As it stands today, the music industry has a number of worrying gaps in terms of authentication and compliance. Artists aren’t always paid fairly for their song plays and an estimated $2.5 billion in royalties go uncollected each year.

A number of blockchain-based music platforms are currently using blockchain technology to help address these shortcomings and make the music industry a fairer place for artists, managers, labels, Digital Service Providers (DSP), and Performance Rights Organizations (PRO) alike. What does blockchain technology mean for the music industry?

Challenges facing the music industry

Thanks to the services such as SoundCloud, Apple Music, and Spotify, listening to music online is easier than ever. You pay a low monthly fee and the digital service provider (DSP) passes on a portion of that money to the artists. Sounds simple enough, right? Well, not exactly.

The average song has nine (9.1 to be precise) different collaborators, and there could be up to 50 different intermediaries between the artists and the users. The difficulty of identifying and driving revenue to all these different people leads to revenue leakage and, in many situations, artists and record labels simply don’t get paid.

An added difficulty is that songs, unlike other copyrightable intellectual properties, almost always have not one, but two copyrights; one for songwriter or publisher and one for the composition. Unless the same person writes and performs the song (Bob Dylan, for example), figuring out who gets paid what share of the revenue can be challenging. That’s before you consider additional complexities such as collaborations, samples and so on.

How blockchain could help track song plays

Blockchain technology has the potential to help accurately track song plays, detect usage of songs and collect more royalties for artists, managers and labels. But how? At present, performance rights organizations (PROs) such as BMI and Artists Rights Society are ultimately responsible for tracking who gets paid and who earns what.

These calculations are made using sampling, and it isn’t always accurate, transparent or completely fair.

For example, artists may receive reports showing 200 million plays, but then receive royalty checks for far less than they were expecting. They may receive statements that simply read ‘Internet’ for all streaming royalties without any details about the song play count or even the DSPs on which the plays occurred.

Blockchain-based services, such as SOUNDAC and eMusic, are aiming to help build a consortium that creates the conditions for PROs to agree on a shared digital architecture for the music industry. This will move the industry away from a sampling model and towards a measurement model where song plays are recorded accurately and transparently on an immutable blockchain.

What does blockchain technology mean for artists and managers?

Blockchain technology aims to provide a fairer, more accurate way of measuring song plays and collecting royalties. This means that artists using blockchain-based services can more accurately track plays for each of their songs across multiple DSPs and potentially collect royalties that would otherwise go uncollected.

Blockchain-based music platforms will let artists create their own immutable contracts with labels and set their own terms. This will fundamentally change the way that artists sell music and interact with their fans. Music managers will benefit from being able to accurately track song plays and ensure that their clients collect the royalties they deserve.

What will blockchain technology mean for music labels?

On average, music labels report roughly a 21 percent discrepancy between reported song play counts and the payouts received. Blockchain music platforms can create an immutable record of song plays.

This can help labels prove the number of plays that each song receives and grow their streaming royalties faster. Working in partnership with a blockchain consortium, labels will be able to verify each song play from every DSP via a blockchain, helping to avoid disputes and boost revenues.

How will digital service providers be affected?

The central problem facing DSPs is that the music industry is a series of non-interoperable verticals. A global hit song could have thousands of ways of making money, yet each platform has its own way of calculating views, shares, and revenue.

Blockchain music platforms will revolutionize the way that DSPs calculate song plays. Instead of relying on questionable sampling data from PROs, immutable blockchains can give DSPs a cheaper, faster and more accurate way of tracking of song plays.

Conclusion

Two decades ago, the 19-year-old computer whizz Shawn Fanning unleashed Napster and, in time, brought the entire music industry to its knees. Although Napster was sued into oblivion, its direct descendants – streaming services such as Spotify – have, over time, enriched music labels beyond their wildest dreams.

Blockchain music platforms stand poised to offer the same sunlit uplands to artists, managers, labels and DSPs who are ready to take the leap.