Music Business

The Future Of Transparency In The Music Business

1cc633fThe process by which music royalties are determined has always been a convoluted one, but the rise of the web has made it even more complex, while simultaneously increasing the demand for more transparency regarding where the money is coming from, and where it's going.


 Guest Post by Cortney Harding on Medium

Last week, I shipped up to Boston for the Rethink Music Conference, a one-day event produced by the Berklee Institute for Creative Entrepreneurship and IDEO. Despite a few hilariously retro moments (a musician on one panel suggested people who download music without paying for it should be arrested, and I swear, somewhere in DC, Hilary Rosen’s heart skipped a beat), the discussion was mostly focused on the future of the business, and specifically on how technology can enable transparency within the biz.


To say the system around royalty payments right now is broken is a gross understatement. It sounds simple — startups pay labels and publishers, who then in turn take their share and pay out the artists. In practice, it’s vastly more complicated and often results in artists getting checks for random amounts of money with little to no explanation or data about how those royalties were calculated. To put it another way — ever get a letter from your health insurance provider explaining why they denied your claim, and you can’t figure out what exactly is happening? It’s kind of like that. There’s a system, sure, but it’s so complex and obfuscated that it might as well just be random.

1-wFBlQnjEBQqirJr_bYXQVwNo one is really at fault here — labels simply failed to anticipate that they’d one day face a system so complicated and byzantine. Artists now have more sources of royalties than ever, which is great, but also muddies the waters when it comes to calculating and distributing payments. Add to this the fact that much of the metadata the reporting is based on is out of date and incorrect, and things get even worse. There’s an old joke that the fastest way to get rich in music is to start a band called “Various Artists” and record a song called “Untitled Track,” and the watch the misallocated funds roll in.

This is a huge problem, and there are any number of ways to solve it. One solution that generated quite a bit of discussion at the Rethink Music was using the blockchain and smart contracts to power payouts, which would cut down on any human errors in calculating payouts, as well as allowing artists to see exactly how the payouts were calculated and where the money was coming from. There are a handful of companies iterating in this space, like PeertracksUjo, and Revelator (full disclosure, my clients), but the technology is at least a few years out. Not only that, but any companies in this space will need to battle public perceptions of the blockchain and bitcoin, which now seem related to the Silk Road and Mt Gox.

But whether the solution lies on the blockchain or another piece of technology, the fact remains that artists are starting to demand more transparency in accounting. To be clear, royalty payouts were never a crystal clear process — though there were fewer revenue sources, contracts were still complicated and plenty of people got shorted, sometimes accidentally (and sometimes not). The trend for more openness is directly related to the rise of the web — and a broader desire for more transparency in general.

Twenty years ago, if a government wanted to cover something up, they just needed to approach a handful of editors and reporters and convince them to keep quiet. There were plenty of times when this didn’t work, but there are also cases where it did, and stories were buried. Coverage was also far more local, and stories in one corner of the world could be more effectively buried. Today, everyone’s a journalist with a platform like Twitter, and this leads to much more reporting — and a bigger backlash when the powers that be try to bury stories. A state government in India asked Twitter to remove posts about a recent lynching, saying that the posts could lead to violence; in August, another state disconnected mobile internet following protests. Both of these actions were met with international attention and calls for change, and if censorship and connectivity interruptions continue to happen, hopefully other governments will take action.

Google-glassWe’re also seeing greater transparency with the increase in smartphone cameras, especially when it comes to police activity and crime. One of the reasons I was disappointed to see Google Glass fail was that there are still barriers to entry when it comes to recording incidents of violence, like pulling out a phone and being seen holding it up and recording. If everyone was livestreaming, incidents would be captured in real time, and people would have less to fear when it came to taking pictures and video.

It’s of course ridiculous to conflate political censorship and violence with artist payouts, but the broader trend is the same. Information wants to be free, and people are demanding that black boxes be opened. But the more we know about what we’re paid, how we’re paid, and what’s happening in the world, the more empowered we are to advocate for ourselves and for change. Artists can use data from detailed reporting to see where their listeners are and make sure everyone who was part of their recording process is fairly compensated. This data can also spur conversations with other artists about how much those artists are making, and whether artists can negotiate better deals.

We’re moving rapidly towards a transparent world, one where sharing of information and demanding accountability will be the norm. Artists should be at the forefront of advocating for this change — it can only benefit them, and others.

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