Are Cryptocurrencies Like Bitcoin the Solution to the Music Industry's Woes?
A few random artists get lucky and make a living from their art, but most struggle. Today, this problem is especially pronounced in music. SoundCloud, Spotify, Mixcloud, Pandora and all the other streaming services constantly tout the benefits they allegedly bestow on the music ecosystem. But in report after report, musicians say their income from such services is a fraction of what they once made from selling music on CDs and other physical formats.
As an artist trying to make ends meet — I haven't earned much from my music since the days when it was still pressed on vinyl — I set out to find a way to make more money from the digital distribution of my work. After a little online research, it became clear I was not alone in my dilemma. Various independent groups and organizations are trying to solve this problem, as well as the music industry itself. Most have come up with the same basic solution: the blockchain.
When these people say “blockchain,” they usually mean something like Bitcoin — that electronic currency you could have bought but never did, each unit of which is now worth about $2,400. Bitcoin is essentially based on the same digital technology that devastated the music industry in the early 2000s: peer-to-peer sharing. “P2P” networks such as the original Napster, BitTorrent and Pirate’s Bay all revolve around sharing networks where each computer's files are made available to every other computer on the network, so that users of the P2P network can quickly get a file they want.
Around 2009, a mysterious, still unidentified person named Satoshi Nakamoto devised a way to make an online currency based on a peer-to-peer network. The units of value were called “Bitcoins” and their transactions were recorded in “blocks” of transactions, one after another, in sequential order. This became known as the first “blockchain.” One of Bitcoin’s most important innovations was that it did not depend on intermediaries such as banks or governments to support its existence; it simply required people with computers to constantly update the series of transactions. (For more of Bitcoin’s history, a good start is the movie The Rise and Rise of Bitcoin.)
The process of validating Bitcoin transactions with one's computer and receiving Bitcoins as a reward is called "mining." The more transactions that occur, the harder it is for computers to process the mathematics required to validate the transactions. The end result is that Bitcoin mining can no longer be done on a normal computer; it requires arrays of special central processing units to accomplish the task, sapping some of Bitcoin's revolutionary, decentralized swagger. This led to the development of Bitcoin alternative coins (often called "alt-coins" or "cryptocurrencies") that could only be mined with video graphic cards that one might buy at Fry's or Best Buy — which has led in recent months to a manic run on video cards.
The graphics card section at Fry's in Burbank, mid-June 2017
One of Bitcoin's more unusual features, compared to traditional currencies, is that each "coin" can hold extra information. Think of it as metadata you might have on your computer files — such as how MP3s tell you the name of the artist and track title when you play them on your phone. This aspect of Bitcoin's implementation on the blockchain is fairly basic, though, so many newer initiatives have aimed to expand the capabilities of this data-carrying capability of a blockchain. For example, you could make a contract with someone that is automatically paid out via the blockchain when certain conditions are met. This is known as a “smart contract.” The most well-known example of this functionality is the software platform Ethereum, whose coins are called “Ether” or "ETH."
Smart contracts are where blockchain technology has the potential to solve many of the music industry's biggest issues with digital distribution — mainly, when it comes to how artists and rights holders get paid. Theoretically with blockchain technology, every time a song is streamed or downloaded, it would register and transmit a payment transaction that would go directly to the copyright owner. Additionally, the copyright owner could program the song so that it would automatically issue payments to anyone else involved with the creation of the work. For example, a band could program its song so that every time it is streamed or downloaded, the blockchain will be notified to issue payments in predetermined percentages to the singer, guitarist, bassist, drummer, manager and label immediately.
The Open Music Initiative says, “We are creating an open-source protocol for the uniform identification of music rights holders and creators.” OMI has a lot of academic and industry members, from Sony Music Entertainment and the Harry Fox Agency to Spotify and MIT, helping to forward its development.
The Dot Blockchain Media initiative is based around promoting a new file format that would replace the common music file types we know today: MP3, WAV and AIFF. The new file format would be identified with a “.bc” extension and would hard-code contractual and rights management data into the actual file when it is made. Whenever the .BC file is played, it conveys its information over the blockchain for any .BC-enabled device to recognize and distribute payments or other necessary data.
On Dot Blockchain Media's website, Benji Rogers, its founder and CEO, says, “Creators, rights holders and influencers who can digitally express their rights into their media will control their own destinies, whereas if we continue to rely on the existing telegraph cable–like technology to try and track down ownership, usage, payments and rights as they surround our ’90s file types, then we will subject our creators only to the whims of these massive companies, their shareholders and business models, which are sometimes fundamentally at odds with the creators in the first place.”
Here, Rogers succinctly sums up the rallying cry for virtually all the blockchain initiatives aimed at the music world. All of them, it would seem, want to help artists like me. But what strikes me as odd about this is when I take a look at the list of Dot Blockchain Media’s co-sponsors and interested parties, it’s the massive companies Rogers speaks of that are taking part in the advancement of the .BC protocol.
Not sure whether OMI and Dot Blockchain really had my best interests at heart, I dug deeper. Turns out there are myriad cryptocurrencies out there specifically targeting the music industry and its content creators: Audiocoin, Songcoin, Metal Music Coin, Bittunes, Ujo, Muse, Voise, Musicoin. Many, such as Audiocoin and Songcoin, are based on older blockchain technology that doesn't support smart contracts (though Audiocoin is being revamped to do so). Others, like Bittunes and Muse, are still in development. The only one with a usable site that artists can upload their music to and the public can actually stream from is Musicoin. Based on a derivative of the Ethereum blockchain, it allows artists to split payments of Musicoins as they see fit so that every time their track is played, it pays out.
