Why You Can’t Put The Music Industry On A Blockchain

In this excerpt from "Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts," author David Gerard offers a critical examination of the Bitcoin and blockchain phenomenon, and what it means for music and the music industry.

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Guest post by David Gerard from his book Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart ContractsAn edited excerpt from Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts by David Gerard, the first critical examination of the entire Bitcoin and blockchain phenomenon, available in paperback and e-book via Amazon. Chapter 12 is a case study of attempts to apply blockchains to the music industry. David Gerard also writes about music at Rocknerd.

The recording industry has suffered nearly two decades of crisis, after the 1990s CD boom petered out and the Internet proceeded to turn the entire world of human communication upside down. The musicians themselves are no happier. In an instructive worked example of Blockchain hype in one industry, both sides have heard the word “blockchain” and wonder if it could be their saviour.Jeremy Silver of Digital Catapult quotes Mark Meharry, CEO of MusicGlue, as calling “blockchain” the “worst case of smoke and mirrors” that he has seen in an industry which “specialises in self-deception”. Nevertheless, the wants and needs behind music industry blockchain dreams are worth exploring.Berklee Rethink and blockchain dreamsThe blockchain hype went public in July 2015 with “Fair Music: Transparency and Payment Flows in the Music Industry,”¹ a report from the Rethink Music initiative at the Berklee College of Music’s Institute for Creative Entrepreneurship.The problems it outlines are well-known and widely acknowledged:

Who owns what is frequently not traceable at all. “20-50 percent of music payments don’t make it to their rightful owners.” Music collection societies tried to create a Global Repertoire Database in the early 2010s, but scrapped the idea in 2014, as nobody wanted to create a new central octopus.²
Existing industry money flows are an unbelievably complicated mess that’s barely understood by most participants.
Middlemen take money without any reasonable present-day justification.
Record and publishing companies deliberately obscure what they owe and who they owe it to,³ and pay very slowly.
Streaming doesn’t pay nearly as well as CDs used to. (That last problem is not like the others, but keeps being spoken of like it is.)

The report proposes: (a) gather data about as many of these deals as possible, to make the problems clear, (b) revise the contractual arrangements of literally the entire recording industry worldwide, and – in half a page tacked on the end – (c) keep the entire details of every deal the recording industry has ever done and continues to do on a blockchain and (d) administer the deals using smart contracts.Specifically, it suggests:

Rights ownership and royalty splits that are recorded on the blockchain, money being automatically redirected accordingly, e.g., directly upon an iTunes purchase;
Transactions that occur “nearly instantaneously” (“in less than one second”) and directly, from consumer to artist without intermediaries.

Of course, the word “blockchain” caught all press attention, and not any of the real problems the rest of the paper described.Why blockchains are a bad fit for musicIt’s immediately obvious that blockchains proper – even if euphemised to Distributed Ledger Technology – can’t possibly be the panacea the record industry desperately desires.No single blockchain can possibly scale to the whole music industry. There were an estimated 35 million songs in iTunes in 2013;⁴ Spotify played a billion streams a day by mid-2015.⁵ If you use multiple blockchains, they will need reconciliation.Apart from the metadata itself being huge, there’s the encoded details of all the hundred-page contracts. Who are the participants in the blockchain who will each be keeping their own copy of all of this data? And who will pay for the computing resources to execute all the smart contracts for each song played?(Posited solutions include storing contract details off-chain on the BitTorrent-like InterPlanetary File System, so you’d better hope there’s still a node that can seed a full copy of your publishing deal thirty years later! Also, the IPFS doesn’t work yet.)“Where there’s a hit, there’s a writ.” Data will change – erroneous or fraudulent claims, copyright lawsuits changing ownership information, you litigate your way free of your awful first contract, a musician dies. How is your “immutable” blockchain corrected?What’s your security threat model? This one never seems to be mentioned, and we’re talking about real-world money here. How is your blockchain kept secure against hostile attackers, e.g., someone who has the money to bring 51% of mining resources to bear against a Proof of Work secured chain? How will you clean up the mess after an attacker uses bugs in your smart contract platform that they knew existed and you didn’t?Musical blockchain initiativesAll of these have as their business plan to become the new central octopus, or at least one of several.Imogen Heap’s Mycelia: see previous coverage.In the wake of its report, Berklee has started its own Open Music Initiative, to do what the Global Repertoire Database tried to, with blockchains thrown in to no obvious utility.⁶PeerTracks is one of several companies attempting to set up a system where every artist would sell their own separate cryptocurrency tokens as shares in their future earnings, and streaming royalties would be allocated to the owners of the tokens via smart contracts.⁷ Apparently the buyers would be the artist’s fans rather than music industry companies. Founder Cédric Cobban subscribes to Austrian economics, which led him to Bitcoin and then this idea.⁸Benji Rogers of the dot.blockchain initiative pushes a holistic vision to which the entire industry would need to subscribe, revolving around his “.bc” file format, which he swears up and down is not at all Digital Rights Management, which customers despise – it’s Digital Rights Expression, which plays only on compliant platforms that only let you do permitted things with it and formats that don’t do this shouldn’t be allowed to exist.⁹ This is literally the approach that crashed and burned hard enough in the early 2000s to make “DRM” a curse to this day. Also, everything should involve Virtual Reality, for some reason. And the InterPlanetary File System, which if it worked would still be a new form of BitTorrent.Revelator promises a generic buzzword soup of rights management, instant transactions, micropayments and “disruptive technologies”, to demonstrate the actual point of much of this: getting funding from venture capitalists. You’ll be pleased to know they say it’s all about the art.¹⁰The TAO is a smart contracts-based rights administrator selling ~~unregistered securities~~ shares to raise development funds. They explicitly invoke The DAO as their model, which is a boldtack to take after July 2016.¹¹All these competing systems speak of the artist as their only and eternal concern. But the TAO promoted its share offering with news of a label putting all their artists on the TAO just like that, suggesting that artists in the new world will play a role much like their present one, i.e., a sort of industrially-processed cheese slice.Are you supposed to sign up with some of these systems? All of them? Why? How are disputes with your blockchain-based rights management organisation handled? Perhaps your contract with them could go on a blockchain.(So sorry, our smart contract got hacked! All your money is gone. Yes, yours in particular. No, we can’t get it back, smart contract says no. Well, you could sue, I suppose. How much money have you got? Oh, none? What a pity. Never mind.)