A Guest Post By Alan Graham of OCL.

Two years ago, this month, I wrote an article here called “Understanding Music and Blockchain Without The Hype“. As with any nascent technology that shows a great deal of promise, there’s generally a tremendous amount of hyperbole as to what’s possible. A lot can happen in two years and frankly a lot has happened since my original piece ran. I felt this would be an excellent time to revisit that article and see where we are. This is a long one, but if you really want the skinny, no BS on music and blockchain, you’ll stay until the end.

The Recap

As a blockchain pragmatist, I’ve always been a supporter of many ideas proposed (better data/improved efficiencies), but skeptical of whether or not any of them actually improve the current situation, exacerbate it, or are in fact possible. Every study I read has clearly been approached from the foregone conclusion that blockchain is the future, without any critical pushback. For two years I’ve been trying to dispel some of the hype.

We’ve seen the hyperbole hit new seemingly impossible heights, promising unicorn dreams of fantasy technologies, improbable cost savings, impossible business models, and instantaneous payments direct to artists without any “middlemen”. Ah the dreaded all encompassing, yet nebulous middlemen. Financial death by a thousand cuts.

The idea that’s been pushed from Day One is that with blockchain we can eliminate all those parties in the middle that take their commissions and cuts and replace it with a world computer using “smart contracts” that automatically just make money, and know who to pay…instantly. Huzzah, problems solved!

Detecting a theme here

Granted, there are many layers of third parties who create inefficiencies in systems, but there are also many useful middlemen, like service providers, the people who build and run things so stuff works. But what I’ve seen proposed the past two years for blockchain is actually the elimination of one set of middlemen for another set of middlemen.

Blockchains are not autonomous god computers that just do your bidding. They require service providers to make things happen (core programmers, hosted nodes, miners, wallets, etc). You can’t just eliminate companies that provide services and expect there to be some universal user interface that will handle all of your needs. Someone needs to build and run this stuff, and they will surprisingly want to be paid. As for cutting costs, those costs can only go so low. There’s this perception that blockchain companies provide cheaper solutions, but we’re talking fractional cost savings. These savings may eventually cost more, not less over time. Building world class technology and then running it costs money. If your royalties vanish in a hack, you’ll want to be able to call someone, not talk to a bot.

Ideal, but unlikely

Back in my original article I said that those working in the blockchain space would have to solve five critical issues for creative industries, or the whole exercise would be a complete waste of time and money. Those included Authority, Immutability, Scalability, Legacy, and Privacy. I’m going to touch on a few, and ad two new ones. Let’s recap with some commentary:

Immutability: this is one of the most misunderstood, yet more actively promoted ideas of blockchain, the idea you can and should write a permanent record of data that no one can alter ever, into a giant sky god database. It is an idea being pushed and sold because it isn’t fully understood. I’ve yet to see one single necessary music data use case for this.

Except the music industry isn’t a trust-less system

Ask yourself, is immutability really the most important aspect for data or better yet a fluid, yet documentable series of committed changes (history) backed by a proven authority? Because the later can still tell you everything about an asset, as well as who owns it and how to pay them “instantly“.

Gideon Greenspan, an expert on blockchain technology, has the following to say about Immutability (I also recommend watching this video on blockchains vs databases):

In the raucous arena of blockchain debate, immutability has become a quasi-religious doctrine – a core belief that must not be shaken or questioned. And just like the doctrines in mainstream religions, members of opposing camps use immutability as a weapon of derision and ridicule.

In blockchains, there is no such thing as perfect immutability. The real question is: What are the conditions under which a particular blockchain can and cannot be changed? And do those conditions match the problem we’re trying to solve?

To put it another way, a blockchain’s transactions are not written into the mind of God (with apologies to Augustine above). Instead, the chain’s behavior depends on a network of corporeal computer systems, which will always be vulnerable to destruction or corruption.

The Blockchain Immutability Myth

Gideon Greenspan PhD Computer Science

CEO Coin Science

 

Ever since this idea popped up, I’ve been saying that the problem with immutable data is that human beings are illogical and therefore business logic tends to change rapidly based on the nuance of human behavior. This isn’t just because people fight over money, territory, or credit for something…it is because the behavior of how citizens interact with technology changes so fast, you need something flexible and fluid that can always change with the immediacy of how we change our habits. Especially when it comes to media.

Devices like Alexa, Google Home, and Apple’s HomePod have seemingly come out of nowhere to become digital hubs, and their long term impact has yet to be felt, but markets are already moving. And in 3 years, we’ll have something new. Therefore there’s zero practical logic for immutable business logic, especially if we consider that we’re just beginning to start a digital journey into a future where we don’t know how we’ll be interacting with media or the systems that will exist 5-10 years from now. This is why locking things with DRM is a bad idea. You can’t plan for obsolescence these days because it comes at you fast, so seemingly good ideas turn horribly bad when suddenly 1B people can’t access things they legitimately paid for because an app goes out of business.

A lot of blockchain development is trying to force blockchain what it isn’t designed to do, what it was never intended to do. Square peg, round hole.

The Zen approach is to build systems that aren’t rigid, but can bend. Systems that are rigid are systems that break. You know whose really good at dealing with stuff like this? Programmers!

Instead of thinking about metadata and ownership information of creative assets as just this data/file problem to solve when we release them, perhaps in our current world, we should be taking a cue from programmers and thinking about dealing with media in the way programmers write and deploy code, particularly what’s called version control systems:

“In computer software engineering, revision control is any kind of practice that tracks and provides control over changes to source code. Software developers sometimes use revision control software to maintain documentation and configuration files as well as source code.”

For example, let’s look at something called Git, a very popular system of revision control that was created by Linus Torvald, you know, the guy whose code is the foundation for some things you may have heard of, like Linux and Android.

Projects that have thousands or millions of lines of code with many people contributing to that code from all over the world requires a way to track the changes made to the project, who made those changes, and be able to see all of this historically (see branches). Sound familiar?

