Blockchain Technology in the Music Industry

24th May 2017 Media Law

Musicians and songwriters have always relied on the accuracy and honesty of record labels, publishing companies and collection societies to ensure that they are paid the royalties that are due to them from the exploitation of their recorded music and compositions. Think for a moment about all the CDs and vinyl records that are pressed and sold every day, and all the songs that are played on the radio or on TV, and you start to get a picture of the challenge involved in tracking this usage. The situation has only become more complicated in recent years with the advent of permanent downloads and music streaming and the proliferation of media platforms.

Not only is there a huge amount of data to be tracked, but the revenue generated must be collected in and calculations made in order that the appropriate proportions can be distributed to the correct people. This distribution then needs to take place. In some cases, payments can take years to reach the artists entitled to them, or might not reach them at all.

Blockchain is perhaps best known as the technology which underpins the digital currency Bitcoin; it is a decentralised ledger which is viewable by all of the users in a particular network. Each new transaction adds a block to the chain, each block being timestamped and containing a link to a previous block. In this way, the Blockchain helps to ensure transparency and to reduce the likelihood of fraudulent transactions. Uses are now being found for Blockchain beyond facilitating cryptocurrency transactions. The question therefore arises, can the Blockchain help to ensure to speedy, accurate payments to musicians and songwriters?

PRS for Music is a collection society that represents UK-based songwriters, composers and music publishers. The organisation has recently joined forces with two other collection societies, the American Society for Composers, Authors and Publishers (ASCAP) and the Society of Authors, Composers and Publishers of Music (SACEM) in France, to develop a project based on Blockchain technology. The societies are working together to create a prototype which will provide a new system for managing the links between International Standard Recording Codes (ISRCs) and International Standard Musical Work Codes (ISWCs). ISRCs are used to identify individual sound recordings, whilst ISWCs relate to compositions (i.e. the music and lyrics). The hope is that by linking these two distinct but connected types of data, the process of royalty matching will become more efficient and accurate.

In addition to improved accuracy of reporting, there is also the potential for instant payment, which would benefit many struggling artists and small music businesses. Take for example a piece of recorded music that is to be distributed online. Once all parties involved are in agreement, the relevant contract terms can be embedded in the Blockchain. Details of every sale are then stored in the Blockchain, and all this information is available to all interested parties. Payments can be made immediately and directly, meaning the artist's payment no longer has to be collected by a record label or other rights holder, but can be passed straight to the artist.

Contracts in the music industry have often been excessively complex, setting a base royalty rate then utilising a variety of calculations and deductions which serve to reduce the artist's share. This approach is at odds with the transparency afforded by the Blockchain. It may also be that record labels and publishers would prefer to stay in control of the payment process by having any income generated filtered through them, allowing them to decide at what point to pay it on to the artist. It may be, therefore, that Blockchain technology alone will not improve the speed and accuracy with which musicians get paid unless the music industry as a whole takes on a new approach to the way it interacts with its artists.

Some commentators have suggested that the use of Blockchain technology in the entertainment industry as a whole has the potential to disrupt the balance of power in that sector. Many people believe that in the television and film industries, just like the music industry, a few people at the top take the lion's share of the income, leaving performers and other creatives struggling at the bottom. However, the Blockchain can facilitate a direct connection between creators and consumers, enabling a peer-to-peer relationship outside of the control of big business. Of course, even the best creative output will fail to generate income if no one knows it exists enter the record companies, studios and managers who are skilled in raising awareness about a product, and have the cash and connections to do so.

It's still early days for Blockchain technology, and only time will tell how it affects contractual arrangements and the provision of content in the music industry. It does seem likely, however, that there will be significant changes ahead for all those whose livelihood depends on the exploitation of recorded music and musical compositions.

The Intellectual Property team at JMW is experienced in music industry law, software development agreements and the protection and licensing of intellectual property. Please call us for a no-obligation discussion of your needs on 0345 872 6666.

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Nick McAleenan is a Partner located in Manchester in our Media & Reputation Management; Data Protection & Privacy department

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