The digitization of the music industry began in the 1980s and, in hindsight, was inevitable. By the late 1990s, with the rise of Napster, digitization officially became a disruptive force, and one that music industry is still grappling with today. At the heart of the struggle is a system of licensing, distribution, and promotion that dates back more than a century. As technology outpaces (and in some cases simply circumvents) the traditional system, there is growing concern and consensus that the century-old music industry might collapse under its own weight after nearly two decades of decline.
And, while the transition to digital music has largely been a boon to listeners, who now enjoy access to an ever-expanding catalog of music through services like Spotify and iTunes, it has been difficult at best for musicians. The industry still keeps the large majority of revenue and is painfully slow to cut a check to musicians, making it increasingly hard for musicians to earn a living.
However, the same technological advancement that has wreaked havoc on the music industry for the past 20 years also presents us with an extraordinary opportunity to redefine the relationship between musicians and listeners. Digital currency (or “cryptocurrency”), in particular, will allow nearly instantaneous payments with minimal transaction cost. “Coded contracts” will allow musicians to maintain control of licenses, rather than relying on a third party.
The remainder of this paper gives a brief overview of two relatively recent and dramatic changes to the way people interact with music, both of which have ultimately failed to produces a sustainable and fair system. Finally, a detailed proposal for a path forward is given.
Two Failed Models
Napster, which was the first peer-to-peer (P2P) file sharing network widely adopted, marked the beginning of the end for the traditional approach to music distribution and consumption. In many people’s eyes, it’s seen as the assassin of the music industry. In this model (which we call the “Torrent Model”), content was casually shared on a P2P network and downloaded by other users without the musician’s permission and without sending any form of compensation. This model is doomed by itself, not only for its legal breach, but also because it is not sustainable as musicians’ benefits were totally annihilated.
Torrent Model (left), where musicians are entirely disregarded. The Subscription Model (right), which retains all of the complexity and inefficiency of the legacy music industry, and ultimately pays musicians a small fraction of total revenue.
More recently, a “Subscription Model” has become popular (see Figure 1). In this model, services deliver streaming content based on a centralized catalog and charge users a level of subscription fee (mostly 9.99USD/month), which is often overpriced. In turn, these streaming services (like Spotify) pay labels and publishers a big portion of revenue to acquire licenses.
This model is an improvement over the Torrent Model, since revenue is actually collected from listeners, nevertheless, the portion of that revenue makes to musicians is extremely small, because there are so many intermediaries taking a major cut. Ultimately, over 80% of royalty fees were kept by intermediaries. The reason for this is largely historical. Prior to the digital age, musicians needed these intermediaries to help them organize, plan, record, produce, and distribute their music. This spawned the creation of many agencies in the music industry, such as music labels, PROs, distributors, retailers, studios, PR agencies, and marketing agencies. After the Digital Millennium Copyright Act (DMCA), more agencies were created, and all of which took their share of revenue. If we look at the income distribution structure, we would be really surprised how little we pay musicians.
Figure 2. The current industry myth on distribution
One famous case is the complaint by singer James Blunt, “I get paid £0.0004499368 per stream”. For 1 million playbacks on Spotify, James Blunt only receives £450! It’s actually not the worst case, many artists can’t even bargain such a rate and are paid far less. For this reason, many musicians still can’t make a living, which forces them to be part time or just change careers. Given the ubiquitous technologies and social media today, it’s worth asking: Do all of these organizations still add value? Most musicians today are very busy marketing themselves, creating and recording music themselves, and sharing content online directly.
New Paradigm
We need a new model that re-structures the entire process, from creation, to consumption, to compensation. The model we propose here is based on the theory of Sharism, which emphasizes the coupling of sharing and rewarding. This “Sharism Model” suggests a complete path from content sharing to payment collecting. It can help create positive feedback loop that enables all musicians to boost their creations. The more musicians share their works, the more music it will bring to listener, and the more payment will be rewarded to musicians.
Figure 3. Sharism Model creates a closed circuit between musician and listener.
In Sharism Model, each playback represents an exchange between the musician and the listener. The listener sends a payment to the musician, and in exchange is granted access to a specific work. In order to make it work, a fast payment mechanism that works across borders and offers a low transaction cost is required. Fortunately, the rise of digital currencies, such as Bitcoin, can offer just such a solution.
Musicoin: A Digital Currency for Music
The whole music industry has long been puzzled by the price of music. With the collapse of physical media formats, panic spread throughout the industry because the primary measure of value (copies sold) was quickly becoming irrelevant.