If we were to think about the release of a creative work (like an album) in the Git Model, you’d find that much of what’s desired to solve the music industries issues of data, negotiations, contracts, ownership, regulation, laws, rates, regions, etc. are things that have already been worked out before, for massive software projects that run on billions of devices. The data necessary to describe a piece of media is tricky, but no more tricky than the code in your average iPhone app. Git is scalable, battle tested (12 years), can have many authorized and trusted parties, has elements of immutability, and is fluid enough to allow for the nuance of business logic and human behavior, while also allowing for the verifiable truth of data. For example, let’s look at how Git handles changes to data:

Cryptographic authentication of history

The Git history is stored in such a way that the ID of a particular version (a commit in Git terms) depends upon the complete development history leading up to that commit. Once it is published, it is not possible to change the old versions without it being noticed. The structure is similar to a Merkle tree, but with added data at the nodes and leaves.

This history of changes and all of the related data and files can be distributed, so you have mirrored repositories of the same data. Every clone of this repository is a full back up of all the data, so if one server fails, you can access others, while using the mirrors to restore the failed copy.

When “the industry” (labels, publishers, artists, PROs, DSPs, etc.) ask for a global database, besides the practical issues of the identifiable metadata and who to pay, they don’t necessarily want a global database, and actually that’s okay. What’s not okay, as has been reported here (see Shiv Act) is trying to force a singular truth on a system and a planet that can’t have a singular truth. What “the industry” really wants and needs is potentially infinite different versions of the truth. This sounds counterintuitive to what everyone is screaming about these days, so let me explain.

There are basic core truths that should be consistent across the world, like what is this file and who is connected to it? Yet beyond that, whoever you are and wherever you are in “the industry”, what you really want is to have Deal A with one party and Deal B with another. Those two truths must be able to co-exist at the same time, and it would be helpful if they weren’t simply trapped in paper contracts. In a Git model this is possible, and therefore Deal A and Deal B can both be true, but would never meet anywhere else than in the view of the deal maker. This means the identification of the asset may remain a constant, but the details of ownership, regions, rates, etc. can always be fluid and changing, because that’s the world we live in. You don’t need a blockchain and smart contracts to express all of these truths. In fact, managing these truths with smart contracts would be a nightmare and could cause cascading failures in mission critical media systems. No matter what anyone is telling you about how we’ll just have “smart contracts” that know how to do all these things, that is a level of complexity I don’t think anyone has ever seen before and it will open up entirely new security risks. We’re already seeing exploits in smart contracts that have lost over a hundred million dollars.

All around the world, everyone, programmer or not, uses revision control every day. You, yes you reading this, you are already familiar with it. Every word processing document, spreadsheet, collaborative web document, blog, and even Wikipedia page history uses version control technology. It’s how we can collaborate and commit changes to documents locally and remotely, while also knowing the history of the who, how, where, and what.

You know who also uses revision control systems? Blockchain developers.

So do not release music…deploy it.

Scalability: Can you run a robust music industry on any of the current blockchain technologies? The answer is no. Don’t just take my word for it, let’s hear from John Palfreyman, Director – Blockchain – National Security CTO at IBM, in his May 2017 blog entry “Ten Things Blockchain is NOT”.

Blockchain is not (yet) mature:  Gartner stated in their 2016 report that blockchain is at the peak of inflated expectations on their hype cycle. They say it’s some 5 to 10 years from the plateau of productivity, which I regard as conservative for some use cases. Problem is, with all the hype, it’s easier to think blockchain for business is more mature than it is. A sense of reality must be maintained, especially when seeking out the use case for a blockchain first project.

Blockchain is not a distributed database replacement: blockchain complements distributed database technology, with appropriate information partitioning between the two.

Blockchain is not usually suited for high volume, low value transactions: as blockchain for business matures, fabric developers will turn to non-functional requirements including transaction throughput. In the near term, the technology remains better suited to low volume high value transactions

I could say more, but I think that encapsulates it well.

Now on to the new issues:

Legal: My company employs one of the best legal firms in the UK when it comes to media and technology, and the legal issues surrounding running a “normal” technology company dealing in media is incredibly complex. Now take that up a notch with decentralized or distributed companies that don’t care about regions or borders or rights. Frankly, I see a lot of these blockchain startups ignoring these facts (See Opus below). The current SEC ruling on Initial Coin Offerings (ICOs) is really a global red flag towards other regulatory shoes dropping. If the SEC and other government agencies around the globe can force compliance on ICOs, it is a short hop to privacy and data security issues. Regulation (like winter) is coming, and blockchain solutions will have to be compliant with these laws, and none are ready because they thought they could operate outside of it.

Disruption: Blockchain proponents seem to think they are the answer to giant corporate control of data and technology services, capable of disrupting the dominant players (Amazon, Airbnb, Uber, Google, Microsoft, Facebook, etc.), but the reality is that giant corporations aren’t always the first to jump into a marketplace until it is established. Sometimes they get caught up in the hype phase, jump the gun, and it goes sideways. What’s likely to happen is that blockchain companies will begin to offer services that have lower costs than giant centralized providers. However, corporations like Amazon (Amazon Web Services), are not likely to just let you take their business from them, so they’ll first begin by cutting prices to match blockchain startups, but providing a more mature service (maybe losing money to outpace competition) with more features (compete on value). Then, after these startups have established the blockchain marketplace, they’ll step right in and compete by offering more for less, or buying up these smaller companies one at a time. Meet the new boss…

Blockchain data storage vs traditional. Pretty sure Amazon could shave off $.07 just to win

Remember, we thought the Internet was going to be the great equalizer. Maybe we should remember the past and learn from it if the belief is that blockchain will be the great equalizer, Part II.

So Where Are We Now, Anywhere, Nowhere?

As I see it, if we look past the multi-million dollar losses from hacks and exploits (imagine they were your royalties), the infighting, the rip offs, and the ICO’s for dumb ideas at crazy valuations, I would say the scalability and legal aspects alone are likely going to be the anchor that weighs the whole thing down. From a cursory glance, if blockchain is the future for the music business, we are many many years from realizing this.

Hacks, ICO’s, Infighting, Exploits, Rip-Offs. I think we were better off two years ago with fantasy vs reality.

