By Maria Kheyfets
The music streaming boom hit a particular high last year, when 61.8bn songs (over half of all consumed music) were streamed. Streaming giants such as Spotify drove a 9.5% increase in music consumption in 2017, and yet, Spotify has also been at the centre of a controversy regarding the way it compensates artists. Not only was Spotify recently sued for $1.6bn in unpaid royalties, as claimed by publisher Wixen music, but its general model has also been publicly criticised. It has been calculated that artists earn an average of $100 for 152,094 song streams on Spotify, whilst record labels that own the catalogues reap most of the profit resulting from the streaming boom. Although Spotify was initially designed to enable artists to gain more independence, its current model appears to be achieving the very opposite.
The fundamental issue with Spotify’s framework is that the only way for artists to obtain fairer compensation would be to renegotiate with their labels, who act as intermediaries. This is where blockchain comes in to disrupt the dominant music industry model, with the goal of eliminating intermediaries and enabling artists to fairly monetise their work.
A token-based economy powered by smart (code-based) contracts allows artists to ‘tokenise’ their music, whereby the token becomes a reflection of creative output. If a consumer purchases music using tokens, they buy into a share of the artistic creation and its revenue. The value of the token increases as more people buy the music (creation). So, artists using the token-based economy can skip middlemen in two ways:
- Raising funds via tokenisation and thus eliminating the need for record label advances, and;
- Earn royalties independently without the help of streaming platforms like Spotify, who have restrictive contracts with record labels.
It is clear that the blockchain model is set to transform the music industry in a very forward-thinking way, and the remaining challenge is to raise awareness and attract more users. Fortunately, established artists have already voiced their views regarding the benefits of this model.
At the end of last year, Bjork announced that her 10th album Utopia would be purchasable using cryptocurrency, whilst those who pre-ordered would be rewarded with “Audio Coins”. These coins would then give them access to added benefits such as the ability to buy Limited Edition albums.
Around the same time, internationally renowned DJ Gramatik and Singular DTV launched the GRMTK Token, which is the DJ’s intellectual property. Anybody who participated in the token launch became entitled to share in Gramatik’s creative output. Within 24 hours of the initial token launch, $2.25 million (the maximum contribution amount) had been successfully raised.
Clearly, pioneers like Bjork and Gramatik, who have embraced blockchain, are paving the way for a true revolution in the artist-fan relationship. Simultaneously, this model poses a serious threat to all intermediaries, including Spotify and record labels. As other artists and music consumers follow in the same footsteps, we could be seeing an entirely new industry landscape within the space of a few short years.
This year, we are excited to be working with clients who plan to disrupt Spotify’s industry monopoly with a forward-thinking, blockchain-based approach to streaming.
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