To address this issue, we created this new currency concept to define the unit price of music consumption. We call it “Musicoin” which is used to pay for and consume music, and make it a standardized way to price. Literally, it starts with one coin per play. Musicoin solves the valuation problem by defining a unit that is tied directly to the act of music consumption. Specifically, each time a musician’s work is played, a payment in Musicoin system will be sent directly from the listener to the musician. The value of a coin relative to fiat currencies will eventually be decided by the market, but is expected to be approximately $0.01 USD – double the price of current streaming services.
The uniqueness of Musicoin is that we believe every playback matters and should be fullfilled with a transaction, instead of being detached between playback and payment. It’s why we need this new currency; when a work is played, a payment should be made based on the terms set by the musician. It’s the real meaning of Sharism philosophy.
Upon this new currency, music content bits flows from one point to another one, currency bits then flow back to the source, completing the cycle. Look at the today’s media players everywhere in web pages or in mobile apps. They all follow a common design, a bar with a triangle button to tout us to play.
Yes, we played, what happened to musician? Whenever a playback happens, there could be either nothing going to musicians (they don’t even know the play occurred), or maybe they receive a royalty check after 9 months or longer, or maybe they need to wait fort hundreds of playbacks occur before being paid.
We want to change. Musicoin defines a core protocol within every play, we called it Pay Per Play(PPP). The new players redesigned following this protocol will be more or less like this:
What’s the difference? When a play finished, you would see the play counter added one and actually there will be a payment executed paying from the listener to musician. So the traditional player never place a counter with it, or even some players did, it’s nothing related to payment. The new player will become a norm, if all the players accept this protocol. To listeners, there won’t be overcharged deal because he/she knows it’s charged based on usage. You may have noticed, the “like” function in this new player also means payment, if fans like the song, they would even pay more to reward the musician by “tipping” it. In this way, “Like” button everywhere on social media get new meaning.
Paying for one play seems not so significant for once, however, it can be huge if it happens every moment and everywhere. The whole world is listening music every moment, and the whole world is paying for their listening. This is the protocol.
Because it’s every play is paid with one coin (or more), the coin should be defined as a secure currency which is not based on today’s currencies in the world. It’s not US Dollars, nor not Euro. It’s not even Bitcoin. Why? Bitcoin is globally adopted today, however it’s becoming more like gold rather than a currency, and especially difficult to be used as a micro-payment system. Nobody would pay 0.000012 Bitcoin to listen to a song.
Digital currency of Musicoin gives a realistic implementation of Sharism Model to enable listener and musicians to build transact-able relationship. Next step, we need a full systematic design to give the currency a safeguard in real world.
Blockchain as Backbone
You may ask who will be the authority to issue the Musicoin, this puzzle was solved by a mysterious inventor called Satoshi Nakamoto in his famous paper, “Bitcoin: A peer-to-peer electronic cash system”, and later the wide adoption of Bitcoin by the world. The issuance of Musicoin, like Bitcoin, is not from any institutions(e.g. Central banks) but a highly-encrypted software system, called Blockchain. Blockchain is a decentralized software system with complex algorithm recording every transaction and encrypting them into linked data blocks to ensure “no double spending”, which means it’s digital but not being able to be copied and abused. There could be faked paper bank notes, but in theory, it won’t happen to cryptocurrency.
Powered by blockchain technology, Musicoin becomes not only a specific currency for music, but assured to be secure, trust-able, transparent and border-less. So any musicians and songwriters can receive the payment instantly, wherever they are in the world because listeners don’t need to write a check, or using Paypal, or taking out cash to pay for the usage. Instead, they can simply wire a coin with a click. Piracy is not efficient because it’s so easy to access song more than ever without moral debt. To musicians, they don’t need to wait for a Godot-like royalty check any more. PPP assure them they can get payment instantly once a playback happens from a corner of the world.
The issuance of the coins will be following top cryptographic algorithms to ensure it’s not being double-spent, also follow a dedicate monetary curve based on economical needs. So Musicoin the currency and economic scale will be possibly used as measurement of the whole music industry some years later. With the adoption of Musicoin into music services, the blockchain will generate more uncrackable digital currency based on consumption scale, a.k.a. the economy. For example, if there’re 5 trillion songs were listened a year, there will be 5 trillion coins in circulation.
Blockchain is proved technology to accommodate every musical works in the world. Not only to songs, but It can include different type of musical works, from musical score, lyrics to recordings. With more and more musical works and recordings were published onto a music-oriented blockchain. The chain itself becomes a global music repertoire and listening history without extra investment.