That means if you are planning to jump in head first now, you might want to rethink and check to see there’s water in the pool before you go all mission critical. Things are a bit of a shit show at the moment.

One of the Ethereum blockchain projects lead developers

What I currently see is a lot of “Me Too” solutions. In fact, as of writing this, I count no fewer than 20 blockchain music data/streaming solutions all vying for their position as leader in a market no one is ready for and frankly, consumers (the ones who drive the market) don’t want it. It’s like being homeschooled and running for Class President. There’s a lot of pitching and giving talks at conferences with lots of promises, by many people who have limited understanding of technology, or more importantly, the history of it. Yet so far, there’s nothing of real value. Many of the “Me Too’s” are based on whitepapers with the promise of building a new music industry, seemingly with no idea that what they are building is sometimes immoral or at the very least definitely illegal. Some of them are jaw droppingly dumb.

Finally!

Look, I don’t expect any of these blockchain issues to be worked out over night. In fact I’ve been saying that on panels and in articles and interviews for two years. Many of the people I highly respect who are working on these projects and pushing these ideas are 100% coming at this from the right place and for that reason I hope they succeed. The music industry is a enigma wrapped in another enigma wrapped inside a ball of rubber bands. This is going to take some time, so some slack needs to be given. But we are in a nascent stage where there are going to be a lot of ideas floated, and a lot of technology pitched, and frankly most of it will fail. Benji Rogers, founder of dotblockchain, and a huge proponent of blockchain technology, was recently quoted as saying:

“If you’re in the music industry and you’re not looking at how this is going to affect your business, you’re going to be in trouble. But we can’t rush this. It’s worth getting right rather than just blundering into it.”

I could not agree more. You should be thinking about how it could affect your business, because it could in fact destroy the entire music business (my next article – piracy perfected). I also agree with the that last part, and it is why I’ve been pushing against this rapid jump to step onto a new world without any forethought or planning as to how we’ll adapt and survive there. You can’t just go to Mars without a supply of potatoes. We need to be asking much tougher questions, and frankly I’ve been very easy on these ideas without even touching on Authority and Privacy issues.

The questions we should all be asking ourselves when we’re being sold something so hard is, are there other possibilities we’re not exploring? Could we be approaching this incorrectly? Are there other options and ideas? If we aren’t asking those questions, then we’ll fail to transform the old creaky machine we have now, into the sleek machine we need for the future. We have little time to fix this, but that doesn’t mean we should fail to really think through where this may take us in 2-5-10 years. And on that note, I’ll see you in another two years.

The following is a guest post by Alan Graham of OCL.

There’s a classic scene in the book The Hitchhikers Guide to the Galaxy where a race of beings called the Magratheans create a super computer called Deep Thought to calculate the answer to the ultimate question of Life, The Universe, and Everything. After 7.5 million years of mulling it over, the answer, as it turns out is “42”.

As you can imagine, the Magratheans are not pleased.

To which Deep Thought responds:

“Only when you know the question will you know what the answer means”.

This is of course the state at which we find ourselves in the music industry. We all seem to know the answer is “DATA” but I’m not sure anyone yet understands what the question is.

——
My company recently became a founding member of the Open Music Initiative. An attempt at bringing academics, music industry members, and technology companies together to solve…well I’ll let them explain it:

THE MISSION OF THE OPEN MUSIC INITIATIVE IS TO PROMOTE AND ADVANCE THE DEVELOPMENT OF OPEN SOURCE STANDARDS AND INNOVATION RELATED TO MUSIC, TO HELP ASSURE PROPER COMPENSATION FOR ALL CREATORS, PERFORMERS AND RIGHTS HOLDERS OF MUSIC.

NEW TECHNOLOGIES CAN BE APPLIED TO RADICALLY SIMPLIFY THE WAY MUSIC RIGHTS OWNERS ARE IDENTIFIED AND COMPENSATED, RESULTING IN SUSTAINABLE BUSINESS MODELS FOR ARTISTS, ENTREPRENEURS AND MUSIC BUSINESSES ALIKE.

I met with Panos Panay, one of the founders of the project, on several occasions and was encouraged and impressed by the broader tent that was being pitched, but I was sold on the idea of participating after learning Jonathan Taplin (a hero of mine) would be participating. That’s a pretty bold and brave move, and I’m hopeful this will therefore not be “business as usual”.

I’m interested in this project because my hope is we can actually progress some ideas into meaningful change. Now as with many efforts like this that I’ve seen over the years, I have some concerns and reservations, but hopeful we can address them and find a solution. While I don’t yet know the structure of our first meeting, I thought I’d share some ideas I would like to see us address in the coming months.
—–

Now for many the belief is that simply solving an issue of data or creating a central and transparent repository of rights in the music industry will solve most of the issues when it comes to money and the speed at which it finds its way back to the creators.

But if the answer is “data”, what is the question?

Now I’m not here to talk about my own project, but I do want to take a moment to address my own search for this ultimate question. Three years ago I had a germ of an idea inspired by my co-founder, Rupert Hine. I had had some experience in the music industry from back when I did a project at Discovery Channel,  where I conceived of, designed, and launched a music site. After that experience (less creative work and more legal work), I vowed never to work with the music industry again, and yet here I was leaping even deeper into the abyss.

The abyss in this instance, however, wasn’t just about music, but more of an existential concern about us all. I had fundamental questions I had been thinking about for several years, of who we were as a society and ultimately caring about the quality of our culture.

So we took this idea around to countless meetings with creators and stakeholders of all kinds (music, images, text, video), and I spent a year just researching how we might reimagine an ecosystem that gave everyone (rights owners, developers, and citizens) what they wanted, knowing that each party might have to give a little, in which to get a lot. Every difficult question I was asked I needed to find an answer for. It was a year of deep thought, before I wrote a single line of code.

Our methodology was guided by some basic principles:

• We have to respect all creators, that includes visual, sound, and word.
• We need to find new markets and build new marketplaces beyond advertising.
• End animosity between rights owners, developers, and citizens.
• Show citizens through action the value of their own ideas.
• Make copyright compatible, regardless of laws or borders or nations.
• Change our culture by providing a better alternative.

