When Napster released in 1999, the industry was shaken by the new, disruptive technology. Over time, the industry adapted to the new industry dynamics, and the music business today is arguably better for it. The paradigm can be applied to streaming music services like Pandora and Spotify, which form the latest wave of technological disruption to the music industry.

However, the industry is yet in the process of adapting to this change, and many inefficiencies and issues that affect artists and businesses alike remain to be resolved. At present, streaming services routinely underpay artists, refusing to equitably distribute profits in return for their music, and music intellectual property is generally improperly secured or tracked. These are two areas in which blockchain with its immutable ledger and smart contracts that facilitate payments can help to create efficiency and equity in the music industry, as well as ease the transition from dynamic change to stability.

The Issues of  Payment and Security

While the proliferation of digital files, smartphones, and streaming music services has served to grow and evolve the music industry, it has also brought new issues, many of which are yet unsolved.

The meteoric rise in size and popularity of streaming services such as Spotify and Pandora belie how little music artists receive as payment. In fact, the disparity between the revenue generated by streaming businesses and the amount that artists are compensated currently presents a significant problem. Spotify recently settled a $1.6 billion lawsuit in which the company was accused of using songs without fairly compensating artists.

Streaming services pay artists very little even in cases of songs that reach millions of people. By some calculations, Spotify pays an artist between $6,000 and $8,000 for a song that is played one million times, and Pandora pays only $1,650 in the same situation. Additionally, these amounts are not entirely retained by the artist as record labels often take sizable portions. Moreover, there is often significant delay between streaming plays and payment distribution to artists. Artists must often wait weeks or even months to receive royalty payments.

The other major issue is intellectual property. As growth in scale of streaming companies has outpaced the speed of technological advancement, it has become increasingly difficult to keep track of music rights; music rights change hands regularly without any standardization, and IP theft, whether intentional or through negligence, is prevalent.

Fair and Transparent Distribution of Profits

While streaming services earn revenue by delivering vast quantities of music to listeners around the globe, they have also benefited from underpaying artists. Presently, an estimated $2.5 billion in royalty payments that should be paid to artists are delayed or unpaid.

Providing transparency for payments was one of the first applications of blockchain technology, and dates back to the creation of Bitcoin. The principles that govern blockchain payment systems can be applied to create fair and transparent payment systems for the music industry. Bitsong is creating a decentralized music streaming platform in which artists will be compensated directly. Artists utilizing this service are paid for streaming plays by users and can even attach advertisements to their music to obtain more revenue for their music.

Other projects seek to achieve the same outcomes through other means. Musicoin allows independent artists to reach a global audience and receive payment directly by cryptocurrency. Revelator is creating a wallet solution for artists to be paid in cryptocurrency whenever a song is played on radio. Royalty payments are made daily instead of monthly, and smart contracts ensure accurate payment based upon the number of plays.

Solving Intellectual Property Rights

As previously noted, the systems used to manage music rights currently lack transparency and security, and are in need of a major overhaul. Blockchains offer the opportunity to accurately and securely track ownership of music rights. Additionally, rights can be bought and sold with secure payment systems, with all transactions tracked and backed by these blockchain systems.

If management of music rights was simplified and managed in a standardized manner, it would allow anyone to identify the owner of a musical work, and even for rights owners to transfer or sell their rights on the market openly and securely. The Open Music Initiative is one project trying to turn this idea into a reality. By creating an open-sourced protocol, Open Music hopes to bring uniformity to intellectual property rights management in the music industry. The project is comprised of many companies and organizations that participate in the music industry. Mycelia is another project working on this problem and creates blockchain-verified profiles and identification for artists in which digital rights can be stored and transferred. Mycelia combines the concept of blockchain-based digital identities with securing digital property rights.

Paving the Way to Future Shakeups

Since the launch of the digital age, not so long ago, the music industry has undergone many and significant changes. Digital music files opened the doors to new ways to consume music, and streaming services have pushed the industry even further. The time is now ripe for blockchain technology to fill in the inefficiencies and security gaps prevalent in the music business. By helping secure payments and digital rights, artists and related businesses will benefit from greater transparency and equity across the industry, and provide the foundation for whatever new changes the future will bring.