Code is Law
Musicoin defines a micro-license called “Pay-Per-Play”(PPP). Musicians will be provided with a standard template that can be released along with a recording of a work. The license is released to the blockchain as a “coded contract”, while the recording is encrypted and released to a distributed peer-to-peer network. In order for a listener to play the recording, a payment must first be sent to the PPP contract. The contract automatically accepts the payment and distributes shares to rights-holders according to the terms of the contract. A music player application conforming to the Musicoin protocol can initiate the payment without requiring any user interaction and provide a seamless experience for the listener.
This license will be released together with a musical work/recording and make it immutable. Then anyone wants to play it(or sync, or perform), should pay for the usage under a condition. In this way, every playback in the world will be accounted. Other licenses related to music royalties will be possible to defined in similar way.
Based on this model, musicians can finally freely control their licenses by themselves. They can create their own tamper-proof profile, release their recordings and works. Once their works released, the income will start to happen since there will be listeners start to pay via Blockchain system. The income can also be distributed automatically to different contributors like band members, and/or songwriters.
A coded contract concept will support this mechanism. Some contracts, like artist registration, license, etc. will become the backbone of the whole concept. We imagine there can be several initial type of contracts on Musicoin blockchain:
Profile Contract(PC): With this contract, artists can create their profile and coin their existence. This contract is between artists and blockchain, the entry of profile will be traceable and linking to all his/her future works. This contract will have “follow” function, so fans can follow it by paying a royalty fee. Of course, they can also unfollow this contract to unleash the loyalty.
Recordings Contract(RC): Upon registering as an artist, he/she can release recordings with additional metadata and licensing terms. All contributors in this contract will be defined and get appropriate portion of income based on the terms. Pay-Per-Play(PPP) is one typical contract musician can choose for their Recording Contract.
Playlist Contract: DJs, curators even common listeners can create this contract to generate and share a playlist with public. So other listeners can subscribe to it by paying several coins(price defined by creator of this contract).
Later, there can be more contract templates being developed to accommodate more scenarios in the industry. E.g. Musical Works Contact. Songwriters including lyricist and composers can use this contract to license their works. Other works/recordings linking to this contract will define payment logic, thus the money circuit can be set up.
The technology of code contract will not only help musicians to define their license terms, but also to receive payment and distribute their income to other contributors automatically. All the process can be seen from client application by connecting to the whole Musicoin blockchain. The network is P2P, but it’s not for piracy, it’s for currency.
Open Opportunities
Musicoin created a new model to liberate music from cages, it puts musician at the center stage and reward their creations in a fair way and free chosen by end users. The trajectory of music industry, will be re-written.
The system also open great opportunity to larger stakeholder groups. Big labels may have to suffer some changes, but it can benefit from this platform because the whole market scale have been enlarged, they can work once and harvest forever and worldwide. They can put their copyrighted stuffs onto Musicoin blockchain and keep enjoying the upscaled consumption;
With Musicoin, today’s streaming music services don’t need to process hectic paper works to prepare reports and pay musicians, instead, all the information are open to access by anyone in the world, instantly. Musicoin is designed for both musician and listeners, but will eventually benefit to the whole industry even traditional players.
Marketers, promoter, DJs, and social curators can also benefit from this system, which can spawn new values for listeners, thus generating returns to them.
Startups can build more innovative technologies and services upon Musicoin system to meet diversified demands from the network; Hardware makers can create tangible and wearable the same time smart gadgets to extend the glory of musical devices in our cultural legacy. Imagine your home speaker can be much smarter someday, not only caching music when you are not at home, but also help you mine coins to pay musicians when you play, it’s the most beautiful thing in the digitized world.
Big open data on Musicoin blockchain can also lead to more intelligent music recommendation. Based on Musicoin system, AI can play more and more important role to help users to discover music based on their taste, which is learned by the machine. It can be very personalized because every playback history will become the foundation of more accurate recommendation in the next. It’s the gold mine to AI researchers.
Conclusion
“Someone is making an enormous profit,” says Krukowski, a musician shared his royalty check online, “and it’s not the musicians.” This is the complaint by many musicians in the past. Today, with Musicoin, we can definitely change this. Musicians will make money and 100% income will go to their own wallet.
In an age of turbulence, we can also expect paradigm shifting. The changes rely on everyone to participate. We’d call all musicians and their appreciators to join this great transition to make music more meaningful to our life!
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