The reason I tell you this story is because, like the Magratheans, I knew the answer (we all know the answer), but I needed a framework to help us discover the question.

Now many competing ideas have been proposed for solving the issues surrounding data, but simply using a word like “transparency” is not a solution. I know very well just how complex the music industry is (I’m neck deep in data, copyright, anti-competition laws, regional issues, rights complications) and a change isn’t as simple as proclaiming “blockchain is the answer,” because frankly, many of the problems are issues involving human nature and behavior, and technology won’t magically solve this.

But I do have some ideas on where we might start.

1. Godzilla vs King Kong. It is important to ensure this doesn’t simply become a battle of giants (music vs tech), who aren’t interested in listening or working on actual solutions with the smaller voices in the group. While I applaud many smaller participants are invited and the goal is to have diverse opinions, if ideas are put forth yet those in power decide to shut everything down they feel isn’t in their interest, we’ll fail rather rapidly. Frankly, if all the giants in the room had the answers, we wouldn’t be here to begin with. It can’t just be about what best serves any individual company, but ensuring the best ideas can rise to the top and then supporting those ideas. At the end of the day we’re trying to improve the lives of creators, and we can’t lose sight of that.

2. Methodology to Prevent Madness. Better data can improve efficiencies, but we need to address another elephant in the room, which is that “transparency” does not change the fact that culturally we’ve created a society that does not value paying for music or asking permissions. The average 18-34yr old will pay over $1k a year for specialty coffee, but feels somehow asking for $120 a year for all the music in the world is too much.

So we can increase efficiencies to squeeze a tiny bit of juice out of a $15B lemon, or we can also give some thought as to how that $15B lemon can become a pitcher of lemonade.  Data and transparency alone won’t solve this issue, it requires methodology as well.

3. Slow and Steady. We need to postpone the immediate urgency to create a central repository of rights, and especially the urge to move it to the blockchain (whichever blockchain). I know, I know, no one wants to hear this, especially if you are working on a blockchain solution. However, this constant talk about how blockchain solves all the data issues is nonsense. Blockchain as a database is still just a repository of data, no matter how fancy you make it. Bad data in is bad data out. Bad input processes lead to bad data. So you don’t start with the storage, you solve the processes first, data storage second. I’ve designed and repaired a lot of databases over the years and if you don’t have a solid process for how things go into it, you create problems that will be harder to fix later…especially if that database is immutable. We need to decide on “how” before we decide on “where”. The number one reason we have bad data is because we have bad processes in place and we should work to change/solve those first.

4. Getting to 42. I agree with Benji Rogers who has been banging the drum of the need for a minimal viable data set (MVD) to accompany a work and a recording. That said, a MVD is not a process, it is an outcome. You need to first decide how this happens. Therefore I suggest the following:
5. No Data/No Money. It isn’t simply that we have a fragmented music industry built on old tech, but we also have fundamental failures that occur because humans don’t do the work they are suppose to. I think we need to draw a line in the sand stating from THIS DAY FORWARD (TBD), no musical recording can be accepted into a system that will pay a royalty towards said recording unless it has a MVD. AND that data includes there is at least one corresponding publishing identifier linked to that recording. If DSPs and the companies that supplied them did this one simple task of refusing any recording that does not have this data associated with it, we could solve vast issues affecting problems with data and the speed of payments on the publishing side. I’m not talking about legacy, but a date in the near future where we “flip” this switch.

6. Blockchain. Quick, name one successful large scale blockchain company everyone is using today. Right. Saying a technology can do something, and then actually doing it are not the same thing. If we take some of the above steps first, and postpone the rush to create a central repository of data, we give ourselves room to see how that technology evolves (especially blockchain) over the coming year or two that it needs to mature. Even blockchain experts have said we’re looking at several years before this tech is fully ready. As Benji Rogers has mentioned before, there are perhaps 20 different competing companies “charging into this blockchain and music space”.

I would also remind you that financial companies (Fintech) are rapidly throwing money into blockchain development, and their ability to drive or steer said development vastly outweighs the power and influence of the music industry. We’re talking about organizations that control likely $100 Trillion in assets, and a total segment of investment that is reportedly in the tens of billions. The money they dump into this space may negatively effect what we’re trying to accomplish.

Being pragmatic with our approach allows us to take the process we create and test it first. Then we roll it out. Not rushing into a global decentralized database won’t kill the music industry, but fucking it up certainly will. If you don’t fix the above, the database you end up with is shit and we’ve made the problem worse.

This also means tabling the discussion of smart contracts and punting it down the road a bit. Again, I’ve been studying these issues and working with the data and on solutions for 3 years. The complexities involved in adding “rights expression” into metadata or a smart contract is immense and further complicates other types of licensing we need to get right across other systems. If even one aspect of this is incorrect it sets off a chain that breaks a lot of shit.

7. Short Term Goals Lead to Bigger Ideas. I’ve worked in technology for over 25 years, around 15 of which I wrote about technology for many leading tech publications. I’ve seen a lot of initiatives go absolutely nowhere, and I’ve seen them go nowhere fast the moment you start to discuss standards, codecs, file formats, etc. It took the W3C roughly 3 years to release the draft for HTML5, but another 3 years to release the final spec. Why? Well for one thing, like the music industry, it was pretty complex with lots of moving parts. Oh and politics certainly had something to do with it. One way to hopefully avoid industry politics is (to my point above) understanding the question to the answer. So let’s take some small but impactful first steps.

8. Build for Today, Plan for Tomorrow. Any and all first steps need to be compliant with today’s technology, not just looking towards tomorrow (because we don’t know what tomorrow looks like). What I mean by that is it is supremely difficult to get massive adoption of any new initiative and ensure it is unified and accepted. If any major player in any part of the space fails to implement this, the whole thing can fall apart. Not to mention, many of the parties that sign on to this project (or don’t), might have their own ideas on how to do things. As I often say, check the pool for water before diving in.

