Musicoin: Cutting out the middleman
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For almost all of history, the only way you could enjoy music was live and in person. Artists performed for small audiences—their art only capable of travelling as far as their feet could carry them. Since music had to be performed live, it could only be heard by those within earshot.
It wasn’t till little over a century ago that technology began to change the course of music history.
The role of technology in music has always been to take the artist’s work to a larger audience. The radio allowed musicians to reach anyone who could access the airwaves. The gramophone let music be replayed infinitely without the artist being physically present. Each incremental improvement advanced the fidelity and reach of music—always trying to recreate the experience of a live performance while, at the same time, conveying it to the widest possible audience.
None of this was cheap and artists who wanted access to the larger audiences that technology offered had to enter into agreements with the radio companies and record labels who had made these technology investments. This is how all the biggest musicians of yesteryear were made—their inherent talent enhanced by technology, to bring them before larger audiences than would have otherwise been possible. In exchange for the privilege of using this technology, artists agreed to share a significant proportion of their earnings with the record labels.
That said, just because they had to, it didn’t mean they liked it. Over time, as artists grew larger than life, they chafed at the manner in which labels were controlling them. Musicians such as Prince engaged in powerful, public protests against the industry, seeking to wrest back some of this control. But it wasn’t until technology evolved yet again that the shape of the industry began to change.
At its inception, digital music was mediocre. Hamstrung by the compression technologies and limited bandwidth of the time, early digital music was virtually unusable. Yet, despite these shortcomings (not to mention patent illegality), Napster was a runaway success—its users willing to trade poor sound quality for access to the available catalogue.
The problem with Napster (and others of its ilk) was that it made music available, free of cost, depriving not only the record label of its revenue, but the artist as well. Predictably, laws were tightened, enforcement bolstered and in time, peer-to-peer (P2P) piracy faded out of public memory. What all this did, however, was bring the notion of digital music distribution into the mainstream. There was a renewed focus on improving fidelity and compression technologies till, in time, digital music became, to the untrained ear, indistinguishable from high-fidelity vinyl recordings. This development finally moved music distribution out of the control of the traditional music industry and into the hands of the large technology firms such as Google, Apple and Amazon. These firms leverage their digital platforms to offer vast catalogues of music, initially via digital downloads and eventually via streaming subscription arrangements.
This is the world we live in today. We no longer own music. Instead we stream music from on-demand services that allow us to access music whenever we feel the need. Artists might finally have access to the largest possible audience on the planet.
Why then is it that artist margins are at the lowest levels they have ever been? The truth of the matter is that record companies still own vast (and valuable) back catalogues of music and in exchange for the right to stream this content, they continue to retain a significant share of the revenue, all of which comes directly out of the artists’ revenue.
Some would question why this should be so. There is no longer a need to have an intermediary between the artist and his audience. Technology has democratized music production to the point where you can produce studio quality recordings on a consumer laptop. Social media and internet marketing is far more effective than the traditional techniques that record labels offer. Why then are artists still beholden to an industry that seems to have lost its relevance? As best as I can determine, the answer seems to lie in the fact that we lack alternatives.
A new blockchain-based pay-per-play service called Musicoin is attempting to change all that. This service allows musicians to get their music directly into the hands of their audience without the need for intermediaries. It uses smart contracts powered by bitcoin, to let fans to decide how much they want to pay per stream and ensure that every bit of that revenue is automatically transferred to all the artists who played on the track in whatever proportion they’d agreed on in the contract.
In many ways, the creation of this distributed business model is the final piece in an age-old puzzle. It remains to be seen whether musicians will accept it.
Rahul Matthan is a partner at Trilegal. Ex Machina is a column on technology, law and everything in between. His Twitter handle is @matthan.