07 Sep, 17

Is Blockchain Technology the Future of Music Streaming?

It’s no secret that ad-based streaming is struggling. Over the last few weeks, Soundcloud’s reputation as a generally stable, secure, and overwhelmingly popular streaming platform and digital archive has been alarmingly called into question following the company’s inability to turn years of venture capital investment into a sustainable, profitable model. In July, news came that founder Alex Ljung had laid off 40% of the Berlin-based company’s staff, and was soon joined by an internal leak revealing that the site only had enough funding to secure its existence through the next three months. That time frame was further accelerated when spooked investors eventually threatened to shut down the entire company within a 24-hour period, with musicians frantically scrambling to archive their own material from the decade-old platform.

While the site was luckily able to secure funding thanks to a $169.5 million investment from the Raine Group, its once-stable footing in the minds of musicians everywhere has continued to dwindle with its reputation, as a generation is left to question the future of the digital infrastructure it often takes for granted. The visible flaws of the broader streaming economy hung heavy over the heads of independent artists already navigating a tricky relationship with the website, which, at least in the months before this breaking point, was always more devoted to its relationship with major labels in the push to monetize with premium options than it was to the independent creators that made the site a household name.

In reality, the digital streaming crisis is much bigger than Soundcloud alone.

As many writing on this site have previously explained, the current lapse between a start-up culture focused on short-term metrics and fast-paced scalability and the lifelong aims of independent creators working to make their art as accessible as possible online has become tangled and tortuous. It forces artists to accept fractional cents-per-stream as a new industry standard, while the streaming landscape becomes increasingly managed by shrouded negotiations between digital platforms and the few major labels they now stand to sustain.

So what’s an independent artist to do? While many have come to rely on ticket and merchandise sales over the erratic nature of the modern music market, a new generation of tech companies have emerged with a promise to fix the current state of the industry. Refining various forms of the same blockchain technology behind the bitcoin cryptocurrency, sites like Resonate, dotBlockchain, and UjoMusic have each made claims that their respective models offer important solutions to the increasingly-evident flaws of current ad-supported and subscription-based options.

But is it all just more smoke-and-mirrors publicity jargon from a handful of new companies all racing to become the next Spotify in a market still limited to eccentrics? The ways in which artists stand to benefit from, say, owning their own royalties thanks to more abundant blockchain metadata, or following stream-to-own models that operate with intellectual property rights more similar to MP3s, feel infinite. But can a new streaming service really win the complete, unmarred control of exactly the sort of digital property rights that every major label seems specifically opposed to giving up?

Can a single company really break down the complexities of royalties and rights ownership and take an idea this involved to a mainstream audience of millions? I gotta admit: I’m a little skeptical here.

When the first bitcoins were mined in January 2009, no one had really considered the broader potential of the blockchain. Developed by a network of cypherpunk cryptographers working to create a decentralized currency completely free from federal regulation, international banking laws, and the various frictions that make electronic money transfers so inefficient today, bitcoin has been touted by many as a cure-all for the dizzying complexities of today’s financial markets. Emerging in the aftermath of the U.S. financial crisis, the cryptocurrency has been largely defined by a certain strand of technophilic libertarianism that at least dates back to Peter Thiel and Max Levchin’s early efforts with Paypal (both of whom are some of the currency’s biggest investors), but the technology itself remains a relatively neutral alternative to other forms of electronic banking.

What’s made bitcoin a uniquely successful billion-dollar currency is largely the technology behind it known as the blockchain. With the blockchain, each bitcoin is embedded with evolving documentation of its entire ownership history, which serves as an ongoing ledger of both ownership rights and each bitcoin’s legitimacy in the marketplace. Records produced by the blockchain are open to the public, legitimized by a global audience free from any government or banking institution, and extraordinarily secure, despite the perpetual threat of hackers and government-sponsored attacks. Companies like Microsoft and IBM have been working to bring the blockchain to an enterprise setting for years now, where the model offers new more secure option for commercial transaction.

But while bitcoin has faced numerous, well-documented problems in the hands of eccentric billionaires, the blockchain model presents more interesting, more robust possibilities for intellectual property rights on the internet. As it stands now, peer-to-peer networks allow digital files to be endlessly reproducible without losses in quality, making it immensely difficult for artists and musicians to effectively monetize their work. As many reading this probably already understand, the shift from physical media to a purely digital exchange has left record labels in a critical bind, forced to pedal outdated models of artificial valuation determined completely by negotiations between platform and label, often to the detriment of artists themselves. At the same time, free file-sharing sites like Napster, LimeWire, and others have thoroughly undermined this system, crippling its artificial market with free download options that arguably still hurt hopeful artists everywhere just trying to get paid.

Most recently, streaming sites like Pandora, Spotify, Apple Music, and others have given up on this idea of the digital media marketplace, instead offering some variation of ad-supported or subscription-based options as noted above.

But of these models, none have really been able to effectively value the creative work of independent artists who, without huge audiences and hundreds of thousands of streams per track, still stand to earn nearly nothing from their relationship with streaming platforms, even as such platforms continue to consolidate wealth.