9. This Isn’t Just A Music Industry Problem. We are going to need massive buy in from a massive ecosystem. This is going to be tough. We’re not just talking labels, artists, songwriters, publishers, DSPs and so forth. We’re talking about many other ancillary industries that interact with the music industry. That means we cannot act as if we are an island, since other industries are reliant on music. We should be inviting others outside of music to the table. That means photographers, videographers, authors, publishers (not music), and so on.

10. The Music Industry Isn’t Broken

The Music Industry Isn’t Broken

-With Love,

Your Fans

At the end of the day, your amazing technology is not what drives adoption, it is the punter, the fan, the listener. The biggest mistake I see again and again from just about everyone trying to solve these issues is forgetting that without them, there is no point in making a better system for yourself. They put the money into the system you are trying to make more efficient. So in order for any of this to work, it can’t affect the customer in any negative manner that pushes them away.

Consider the experience of today’s music lover. Walking down the street, when they push play, the music plays. For a fan, they live in a near-utopian world where almost anything is available within seconds. Within a year or two this will be the expectation of almost everyone, including us old farts. Add to that, incremental improvements in experience from DSPs over the next year or two, means that whatever you want to accomplish to make a better experience for the rights owner, better not fuck with that user experience one bit. It better work on day one exactly as it does today…I push play…it plays. In fact I suggest you better make it amazing, or you are going to have a tough time getting tech to adopt it.

Remember, when you only view this from the rights owner perspective, you fail to see that the fan doesn’t think the music industry is broken. All they hear is a bunch of whiney artists complaining they aren’t making any money (just read any comments on any social media story about music). They don’t care about transparency, data, reporting, or speed of payments. They don’t even really care about giving you money directly and likely won’t care about fair trade, except as a passing idea. They want what they want the instant they want it. So remember the wisest words any sage has ever spoken:

“Don’t fuck it up.”

-Ru Paul

——

Again, I think it is a positive sign having all of these parties in a room together to address these issues, and I applaud even attempting this at all. I know it took Panay and the OMI group a lot of work to get this far. But it would be a damn shame if one year from now, we’ve got nothing to show but an even more fragmented industry and find ourselves back at “42”. None of us want that, but it is up to us all to make that a reality.

Right now there is no greater dichotomy regarding the future of information technology than with that of the blockchain. Liberating yet infuriating. Beautiful yet ugly. Established yet unproven. Immensely complex yet elegantly simple. In short, blockchain is one of the more fascinatingly profound ideas I’ve seen in 15 or so years. At OCL we began working on solutions that lent themselves well to the blockchain over 2 years ago, and last year when we started combining some of our technologies with blockchain, I was quite excited at what we were able to come up with.

But I’ve been down this road before. I’ve seen more than one professed technology of the future not realize its promised potential. Hell, I’ve worked with many of those companies. And while I’m quickly getting (or hoping to get) a reputation as someone trying to temper the exuberant expectations over blockchain technology, I am very intrigued by where all of this might be headed. And terrified.

Thoroughly and completely terrified. Not terrified with the technology itself or what is possible, but our natural tendency to leap first, look second.

In this piece I’m going to begin to tackle just two ideas surrounding the technology behind solutions people are looking towards blockchain as a panacea for the music industry.

I’m not writing these pieces to take apart the idea of using the blockchain with music, but just lend a critical voice that we need to start thinking through the process before we go headfirst into it. It is, after all, important to verify there is water in the pool before diving into it.

 
Terms and Rates and Smart Contracts – Oh My
One of the most touted aspects of using blockchain technology is the idea of combining it with something called a smart contract. Essentially this is a bit of executable code, a program or software robot, if you will, that resides in or can communicate with a/the blockchain. The idea is that an artist will simply write into the blockchain their ownership information, plus terms and rates so that every other system on the planet will be able to read those terms and rates and execute the artist’s wishes. Somehow, this smart contract will be capable of interpreting everything that needs to happen and performing that task. The idea is that if we had something like this, we could just eliminate the need for PROs and labels and whatnot, because we have a super-efficient and direct connection between rights owner and rights user. This puts the artist in complete control of their destiny and helps to solve many of the issues surrounding rights and data.

Or does it?

It sounds like a brilliant idea. Fewer middlemen and a more direct relationship with their works and fans. Except there’s a few problems that perhaps make it even worse. If you’ve ever actually dealt with the music industry you know that the business of art is just as subjective as the art itself and often you don’t know how to deal with a “thing” until the “thing” arises. The complexities of these situations cannot be fully captured by an actual contract, much less a virtual one. Plus, software robots and Artificial Intelligence don’t work well with the subjective nature of humans. They don’t understand intent.

Let’s say you have the terms of use for a song written into the blockchain that spell out how you can or cannot use a musical track (and keep in mind there is no such thing as simplified rights in an age where billions of people are creating trillions of uses). For example, an artist determines that in their terms you can create user-generated content, but not on services in certain countries that have a poor record of human rights, nor can it be used to promote certain products, nor can it be used on any offensive or exploitative platform, nor can it be used for certain political reasons or parties. Also since the artist is a staunch vegetarian and animal rights supporter, the music cannot be used with any media that contains cruelty or abuse, nor appear with visuals of any meat products. You can use the music for charitable organizations, but only certain types of charities, and not to raise money, just awareness. There is no commercial use allowed, but ad-revenue sharing might be allowed, but only if your audience scope is smaller than “X” and the views are kept below “X”. You may download the music for personal listening if you pay “X,” and streaming will cost “X” for these tracks and “X” for these others. Also, those rates are different depending on the region the listener is from and how many devices they are using. You can also stream the music for “X” amount in your place of business, but these rates are different depending on the size of your business and how many locations you have. Oh, and if you serve meat, you can’t play the music.

So the KKK charitable BBQ Pork event at the Whites-Only restaurant is certainly not going to be allowed to use this music, but how will a smart contract and a system devised to interpret all of this actually work? An artist can’t possibly be expected to keep on top of this. What about use in social or encrypted networks or apps where you can’t see what’s being created or how it is being used? And all of this has to happen in real-time and be automated. The complexities of writing such a smart contract and then it interpreting use or intent in a way that grants it in milliseconds is vast, if not practically impossible. And let’s not forget, the above scenario is based on the simplified assumption that there is only one owner (performance/publisher) of the work(s) in question. Now add three more owners, each with their own terms.

