REBEAT's Digipinion

October 6th, 2015

REBEAT's Digipinion:
10 questions about the use of blockchain in music

By suggesting the use of Blockchain technology to manage the rights to her musical works, British musician Imogen Heap has once again highlighted her reputation for innovative, out-of-the-box thinking.

In a nutshell, Blockchain is a decentralized "ledger" that provides information on who owns a given asset (Bitcoin, stock, contract, file, etc.). In addition, Blockchain also provides exact information on how this asset has been used and transferred in the past. This ledger is accessible by all members of a decentralized network. Ownership and transaction of an asset will only be verified if the majority of the network confirms the underlying Blockchain to be valid and correct. Thus, at least in theory, one cannot simply manipulate an asset’s Blockchain—you'd have to obtain control of more than 50% of the entire network to verify the manipulation.

Blockchain is most famous for being the technology that powers Bitcoin. But can it be transferred to music rights as well? Currently, Imogen Heap's idea of keeping control over her rights by using Blockchain poses more questions than it seems to answer. Here are ten pressing ones:

1.) Under the existing system, major publishers, record labels and PROs profit from huge amounts of unclaimed and non-distributed royalties. Why should they support a system that promises higher transparency and undercuts their revenues?

2.) Blockchain shows the potential to cut out the middlemen—a massive threat to the likes of Soundexchange, HFA, ASCAP, BMI & Co. Why should they support a system that puts a substantial threat to their very existence?

3.) If rights holders decide to pull out their content from the PROs and manage their rights via Blockchain, who's to take care of royalty collection in use cases that cannot be managed via this new system, e.g. public performance from CDs, harddrives?

4.) Collecting societies do important lobbying to protect author's rights. If Blockchain cuts out these middlemen, who's to lobby for artists and negotiate fair compensation with tech giants like Apple, Google, Spotify & Co?

5.) Information on rights ownership is highly fragmented and scattered across a multitude of entities. As a result, rights conflicts due to first-come, first-claim scenarios or multiple claims on content are only too familiar to all rights holders that manage content on platforms like YouTube. How can these conflicts be avoided in the Blockchain ecosystem?

6.) Today, music consumption is driven by streaming services like Spotify, video services like YouTube and digital radio services like Pandora. Will they all be willing to incorporate the Blockchain in order to create a working eco system, and where is their benefit in it?

7.) Already, rights holders are drowning in a flood of data from hundreds of digital music services. How can Blockchain provide more efficiency instead of only increasing the amount of data to be managed?

8.) In Bitcoin, every user that wishes to join the network needs to download the Blockchain and its history of transactions. Already, this consists of Gigabytes of data. Will users in a Blockchain-driven music business be willing to handle such massive amounts of data, just to listen to their favourite acts?

9.) Ultimately, where is the benefit for the end user? Will they adapt to a system that provides total transparency to their content use (even if Blockchain promises to make the username anonymous)?

10.) Despite claims of the impossibility of manipulation to the Blockchain, millions in Bitcoin "disappeared" in the downfall of Mt. Gox. What's to prevent this from happening again in a music business that is Blockchain-driven?

Note that we do not mean to suggest that Blockchain in music business cannot work at all. But the above are certainly questions worth digging into. Let us know your thoughts on this Digipinion—we’d be thrilled to hear from you!




September 23rd, 2015

REBEAT's Digipinion:
Who's to benefit from a Deezer IPO?

Music Ally today reports that french company Deezer is bound to be the first music streaming service to file for an IPO. That's certainly interesting news, given that archrival Spotify was widely percieved to be the number-one candidate to make that step. With Deezer still in the red after revenues of $142 mio. reported in 2014, this IPO could provide a much needed infusion of capital necessary to continue competing with Spotify, iTunes Music, Google Play and other key players on the growing streaming music market. But is this really only about acquiring fresh capital? What is the long term perspective on this step?

Deezer has received several funding rounds over the past years, the most notable being a $130 mio. series D by Access Industries, the investment firm of Len Blavatnik. Blavatnik, of course, is no stranger to the music industry: Access Industries own Warner Music Group, through which Blavatnik in turn purchased renowned record label Parlophon back in May 2013. In this light and having made such considerable investments in both music catalogues and digital music services, Blavatnik cannot be blamed for wanting to get a return on his investments by cashing in on the Deezer IPO. But what's next, after the IPO?

Let's go wild and think out of the box here. What if Len Blavatnik and Acess Industries use the IPO to raise Deezer's overall valuation and then sell the whole company, including their own equity in Deezer, to a third party? This could certainly prove to be a lucrative deal. But who could be a potential buyer for Deezer? Tech-giants Apple and Amazon are unlikely candidates as they both have existing digital music services in place. Twitter have just nose-dived in their attempt to launch their own digital music service. Facebook could be an interesting candidate, but would they really buy only the second-most important streaming service? No, if they really were to make this step, it's probably more likely for them to go all-in and buy Spotify instead. So who else is on the table? Who could massively benefit from acquiring a streaming service?

With record sales having tanked and both publishing and neighbouring rights royalties caught up in a maze of intransparent accounting practices, live is certainly where the money flows in today's music business. So what if event-behemoth Live Nation bought Deezer? For the leading concert promoter in the world, having their own streaming service under their roof could bring substantial benefits. Just imagine: you're a Deezer user and receive the notification that your favorite artist comes to town. Best of all, you receive a 30% discount on your tickets, given the fact that it is an artist of Deezer's parent company Live Nation 30%? On tickets for superstar artists this is a lot of money and certainly makes it much easier for you to say "yes" to attending the concert. Furthermore, attending just three events a year would bring in the costs usually associated with an annual streaming subscription. A great incentive to the consumer.

Live Nation, in turn, would benefit from Deezer being available in more than 130 countries in the world. This way, they could expose their artists to an even wider audience of streaming users across the globe. Furthermore, this could help fill up the concert venues for lesser known bands that are still developing their fanbase. In addition, Live Nation would get important insight into the musical interests of their customers by monitoring which artists they follow on Deezer. And this would enable Live Nation to serve dedicated advertising for concert events right to an artists' core audience. A potential win-win situation for the promoter, the artists and their fans.

As always, this is just our 2 cents—REBEAT's Digipinion. Take it with a grain of salt and let us know what you think about it. We'd be thrilled to hear from you!

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