Blockchains and Music

by Ian Hellström (3 March 2017)

There are two crucial pieces of information for each song: who performed it (performing rights) and who owns the rights to it (copyrights). As of today, there is no central system that maintains this information. Is this really such a problem? Well, Spotify had to settle a $30m lawsuit a while ago because they had no idea whom to pay. There is also an infamous case in which 107% of the rights to a single song were sold. So, yes, it’s a pretty big deal. That’s why I want to take a look at blockchains as a possible solution.

Blockchains

In a nutshell, blockchains provide a distributed and immutable ledger of each and every transaction; blockchains combine peer-to-peer file-sharing technology and public-key cryptography. Transactions are arranged in blocks that are timestamped. The blocks are closed once they reach a certain size or contain a pre-defined number of transactions. A cryptographic hash based on the contents is computed, after which this hash is included in the next block. The blocks therefore form a chain in which the current block refers to the previous one, the previous one to the one before, and so on. That way, the entire history of all transactions is linked up. Since the hash from the previous blocks is an integral part of the current block, that hash co-determines the hash of the current block. This makes the blockchain immutable, provided the hash algorithm is sufficiently tamper-proof, that is, the pre-image cannot be computed in less than the amount of time it takes to fill up another block.

Decentralized consensus can be achieved with blockchains. All nodes in the network are equal: every node has a copy of the blockchain and no node is trusted more than any other. This is why blockchains can offer a trustless exchange, in which there is no need for middlemen who skim their commission off each transaction.

So, how is consensus reached? There are various ways to do it. The protocol used by Bitcoin, the mother of all blockchain technologies, is a known as proof of work. Before a block is finalized and accepted as the block, a computation has to be performed by all workers in the network. This computation is difficult to produce but easy for all other workers to verify. This is typically a random process with a low probability of success, so that on average a lot of effort is required. The randomness is needed to ensure that it stays impossible to predict who will generate the next block, which could allow an attacker to gain control of the blockchain.

The incentive to spend hard-earned cash on hardware and electricity on these seemingly senseless computations that actually maintain the integrity of the entire blockchain is the promise of money. The first worker to successfully generate the block is awarded bitcoins. The difficulty of these computations is varied in such a way that a roughly constant rate of blocks is being generated.

Since nowadays custom energy-hungry ASIC rigs are used to compute the meagre amount of transactions in each 1 MB block, alternatives to the proof-of-work protocol have been developed. In proof-of-stake algorithms the creator of the next block is chosen in a pseudo-random manner that depends on its wealth or rather stake. Workers with a larger stake in the whole blockchain have a higher probability of being chosen as the next block generator. The idea behind this method is that those with a larger stake also have a greater interest in the integrity of the blockchain.

Another option is referred to as proof of burn. The key idea is to have miners prove that they ‘burned’ cryptocurrency by sending them to a address that cannot spend any of it, basically a black hole or perhaps more aptly a bottomless money pit. This is expensive for the individual miners but it consumes no ‘real’ resources except a bit of cryptocurrency. Right now all proof-of-burn protocols burn cryptocurrencies based on a proof-of-work algorithm, such as Bitcoin; a pure proof-of-burn blockchain does not exist yet. There are a few more options though, such as proof of activity, proof of capacity, and proof of checkpoint.

Global Repertoire Database – Not Again?!

What makes blockchains interesting for rights management for music is that they provide the means to publicly share data across organizations that is virtually tamper-proof — without the need for an intermediary. Few copyright collection agencies, if any at all, would be willing to provide direct access to their data, and some do not have to because they hold monopolies in the respective countries they operate in, which happens to be the norm in the European Union. Right owners allow these societies to sell non-exclusive licences, collect and distribute royalties, deal with other copyright collectives, and enforce their rights on their behalf. That sounds like a great service until you realize how many such agencies exist.

So how is this different from the already dead-and-buried Global Repertoire Database? Industry commentators claim that the initiative died in its infancy because collection societies feared losing revenue in the short term and their existence in the long term, whereas the major labels quarrelled over control over the database.

With blockchains, the Big Three — Universal, Sony, and Warner — as well as all the independent labels and even unsigned artists could store their information in a decentralized and public repository. No one and at the same time everyone controls the blockchain. There is only a single (yet decentralized) source of the truth.

A blockchain to register music rights is highly likely to be more cost-efficient than the myriad of collection agencies in existence today. For rights holders this is of course fantastic news. For all collection societies it is an obvious threat to their very existence.