Granting an artist or songwriter more minute control over their work might seem like a fucking awesome idea, but the execution of all these details could actually add vast problems that bring the whole system to a screeching halt. If you think that greater control over works will bring greater simplicity, you are kidding yourselves.

To make any of the above workable, a set standard of terms or uses would need to be devised in which to ensure all systems can communicate and understand those uses and each use is applicable under the laws of those regions, and all systems of use must also be able to interact and interpret all of this and perform it flawlessly and within milliseconds, much like how DNS ensures that when you click on a link, you get back what you are looking for. That’s a tremendous amount of complexity that must be disguised in a very simple executable form. I’ve seen no one propose nor describe how such a system would work for music on the blockchain and how you might simplify the process. Will there be a standardized smart contract for music rights? Who will define those standards? Who will govern that process? Will there be a set rate for the use of music? Who will devise how third party apps and platforms interact with these smart contracts and how do you control which platforms can and cannot have access? How will we structure the data and what’s the proposed requirements for identifying a work properly? Who is the authority that will back the validity of this data? We can’t generally get artists to sit down and fill out basic paperwork, so whose going to make sure this is done and done correctly? Which body will police it?

What happens if a system can’t properly decipher a smart contract? Do we essentially designate a new type of 404 error? How and who resolves that issue? What will that experience be like for the listener and are we asking an awful lot from them to join this bold experiment, when for them the current model is working well? Today I pay a streaming service and I click on a song and it plays. What truly incentivizes anyone to want to switch over to this model? How do you incentivize music platforms who are locked into current streaming contracts to switch over?

And now let me expand the complexity by a massive factor. How do you perform an automated UGC sync? Across disparate assets? Multiple owners and industries? Automatically? It took me three years to solve that problem, and I can’t find anyone who is talking about how to solve that.

Seriously people…think about this stuff. I’m seeing article after article that talks about the simplification of music by just using the blockchain with wild promises that have no possibility of being solved anytime soon…if ever, and I don’t think we have the luxury of playing around with this while Rome burns.

Transparency is Clearly the Answer
If there’s a “Word of the Year” for the music industry, it certainly has to be the word “transparency”. There is an awful lot of talk about transparency that revolves around the idea that there are all these black box deals over rates and use that also involve advances paid by tech companies to rights owners with no understanding of where that money goes or if artists and songwriters actually see any of it. The other pressing aspect has to do with the accuracy of streaming plays and pay. Both are issues that need to urgently be addressed.

The idea put forward in partially solving this with blockchain is to create a universal rights database by transferring all the details of what the work is, plus use and rates over to a transparent system that not only covers the what/how/when/cost of something, but also to create a transparent transactional record of each use that can be audited by anyone. Expanding on this has also been the idea that you could also use the same type of system to create transparency as to who may have worked on a project, how much they “own”, what they get paid as a percentage, even automating that payment process, etc. Buy a song and everyone who should be paid is instantly paid.

That’s not necessarily a bad idea, in fact many aspects of this are brilliant. But when it comes to execution, yet again, there are a lot of questions I’ve yet to hear answered, and some rabbit holes I’m not sure we’re prepared to go down.

So let’s ask some questions, starting with how much transparency is too much transparency? I’ve seen it proposed that we should just open everything up and have a completely transparent music industry.

Imagine you went into Starbucks one day and on the menu board was a breakdown of the costs and sources of everything that went into your $4 latte, and you knew exactly what the margin was on any given item in the store? Would you still be inclined to pay $4?

Should we be breaking down and removing all obfuscation of the costs associated with making music? Should someone know who you paid, how much, your studio time, etc? Hell, should artists know what each other are being paid? What then would be the point of negotiations? How would you get the best sync or sponsorship deal? Does a session musician want the money he was paid on one gig transparent to other session musicians on that gig or other gigs?

Let’s suppose we find ourselves in a blockchain future where by using the blockchain and cryptocurrency, instead of the music platform (Spotify/Apple/Deezer/YouTube) paying the rights owner, the listener pays the artist direct through a micropayment system each time a song is played.

Who sets the rates? If the rates fluctuate, how do you inform or ensure that the listener is willing to pay a fluctuating rate? How do you get them to agree to terms for each artist across the blockchain? Assuming this is an automated process, what mechanism on the listener side ensures this is agreed upon? What about ensuring you are compliant with the consumer protections in each region? What about age validation or explicit material?

If you were to charge the listener on a direct micropayment system, how do you calculate that? Based on length of time? What if they don’t complete the track? What if by accident they forget to turn off their player? What if there is a network interruption? Will you pro-rate? Will you refund their money automatically? What if they accidentally play the wrong song or fast forward/rewind? Do you charge them for the first 20 seconds? What if it is the recommendation of a friend through a shared link? Who pays for that? Say they buy a track and realize they made an incorrect purchase? Can they get a refund? If your system of payments is automated and the money already has been distributed to those who contributed on your track (musicians, producers, songwriters, etc.), will you pull money automatically from them if you have a refund? What if you have a band and there are 5 members and 3 of them already spent their money? Who performs the refund? What if the payment system is compromised or the individual with the charges didn’t authorize that use? Who eats those charges?

How will the artist or their smart contract handle CRM? I mean once you are in direct 100% control of your data, assets, and business and no longer have the services of a PRO or label, you are now also in charge of the entire workload including customer service, so that tech is going to need CRM tools. How will you issue promotional tracks that are free to some but paid to others? How will you handle that some systems have free models and others have paid models?

You are going to say, but Alan, what about the fact that with such a system, we can deal with a bit of hassle because as artists, we now make more for each sale or stream? With the reduced overhead of all these middlemen, we can cover these things.

Okay true, the costs for the artist to transact have dropped, and they now make a higher percentage of income “per stream” because it is a direct connection to the fan who pays, but now you aren’t working as a collective body so you may have also driven the “transactional royalty rates” lower as the market is now even more highly saturated and competitive, plus there is no set rate for music since each artist wanted to be independent and set their own pricing via blockchain/cryptocurrency.

