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The use of blockchain in the music industry

Music is not what it used to be, neither is the music industry. People want to listen to music, however they are not willing to pay for it anymore. The business enjoyed a slight recovery in 2016 thanks to paid streaming services such as Apple Music and Spotify.¹Nevertheless, the industry is still not even half of what it used to be. Dutch top DJ, Hardwell, is the first DJ to put his rights into a blockchain, so 2017 might be the year that will change the industry forever.² But what is blockchain? And how will it change the music industry?

What is Blockchain?
Blockchain is a distributed data structure and algorithm designed to manage electronic cash. Satoshi Nakamoto (pseudonym) invented the original blockchain in 2008. It was initially made to support Bitcoin.

Nowadays, most people need trusted middlemen such as banks and governments to make safe transactions. Blockchain removes the need for a third party by allowing consumers and suppliers to connect directly. Exchanges are kept secure by using cryptography.³ Blockchain provides a decentralized database – a so called “digital ledger” – of transactions that is open to everyone who has access to the network.⁴ This network can be private with restricted access or public like the entire internet. In essence, this network is a chain of blocks that must all approve the exchange before it can be verified and recorded.⁵

Blockchain is revolutionary as the uses are virtually endless. It is accessible to everyone who has acces to the internet and can be used for practically every type of transaction that involves property, money or goods. For instance, it is already used to handle insurance claims, improve supply chain management and create decentralized payment systems.⁶ Furthermore, proposed uses include energy grid management and health record management.⁷ Even governments are interested in the upcoming technology.⁸ But will blockchain also find its way in the music industry? What problems is this industry facing?

What is wrong with the music industry?
The first problem the industry is facing, is that people do not know the value of music. Some say music should be free to consumers, since the creators will get paid on the backend. However, that backend money does not go to the creators, but to the companies that are determined to keep the biggest slice of the cake.⁹ This results in a situation where creators are not able to make a living by making music anymore. Internet companies and radio are lobbying to pay less for the use of music as well.¹⁰ Even television and film companies are now fighting to pay less when using music in their productions. Consequently, the creators are paying the price in the long run.

The second major problem is the model that the industry uses to license copyrights. The music industry has always relied on a licensing basis where each writer or his representative controls the respective shares of the songs that writer has written.¹¹ This model is not transparent and makes it harder for creators to claim their part of the product.

Furthermore, the cooperation between the internet and the law is questionable. The law needs to be modernized in order to address how work can be licensed in a way that goes along with the digital world and also fairly compensates those who create the work.

So, can the use of blockchain be the ultimate remedy?

Video – the Blockchain explained

Is Blockchain really the solution?
Several companies, such as Blockchain, Mediachain and Rightsshare believe that the use of blockchain technology is the future.¹² They consider blockchain as a suitable technology to protect against copyright infringement and as an ideal technology for decentralized storing of original work, like music.

Writers can use Blockchain in order to follow their work constantly and it is possible to trace any violations and correct these at the same time.¹³ Besides, it is possible for artists to monitor activities and streaming revenues so they can be received immediately.¹⁴ Likewise, the ownership chain will be easier to trace, leading to fair distributions of revenues.¹⁵

The technology alone will not fix all of the problems. Copyright law needs to be in compliance with the modern day industry as well as the legal system. While the music business is a global industry, the legal systems differ from country to country. A Toronto-based patent lawyer, Addison Cameron-Huff, has told Bitcoin Magazine the following: “Copyright is governed by a patchwork of local laws that differ in sometimes important ways (e.g. copyright registration processes and differences in protections for certain types of works). Any startup entering this space will have to consider the laws of many jurisdictions.”¹⁶

”People do not know the value of music”

Not there yet
We are not there yet. However, we are in the middle of a technological evolution. The music industry must continue to reinvent itself to stay alive. Blockchain could be the next big step, nevertheless the legal system has to work harder, better, faster and become stronger to survive in the long run!

Djoe Kuils

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1. Bloomberg Technology, The Music Industry Is Finally Making Money on Streaming, September 20, 2016, https://www.bloomberg.com/news/articles/2016-09-20/spotify-apple-drive-u-s-music-industry-s-8-first-half-growth
2. Rightsshare, HARDWELL FIRST DJ IN BLOCKCHAIN, Blockchain technology to make legal distribution more reliable, fair and transparent, October 19, 2016, https://rightsshare.com/?p=206
3. Kaspersky Lab, Blockhain, simplified, September 8, 2016 https://blog.kaspersky.com/bitcoin-easy-explanation/12915/
4. World Economic Forum, All you need to know about blockchain, explained simply, April 1, 2017 https://www.weforum.org/agenda/2016/06/blockchain-explained-simply/
5. World Economic Forum, All you need to know about blockchain, explained simply, April 1, 2017 https://www.weforum.org/agenda/2016/06/blockchain-explained-simply/
6. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/

7. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/
8. Gemeente Zuidhorn, Gemeente Zuidhorn neemt deel aan eerste Blockchain Hackaton in Groningen, January 4, 2017, https://www.zuidhorn.nl/bestuur-en-organisatie/nieuws_3800/item/gemeente-zuidhorn-neemt-deel-aan-eerste-blockchain-hackathon-in-groningen_5098.html
9. Forbes, Ways The Music Industry Can Change For The Better, February 1, 2017, https://www.forbes.com/sites/legalentertainment/2017/02/01/improvements-the-music-industry-needs-to-see-in-2017/#590fe209229c
10. Forbes, Ways The Music Industry Can Change For The Better, February 1, 2017, https://www.forbes.com/sites/legalentertainment/2017/02/01/improvements-the-music-industry-needs-to-see-in-2017/#590fe209229c

11. Forbes, Ways The Music Industry Can Change For The Better, February 1, 2017, https://www.forbes.com/sites/legalentertainment/2017/02/01/improvements-the-music-industry-needs-to-see-in-2017/#590fe209229c
12. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/
13. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/
14. Rightsshare, HARDWELL FIRST DJ IN BLOCKCHAIN, Blockchain technology to make legal distribution more reliable, fair and transparent, https://rightsshare.com/?p=206
15. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/
16. Bitcoin Magazine, Is Blockchain-Powered Copyright Protection Possible ?, August 9, 2016, https://bitcoinmagazine.com/articles/is-blockchain-powered-copyright-protection-possible-1470758430/