While a blockchain-backed repertoire database sounds sensible and perhaps even desirable, few of the major players in the industry are holding their breath. Spotify have pledged to work towards greater transparency though. But the main issue for the labels is and always will be transparency: everyone wants large windows to have a light and airy apartment but few people want to live in a glass box for everyone to see in. Imagine records labels having access to the details of the music rights of and deals with their competitors’ artists and songwriters. They might be willing and able to offer better deals and poach their talent. It would indeed shine a harsh light on all the skeletons in the cupboard. It’s questionable whether more openness is even feasible with existing non-disclosure agreements.

This means that if there ever will be any wind of change, it’s likely going to blow from the general direction of independent record labels and artists. Bittunes, for example, exclude all major labels from their Bitcoin-based platform where artists (‘music makers’), fans (‘music movers’), and service providers (‘music managers’) can make money, which is why they are able to use a single rights system, Creative Commons. Fortunately, independent labels took the largest slice of the recorded-music pie in 2016. This may therefore be a great opportunity for innovation in the music industry.

Smart Contracts

Beyond a music rights blockchain, there are opportunities for the blockchain to be used to pay rights holders automatically. So instead of merely storing the rights to individual songs, each transaction could be recorded too. If all digital-music stores and streaming services would connect to such a music marketplace, it would allow ‘fast, frictionless royalty payments’. So-called smart contacts atop the music rights blockchain would be able to send the correct amount of money to all rights holders after a pre-defined number of streams or downloads has been reached. It would not make sense to do that on a by-stream or per-download basis as the transaction fees would become significant. A pay-per-play option is offered by Musicoin though.

With smart contracts, no one could ever sell more (or less) than 100% of the rights to any song, because such checks could be baked into the platform. These smart contracts (or ‘policies’) would make it clear to anyone who wants to download, stream, license, synchronize, or remix a song — or even a part of it — what the conditions and associated costs are. All is automatically taken care of and verified by the smart contract itself, which is just a program that performs the verification, execution, and enforcement of said contract. It would also provide fans with information that the money has been sent to the right people. This is at least the vision of Ujo Music and its successor Blokur: to have self-executing agreements that automate the complexities of music rights, permissions, and payments — across the globe.

Smart contracts and music are not mere Zukunftsmusik. In October 2015, Imogen Heap, the award-winning singer/songwriter, released her song Tiny Human on the Ethereum blockchain thanks to the efforts of Ujo Music. It allowed users to purchases licences to download, stream, sync, or remix the song. Imogen and each of her collaborators automatically received their share from each payment. Tiny Human was only just a prototype to show off the possibilities of the blockchain for rights management and payment. The Ethereum blockchain is also used by Jaak to connect media, metadata, and rights.

For rights owners smart contracts may also provide interesting analytics opportunities. Instead of receiving bulk payment after many weeks or even months, composers and musicians could gain insight into the dynamics of where, when, by whom, how and how often their music is listened to. The same is true for concert tickets and merchandise: analytics would provide options for improved marketing and even package deals that benefit both artists and their loyal fans.

A community that gathers musicians and fans alike is obviously not too much of a stretch, and this is the promise of MUSE. MUSE have their own blockchain-backed global music rights database. As they list in their FAQ, they do not use Bitcoin’s blockchain or the cryptocurrency itself because of the low transaction rate, the volatility of bitcoins, and the fact that it’s controlled by miners (or rather: mining pools) rather than people who have a stake in the network. Consensus in MUSE is therefore reached by means of a (delegated) proof of stake.

The only way to add music to the MUSE blockchain is by means of PeerTracks, which also claims to support downloading, streaming, peer-to-peer talent discovery, and it includes options for patronage (e.g. tipping) too. PeerTracks claim that artists can receive upwards of 90% of their sales income. In 2015, Spotify, by comparison, paid 84% of their annual revenue back to the music industry, who in turn distributed it to their own composers and performers. Of course, PeerTracks are nowhere near Spotify’s scale, so a direct comparison is not completely fair.

The Four Ps: Privacy, Politics, Piracy, and Potential

While a fully connected and truly open music platform may be every crypto-anarchists dream, it is extremely unlikely to be supported by the music industry as a whole. Not everyone needs access to all available data, and what is perhaps more important is that only trusted parties should be allowed to add metadata to the blockchain. There is no point in having a decentralized database for music rights when everyone with a computer can modify everything.

A naive way out of this predicament is to have a well-defined API with restricted access based on, say, roles. These roles would enable only trusted third parties to enter or modify metadata. Performing rights organizations (PROs) and record labels can both manage the rights to tracks, but only the latter can upload both music or scores and artwork. Digital service providers are able to read the rights and register transactions (e.g. purchases or streams), but they cannot change any of the metadata or see their competitor’s transactions. Music lovers see all available songs and they can download or stream these.