So now in the future, instead of the “music industry” as a collective having the leverage to negotiate/justify the costs/price of something, it will now be the individual artist in the position of justifying what their work is worth to people who have no understanding at all of the value.

Welcome to the completely transparent music industry. This. Will. Be. Brutal.

Closing Thoughts
I’ve said before, we need a better methodology for how we manage data, and clearly there are efficiencies and obvious improvements in transparency we could do in the near term. However, depending on how we execute these solutions we could in fact make the problems worse and all the money saved will simply be spent in other areas, thus wiping out any benefits. Add to that in order to answer many of the questions above, we need new technologies, standards, organizations, and companies to exist (that currently do not) before any of this will work. That won’t happen overnight, and it makes me wonder if there isn’t a better manner of going about solving these issues that still includes the blockchain, but doesn’t waste time reinventing the wheel.

More to come…

Guest Post By Alan Graham

Since I wrote my last piece on deciphering the importance of blockchain without the hype, the hype machine has actually kicked it up several notches. I feel it has gotten so ridiculously far out of hand it is time to bring some additional context to the discussion and take it down a peg, because the overabundance of passion is lacking a fair amount of context. And I’m saying this as someone who uses the blockchain daily.

We need to temper our approach to blockchain because frankly, I’ve seen many pie in the sky ideas run up this flagpole lately with the flag being that of Fair Trade Music (this will solve everything!), but not a lot of discussion of what it actually means, how it will function, how to get buy in from every major/minor player and artist and songwriter etc. in the music industry, and then the most important factor of all, convince listeners. We all see the iceberg, and there is still time to turn the ship before it hits, yet I keep seeing people ready to jump in rowboats and proclaim, “we did all we can”.

Blockchain, for all of what it could do, will not solve the underlying issue that all kinds of creators are facing. That issue is societal. It is at the very heart of everything, and no amount of talk about blockchain, improved transparency, or fair trade is going to change what is ultimately broken.

It’s us…we’re broken.

Globally, citizens have decided that the value to access virtually all the music in the world, is worth less than two cups of coffee. 

The average price of a Starbucks latte in New York City is about $4. The cup, lid, water, milk, and beans are negligible in comparison to the actual labor itself. We all know we pay a remarkable markup on that cup of coffee, yet we have no qualms about it. In fact, a study in 2012 showed the average American worker (18-34) paid over $1,100 a year on coffee.

Now, you can purchase an album for around 2-3 cups of coffee. For the price of 1-2 cups of coffee, you can pay a monthly subscription fee for music which gives you nearly all the music you could ever want to listen to, instantly at your fingertips.

Unlike coffee, music has incredible lasting value yet something really weird is happening. Even though it is easier and cheaper to buy music than coffee, people are not only buying less music, they believe that the music they are purchasing, or even the streaming subscriptions they are paying for, are still too much money:

According to the study, the top…reasons that consumers gave for not subscribing was that services are too expensive (46%), they can stream music for free elsewhere (42%)…

What. The. Fuck.

In fact, Starbucks global revenue for 2014 outpaced the entire music industries sales by over $1B. Just think about this a second and what it says about our cultural values. If people are willing to spend $1,100 a year on coffee and Starbucks actually generates more revenue than global music sales and subscriptions, how will more transparency, fair trading, and blockchain technologies help artists? Is it the lack of transparency or is it the fact that the money just isn’t there? And it isn’t.

Blockchain solves none of this.

Is Fair Trade Music & Blockchain the Answer?

Who doesn’t like the idea of Fair Trade? Sounds great, but the first thing we need to define is what Fair Trade Music actually means. I’ve seen the term used quite a bit and found numerous definitions as to what it means. The only thing I am 100% sure of is that it means different things depending on who you ask. For some it seems to mean having more control and transparency over the supply chain (à la blockchain). For others it is about educating consumers on where and how to source their music that best remunerates artists. For some it is both. If you go to the website Fair Trade Music.info you’ll find the following:

“Fair Trade Music” is an initiative designed to transform music in much the same way “fair trade” has transformed the value chain for agricultural products such as coffee.

As with coffee, “Fair Trade Music” will provide consumers with the information they need to make “fair” choices in deciding which music providers and services to use in order to access and enjoy music.

Music providers and services that abide by certain criteria, such as fair compensation for music creators and transparency will be certified by an independent fair trade music certification body. They will then be authorized to display a Fair Trade Music certification “seal of approval” on their website, apps, promotional materials, etc..

First of all, citizens don’t want choices. They want convenience.  This is the lesson we’ve learned from the age we now live in. We have an overabundance of everything and we are absolutely drowning in choices. Citizens certainly know that buying a song is more financially beneficial to an artist than streaming a song, yet the growth is in subscriptions, not sales, and unfortunately most of those subscriptions are freemium. That is a choice that citizens already made. As it is with rivers and lightning, people will always choose the path of least resistance. Hello YouTube.

Secondly, if you are using coffee as a parallel to the type of movement you want in music, and as someone who had a coffee company and studied the sourcing of fair trade coffee, you need to more carefully examine that comparison. From the fair trade coffee site:

The coffee supply chain is complex as beans pass hands through growers, traders, processors, exporters, roaster, retailers and finally the consumer. Most farmers have little idea of where their coffee goes or what price it ends up selling for. The more lucrative export of green coffee is only an option for farmers if they can form co-operatives, purchase processing equipment and organise export or hire a contractor to carry out these services. 

Lack of supply chain transparency. Sounds familiar to the music industry, right? However, the Fair Trade music movement needs to recognize and push the most powerful aspect of what fair trade coffee set out to do. It wasn’t about transparency, feel good labels, or choice. It wasn’t even having complete control (farmers give up a lot control to be fair trade certified). Fair Trade works as a collective (50% of it is owned by the members) to guarantee a minimum price for coffee beans. Working as a collective it gives them that negotiating power.

In a volatile marketplace, without the power to exact that influence, all the feel good badges in the world mean nothing.

In addition to that, part of the money collected by Fair Trade (premium) funds programs for economic, social, and environmental issues.

