Blockchain technology set to bring transparency to the music industry
Support from SIDN Fund enables IBT Music to make a difference
The music industry has a reputation for being ruthless. Earning a living from music is anything but easy, especially for young artists. Performers have to operate within a complex, bureaucratic landscape, where legal arrangements are opaque and there's little choice but to accept tortuous contracts, under which royalty payments are often delayed for months. Surely there has to be a better way? The people behind IBT Music believe that there is. Project Leader Teun van Eil explains how the team's automated blockchain system can make a difference by bringing transparency to the music industry.
Under the current system, the rules regarding music rights are far from clear. That tends to disadvantage young artists in particular, because it's almost impossible to get established in the industry and make a living unless you can get a contract with a major record label. One newcomer who encountered difficulties is Martin Garrix. At the start of his career, Martin agreed a recording contract so that he could concentrate fully on his music. The deal was that his record label would pay him a monthly salary in exchange for the rights to his songs. It looked like an attractive arrangement for an upcoming artist, but appearances can be deceptive. Because, when his career started taking off, he found himself tied to the contract. A contract under which the earnings went to the record company and Martin had just a salary to show for his success.
Payment of streaming royalties (fees for playing an internet audio or video) is also a source of considerble frustration. The system relies on manual administrative processes, meaning that artists have to wait up to nine months to get paid. Digital service providers (DSPs), such as Spotify, Apple Music and VEVO, send play data to Buma/Stemra, an organisation that represents composers, lyricists and music publishers on copyright-related issues. Buma/Stemra then has to print out the data before manually inputting it to its own system: a time-consuming process that prevents Buma/Stemra making payments to artists with fewer than 50,000 streams per number. For less prominent and upcoming artists, the disadvantages are obvious.
Transparency is the key
IBT Music is an automated system developed to change all that. It enables artists to draw up smart contracts and use them as a basis for payment by DSPs and record labels. "IBT Music wants everything to be transparent, so that small record labels can compete against the big players," says Teun. "And so that royalties can be paid within a day, instead of after nine months. That will ease the pressure to find a regular source of income."
The system's structure allows you to use Rightsshare in combination with Settled, or with another blockchain product of your choice. "Settled is like a railtrack, and Rightsshare is the first train along it," explains Teun. "But there are other trains and other tracks; Settled and Rightsshare don't always have to go together. We look forward to running our train on other tracks and having other trains running on our track.
How the system works
Sounds good, but how will that work in practice? The idea is that, when an artists records a song, their record label registers it via Rightsshare (or a competing system). The label then goes ahead and distributes the recording. Settled assigns a unique alphanumeric code to the song, which is used to make the song available through DSPs. From the code, a DSP can see exactly where the song is registered in the blockchain. And every time the song gets streamed via a DSP, the blockchain system automatically logs the event against the code. Because the blockchain is transparent and open, the artist is also free to check how often the number has been played via each DSP. With that information, they can work out how much they're entitled to in royalties under their contract with the label. "Initially," says Teun, "DSPs will still pay the record companies, who in turn will pay the artists. However, there's no reason why ultimately you shouldn't have a set-up where the DSPs pay the artists direct."
SIDN's mission is connecting people and organisations to promote safe and convenient digital living. SIDN Fund was set up in 2014 to support that mission. The foundation works to build a better internet for everyone by providing grants to projects that help to make the internet stronger, promote user empowerment or utilise the internet in innovative ways. By doing so, it contributes to the prosperity and wellbeing of the nation.
Support from SIDN Fund
As well as receiving considerable support from the market, this promising initiative is co-enabled by SIDN Fund. Teun is in no doubt: "We couldn't have built this software without SIDN Fund." The Fund invests in bold projects with real value to the community; projects that help to make the internet stronger. Last year, it invited grant applications linked to the theme of Blockchain for Good. Teun and his partners heard about the call, decided to apply and won the Fund's backing.
"We've now secured additional funding through an ICO, which involves crowd-funding in cryptocurrency. In recent months, the emphasis has been on showing potential investors that the idea can really work. And it's been going well. For us, 23 May was an important deadline. That's when the ICO started in Ibiza, at a big dance event, and the first investors came on board. We've since managed to bring in the first million: a clear indication that the market has confidence in us. The money will be used to take the projects forward. We want our product to be properly market-oriented.
According to Teun, the ultimate goal is to become a global standard. "We want to act as a portal to the blockchain, at least. It would be great if everyone was using the Settled blockchain system to register music rights. And, ideally, we want as many labels as possible going over to Rightsshare. At the moment, record companies all use their own software to record rights information. We're building the same functionalities into our system, so in principle there's no need for them to remain tied to their existing software."
Thanks to the support from SIDN Fund, IBT Music now has a sound basic product. But that is just the start. The next goal is to get people within the industry using the product, so that the transition to a more transparent and fair music industry can begin.