Like most blockchain initiatives, Musicoin is geared toward streaming rather than downloading tracks, and all streaming is done via Musicoin.org so that it can easily interface with the Musicoin blockchain. Like SoundCloud and Spotify, though, embedded music players that can be added to any website are currently being developed, and these players would also interface with the Musicoin blockchain.
My track "Speaker Creature" on Musicoin (now up to 48 plays!)
Musicoin screen grab
So by default, I started making my profile on Musicoin. My first upload was “Speaker Creature,” a track I made years ago that I thought never got enough attention. So, maybe here it would find its niche. (You can check it out here.)
At the time of this writing, I'd received 27 plays. Every time "Speaker Creature" is played via the Musicoin system it earns one Musicoin. Then, listeners “tipped” me another 110 Musicoins on "Speaker Creature" and the two other tracks I uploaded (listeners can give you extra Musicoins if they are so inclined). Now I had 137 Musicoins. Great! Now, how do I get paid?
As it turns out, I have to take my Musicoins to an exchange website where I trade them for Bitcoin. I can then sell the Bitcoin for good old American dollars. Popular cryptocurrency exchanges are Bittrex, Poloniex, Cryptopia and Kraken. The easiest way to transfer Bitcoin to U.S. dollars is Coinbase.
When I went to cash them in, Musicoins were trading as high as almost $.04 each. So that’s $5.48, minus some fees. Hey, that’s pizza money! I was starting to like this.
For comparison's sake, I looked at my mainstream streaming reports (from Spotify, iTunes, Amazon, etc.) for "Speaker Creature" from January to April 2017. (It takes a few months to get play reports back from these streaming services.) From a measly 22 streams and downloads, I made a total of $0.83 from the big services. Spotify was paying me about half a cent per stream. Which isn’t all that bad, but compared with the 4 cents I was getting from Musicoin? Obviously, this meant I had to radically rethink my online strategy. But before I jumped in with both feet, I figured I should do some further investigating.
Musicoin is an open-source project founded by China’s first online blogger and longtime advocate of internet freedom, Isaac Mao, 45. Hong Kong–born Mao also co-founded CNBlogs.org, is a venture capitalist, was a vice president of the United Capital Investment Group, worked for Intel for years, programs artificial intelligence applications to create music, and developed a philosophy that underlies Musicoin called “sharism."
“Musicoin to me, it's another practice to fight for the freedom of creative content on the internet,” he told me in an online interview.
Though Musicoin was only introduced in February 2017, it has quickly amassed more than 4,000 users actively uploading and listening. When I asked Mao about other initiatives such as OMI and Dot Blockchain, he said, “We are open to interact with the music industry, especially to those innovators. But for the technical solutions I think both OMI and .BC are trying to solve problems from inside the music industry. The team of Musicoin was not from the industry, so we can jump out of the box. I personally dealt with the music industry several years ago with one of my musical device startups. I know how hard it is to crack the status quo.”
He went on to say, ”The music industry was digitized much earlier than others. Nevertheless, it’s still the most closed ecosystem, full of monopolies and establishments. Musicians are starved because of this, and creations are withering year by year. I'd say Musicoin is trying to represent a new economy rather than just being another cryptocurrency.”
As much as OMI, Dot Blockchain and the established music industry hope to use blockchain technology, there are multiple blockchains, decentralized from any country or institution, gearing up to service music producers and fans, each with their own slightly different, competing approach. This could possibly provide a wealth of opportunity for artist and listener alike — which reminded me of Alvin Toffler’s theory of “prosumerism.”
Back in 1980 in his book The Third Wave, nearly 30 years before the advent of Bitcoin, Alvin Toffler predicted the rise of “prosumerism,” in which the producer and the consumer are the same. Also, he made a curious quip in his last book, 2006's Revolutionary Wealth, suggesting that we might be seeing the end of money as we know it.
Toffler died in 2016, but he and his wife, Heidi — co-author of Revolutionary Wealth — set up an organization more than 20 years ago, Toffler Associates, to continue developing their ideas. I reached out to Toffler Associates to ask what it thought of the blockchain's possible effects on the music ecosystem. One of their directors, Tyler Sweatt, replied to my email and later we spoke on the phone. He pretty much laid it on the line: “Blockchain enables a power shift from the labels to the individual.”
This power shift goes far beyond the music industry. As Sweatt explained, “Since a blockchain is a decentralized system — actually ever-multiplying systems, really — it democratizes technology, capital, knowledge and the ability to rapidly leverage them to drive value across a disaggregating value chain. This is disruption.”
Of course, a service with 4,000 users (Musicoin) is still a ways off from disrupting one with 50 million (Spotify). But every new platform has to start somewhere, and the blockchain's potential for massive disruption in the way music is produced, distributed and consumed is clearly there. Music creators and listeners just need to overcome their resistance to new technologies.
"Don’t fear change," Sweatt advised. "Blockchain can unlock a bunch of potential and entrance into a monetized economy. It creates more space with less bureaucracy, an ecosystem of sharing value in a far more equitable way."
Translation: a whole lot more pizza money.
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