Through their producer organisations, farmers also receive the additional Fairtrade Premium to invest in business or community improvements and must use at least 25 per cent of it to enhance productivity and quality

Fair Trade is not a bunch of farmers working independently so they have complete control of their farming process, beans, and supply chain. It is a collaborative endeavor for change and stability that works to protect members, but each of them has to give something up. They all have to make sacrifices for the greater good. What I hear from many artists these days is quite the opposite.

In the music industry, traditionally artists are terrible at organizing and working collectively, but excellent when it comes to voicing an opinion about things, the one thing there is no shortage of (admit it, you know it’s true). Many artists in the music business can’t really even be bothered with the “business” part. I get that, it isn’t any fun. This is why there are PROs and other organizations that essentially do the exact same work as Fair Trade coffee on the behalf of artists to help set standards, pricing, collect money, negotiate, and social programs. For example, PRS for Music:

We are a society of songwriters, composers and music publishers. We license organisations to play, perform or make available copyright music on behalf of our members and overseas societies, and distribute the resulting royalties to them fairly and efficiently. We promote and protect the value of copyright. Achieving fair value for copyright music in the face of changing technology and legislation. Forging international alliances to enable cost-effective and transparent copyright administration around the world. Striving to increase distributions to members and improve the service we offer.

We are owned by and accountable to our members. After deducting the costs of running our organisation, all the income we receive from licence fees is distributed back to our members

and

The PRS for Music Members Benevolent Fund offers assistance to songwriters, composers and their dependants, who are suffering financial hardship due to illness, accident or problems associated with old age.

and

Since 2000 PRS for Music Foundation has given more than £14 million to over 4,000 new music initiatives by awarding grants and leading partnership programmes that support music sector development.

• Collaborative Organization? Check
• Working on behalf of member owners? Check
• Working to establish fair value? Check
• Collectively negotiate on behalf of members? Check
• Fund charitable/community projects? Check
• Give a sticker/badge to denote proper use? Check

The language and functions of PRS are actually very much aligned with those of Fair Trade coffee. So, perhaps instead of starting another movement and maligning these types of organizations we should be working to help make them stronger and more efficient. Instead of burning it down, we build it up.

Fair Trade is pointless and powerless if it is just a collection of smart contracts on a blockchain without any muscle. And unless you can get every artist to coordinate, set a guaranteed value for work, and be able to get consumers to pay it, what’s the point?

So let’s break down the argument I’ve made so far. 

• Society no longer values paying for music and has instead transferred this value to other areas in their lives.
• Artists today actually have more control, independence, and insight into their industry than ever before, yet are still struggling to make ends meet.
• While costs to create, distribute, acquire music have all dropped, and access to purchasing music is easier than at any point in history, sales continue to drop.
• While streaming as a technology continues to grow in popularity, subscriptions (payment) have lagged behind, with many consumers saying the cost is still too high.
• The average American spends 89% more on coffee each year than music.
• Adjusting for inflation, there is roughly a $35B hole of lost revenue still missing from the peak of the music industry in 1999. We have a long path ahead of us.
• While more transparency and efficiency will help reduce waste within the music industry, that money will likely not reverse the fortunes of the music industry (see coffee supply chain).
• Reducing the obfuscation of the music industry (contracts, deals, negotiations) may reveal additional revenue that should go towards artists, however it means very little if consumer spending continues to drop. 100% more of zero is still zero.
• There is no clear definition of what fair trade for music actually is, how it will organize, collectively bargain, strengthen the global music industry. Negotiating only works if you have the muscle to back it.
• How exactly will Fair Trade Music negotiate and enforce on behalf of rights owners and how will it sustain itself financially?
• There is no evidence to support simply having a fair trade designation will suddenly change public opinion on paying for music, simply because it makes them feel good about their choices. Survey any group of people and they will tell you artists should be paid, but the evidence is contrary.
• Blockchain solves none of this.

There are many solutions for increasing the efficiencies of the music industry, including blockchain. But there is only one solution for changing the fortunes of the music industry. That is getting people to once again value music enough to pay for it. How to do that is a discussion for another time. But I do believe it can be done.

Incorrect Assumptions Lead To Incorrect Solutions

In the 90’s, I was VP of two very early e-commerce companies. We did something unique in that we were two of the very first technology solutions that allowed ordinary people to sell things on the Internet. Yes, there was a time when, unless you were a multi-million dollar company, it was nearly impossible to sell a product online.

We helped change that. However, what we later discovered was a bigger issue so obvious, we had completely missed it. E-commerce was so new (just like blockchain) we were working off of incorrect assumptions, which is the worst way to approach solving any problem with technology.

You see it turned out that having an online store and processing a transaction was the easy part.

Getting people to discover you and convincing them to spend their money was the hard part.

What we hadn’t realized at the time (but soon became apparent), was that it wasn’t enough to solve the problem of transacting, the true challenge, it turned out, was the exact same problem we have with music.

Getting discovered>Getting Paid

You have to get people into your store, and convince them what you have is valuable and have them part with their money. This truth cannot be ignored, as the entire world has struggled with it for thousands of years.

Blockchain doesn’t solve this.

After all is said and done, at the end of the day, the mechanisms of public relations, communications, marketing, promotion, management (essentially running your business), will always be the most important and the most costly components of getting music heard or purchased. If not always in financial costs, in time costs. And what’s your time worth if you’re spending it not creating music or performing it? Simply solving an issue of transparency, while important, means very little if you are simply illuminating there is no money.

In those early days of e-commerce we learned the hard way that being 100% in control of your destiny was only as good as your ability to get customers to hand over their cash, and if we don’t fundamentally solve this issue for the music industry, what good is a fair and open system that no one wants to pay for?

I absolutely agree that having a fair system with great efficiency is paramount, and that it is important to continue to bring these issues to light and to push forward ideas that speak to the value of art and the need to pay for it. But unless we solve that last part…pay for it…we’re only wasting both time and money on what boils down to rhetoric.

In my next piece I’ll break down the technical challenges facing blockchain and the music industry.

Alan Graham is the Co-Founder of OCL