, and fairs—rather than provide perverse incentives for one party at the expense of the others. To foster patronage and build reputation for an artist, Artlery stages initial public offerings (IPOs) of digital pieces of that artist’s work. Artlery’s app enables artists such as JaZoN Frings, David Perea, Keith Hollander, Benton C Bainbridge, and the Bazaar Teens to replicate their physical works digitally, break them into many pieces like a picture puzzle, and apportion them to patrons based on each patron’s level of appreciation from within the Artlery app. During a work’s IPO period, patrons can accumulate interest up to the specified percentage of the piece that the artist initially gifted to the community. As the platform matures, Artlery plans to allow for the transfer and sale of the accumulated interests in the works.

  At the 2015 Stanford Blockchain Summit sponsored by Artlery, Don decided to back a work by Anselm Skogstad, titled EUR/USD 3081, an artistic rendering of a euro currency note magnified and printed on a fifty-eight-by-forty-four-inch Dibond aluminum composite.

  Buying Art Through the Bitcoin Blockchain: How It Works

  To purchase the piece, Don opened his bitcoin wallet app. He used it to create a message that specified the amount of bitcoin representing the purchase price of the piece, designated Artlery’s public key as the recipient of that bitcoin, and used his private key to “sign” or authenticate the message. Don double-checked all the fields because, unlike traditional payment methods, there was no reversing this bitcoin transaction. Then he broadcast the message not to his Canadian bank but to the entire network of computers running the full bitcoin blockchain.

  Some people refer to these computers as nodes, where some nodes are donating their processing power to solve the math problem associated with creatin
g a block. As we’ve explained, the bitcoin community refers to them as miners and to their problem-solving work as mining, as in gold mining. It’s an awkward analogy because it conjures images of experts whose talent might confer some competitive advantage over noobs (newbies). It doesn’t. Each miner is running the software like a utility function in the background, and the software is doing all the computations. Serious miners configure their machines to optimize their processing power, minimize their energy consumption, and leverage high-speed network connectivity. Beyond that, there’s really no human aptitude necessary and no human interference tolerated.

  Not all nodes are mining. In fact, the vast majority of nodes on the bitcoin network are simply performing bitcoin rule verification of received data before routing the data to peer connections. The network verified the two bits of data—that Don controlled the amount of bitcoin specified and authorized the transaction—and recognized Don’s message as a transaction. The miners then race to convert unordered and unrecorded transactions into transactions ordered and recorded in a block of data. Each block had to include the digest or hash of the previous block of transactions, as well as a random number known as a nonce. To win the race, a computer must create a hash of the block; this hash must have a certain, but arbitrary, number of zeros at the beginning. It’s unpredictable which nonce will produce a hash with the correct number of zeros, and so the computers have to try different nonces until they stumble upon the right value. It’s really like winning the lottery because there’s no skill involved. However, a human being can increase her chance of winning the lottery by buying a state-of-the-art computer processor that specializes in solving bitcoin’s math problems; buying more tickets, that is, running multiple high-powered nodes; or, as human beings often do, pooling her node with other nodes—like colleagues at the office—and agreeing to split the pot if one of their nodes wins. So winning is a matter of luck, processing power, and the size of one’s mining pool.