Now, with the blockchain, sites like Resonate, dotBlockchain, and Ujo Music are working on different kind of streaming experience. Offering their own file formats with richer, more robust metadata, sites like dotBlockchain use a peer-to-peer network that continually tracks listening habits, logs them to a distributed ledger accessible by everyone, and, at the discretion of the platform itself, works to ensure everyone involved in the writing, recording, and production of the track gets effectively paid with each stream. By maintaining a transparent, decentralized ledger of rightsholders algorithmically updated with each listen or purchase, such platforms continually generate fractional royalties to all involved in the creative process, in theory avoiding the sort of blanket negotiations between artists and label that often squeeze ill-informed musicians out of ownership of the music they created to begin with.

With Ujo Music, singles also come with the option to make their individual audio components, or “stems,” available for legal purchase. In 2015, the site partnered with new media musician Imogen Heap to release her song “Tiny Human” exclusively on the platform. Though then still a prototype, the single was available for a $0.60 fee or $0.006 per stream, with the full stem package available for a flat $45 fee. The track also came with blockchain metadata including the session musicians that performed on the track, as well as other logistical details about its recording and production work. Earlier this year, electronic producer RAC released the first full-length album on the platform with similar options.

Resonate, one of the more fully-formed iterations of this idea, has its own stream-to-own model, which, rather than subscribing to a streaming site for a flat monthly fee, instead charges 0.002 cents per play, with successive plays charging more and more until listeners ‘unlock’ ownership with the ninth play, which costs around $1.016. According to founder Peter Harris, musicians stand to gain up to 2.5 times as much profit compared to mainstream alternatives and are considered partial “owners” of the platform under its cooperative model, while listeners can take comfort in the fact that they’re helping contribute to a more sustainable digital service.

In theory, this technology also offers much more flexibility for licensing agreements. Where a standard Spotify subscription technically only allows for “personal entertainment use,” with more expensive options available for commercial needs through Spotify Business, on the blockchain, artists could benefit from smarter contracts that streamline commercial negotiation within the technology itself, offering some sort of algorithmically-determined solution that scales the personal agreement to one for public use in an effective way.

The blockchain presents a huge expanse of new possibilities for speculative systems design, which in abstract could do so much more to enhance user experience across the entire ecosystem of the streaming economy.

As exciting as this seems from the outside, none of these efforts have really taken off with the scale necessary to make an impact.

As of August 2016, when the track was removed from the site, Imogen Heap’s “Tiny Human” only generated $133.20 in overall profit, or 222 sales at $0.60 each. As vocal of an advocate as she was for the idea, the track certainly wasn’t easy for listeners to buy, requiring them to first purchase the blockchain token Ethereum before buying their digital download. For listeners used to the frictionless experience of Soundcloud or even the iTunes store, this proved much more of an inconvenience than the site had originally foreseen. Almost a year later, Ujo offered an apology to fans that had faith in their efforts, noting that they “took an admittedly simplified approach to solving the payments problem in the music industry.” But even after another year since the incident, tokenized payment with Ethereum still seems astoundingly complex for something already so easily available through other channels.

Since its start in 2015, Resonate has similarly struggled to attract musicians and listeners beyond of the blockchain community. While piquing the interest of a few prominent underground labels like RVNG INTL. and Topshelf Records, the site is still far from the full-catalog diversity necessary to attract listeners en masse, without any of the “big four” major labels and their many subsidies on board.

At the same time, the transparency of decentralized models has almost no appeal with the record industry.

From listener habits and recommendation algorithms to various current models of royalty payout that most labels would rather not handle publically, much of the black box mystique of most current arrangements still gives labels—particularly majors, who already have a groomed roster of what fans are looking for—a huge amount of leverage in this arrangement in ways most seem eager to maintain. Despite the obvious profit incentive to at least partially return the industry to its former, cash-strapped glory, the accountability asked of most current blockchain options seems largely incompatible with the industry, even as ad-supported models prove increasingly unstable.

While these sorts of speculative models present unprecedented potential for an industry most definitely in flux, none so far have really attracted an audience large enough to make huge changes in the industry. As much as these companies hope to return economic agency back to the independent artists hurt most by the growing entanglement between major labels and streaming sites (an admirable solution to a massive, unresolved crisis in itself), for now listeners demand a frictionless user experience that, even if Soundcloud were to collapse completely tomorrow, would most likely favor similar “freemium” options.

Blockchain technology provides a unique case study of the many individual issues confronting the industry. As companies like Soundcloud and Spotify struggle with many of the same issues, the blockchain (and the many forward-thinking designers behind it) already imparts fascinating solutions to many of the detrimental issues that have plagued streaming since its beginnings. But until blockchain models offer something as simple and easy-to-use as the current system, itself propped up by all the flaws of the current venture capital system, the expectations of listeners unfortunately favor the easiest, most accessible models. And at least right now, these sort of speculative models—however visionary their intentions—have yet to truly account for this with any impact.

By Rob Arcand, distributed under a Creative Commons CC-BY license.

Image by jk_scotland, distributed under the CC-BY-NC creative commons license.

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