The problem is that the data will be available but not publicly accessible, which means that the platform itself still requires a significant level of trust. There will likely be ‘special’ roles that can see all data, which is of course a major concern for businesses and individuals alike. Data protection laws are a complex and thorny subject as there really is no such thing as complete anonymity. These problems are not insurmountable, but they have to be thought out carefully. An alternative that is closer to the heart of blockchains is to use cryptographically secure obfuscation.

Moreover, contracts between labels and artists have always been excessively complicated. While it’s possible to encode (almost) all details in code, it may not be entirely feasible or enforceable. Many organizations that are now involved in the entire process from creative inception all the way down to the individual sale or stream stand to lose. A lot.

Or so it seems. Both Imogen Heap and Phil Barry agree that there is no need to for the music industry to be disbanded. Artists still have a need for promotion, which is best handled by aggregators anyway:

Major music companies no longer add value through ownership of chains of record stores or manufacturing plants, but they still finance and market the majority of hit records. Phil Barry, Bitcoin Magazine (2015)

The real question remains whether the music industry will see it that way…

Nevertheless, even with privacy issues and politics out of the way, piracy is still on everyone’s radar. It’s possible to secure downloads and streams with DRM, but that will prove to be difficult and extremely unpopular. A possible solution is .BC Music, or dot blockchain for music. It is a codec for music that includes the media as well as the metadata. Both components are inseparable. The .BC format is not about limiting usage but rather about enabling fair use based on the terms under which a file can be exploited. The format is used by PledgeMusic, which a bazaar for music that encourages artists to donate a percentage of their revenue to a charity of their choice.

There are also some half-baked ideas to use Steem’s social media platform for music curation and payment, but as of now Steemit does not allow posts to be larger than 100 kB and there would only be a link to a digital music file that’s stored somewhere else. A potential solution could be IPFS (InterPlanetary File System), which provides a versioned peer-to-peer file system.

Outside the confines of the music industry, Mediachain is worth mentioning. It is designed for image attribution instead of music rights. A related effort is Monegraph, which is a content monetization platform that verifies ownership of graphics.

For all their potential, cryptocurrencies and blockchains are not quite there yet. Predictions that cryptocurrencies would take the world by storm, especially in the wake of the Great Recession, have turned out to be wrong. Countries still issue fiat currencies, the dollar is still in use as the world’s reserve currency, and bitcoins are only accepted by very few shops around the globe. Bitcoin, by far the most popular cryptocurrency, is quite volatile, which makes it ideal for speculation but not as a medium of exchange, or at least not in the foreseeable future.

While the financial sector has been experimenting with blockchains for years, the back-end of the financial services industry continues to stand on the shoulders of giant centralized databases and trusted authorities that yield significant power. It is hard if not downright impossible to swap the engine of a speeding car, especially when the driver has little incentive to slow down. A music industry that is backed by blockchains for both rights and payments but accepts mostly fiat currencies may prove a key first step to make both consumers and the industry itself comfortable enough with the idea of blockchains. Plus, it would give some time for kinks in the payment-side of the technology to be ironed out without affecting public trust in the entire concept.

Another obstacle that I have alluded to is the law. For all its impact, globalization has yet to create a common legal framework for the music industry. Even with international organizations that mainly crack down on intellectual property theft, there is no unified music law: the focus is too often on tracking down and punishing pirates and not on laying the foundations for a more open and sustainable global community for the exchange and appreciation of music. This means that musicians are dependent on the legal support from record labels who have the experience and expertise required, or they have to take a chance on platforms such as Bittunes. After all, it’s impossible for individual composers and performers to be aware of arcane variations in the copyright legislature.

From the perspective of the fans, there is also much to be desired: licensing terms are not international. For instance, I cannot listen to my favourite Japanese rock band B’z on Spotify, Apple Music, or Google Play Music. Fortunately I have a substantial CD collection that includes their entire back catalogue, procured legally from YesAsia and CDJapan. So, I am covered as a proud life-time member of a soon-to-be-extinct breed of music aficionados who own physical copies. Many others may resort to pirated physical copies or illegal downloads from file-sharing networks instead. Even worse, many videos on artists’ official YouTube channels used to be blocked thanks to GEMA, the German copyright collective. This meant that fans in Germany were not able to see the videos the musicians actually wanted them to watch.

These issues are of course not limited to blockchains, not at all. The next few years will be exciting in terms of whether blockchains can succeed where the Global Repertoire Database failed. Beyond that, we may see glimpses of what’s to come. Whether everyone in the industry will play along remains to be seen. Perhaps the innovation will (have to) come from independent labels and artists.