Disruptors have the best chance of success when they tackle inefficiency in a market. We've seen it with financial services, travel, retail and insurance. Next up is music, writes Ben Robinson
You might think music has already been disrupted and point to ITunes, Spotify and YouTube as evidence of the long tail and a remunerative route to market for those enjoying very small demand. But hen's teeth are more common than artists made rich by presence on the internet alone.
The reason is simple: those that do sell their work online see some 86 per cent of the proceeds eaten by middle men. Not only that, but payment often takes many months, sometimes years, to come through. That could be about to change thanks to companies such as IBT, a start-up blockchain specialist, and Ujo Music, a music distribution platform.
Both companies believe blockchain will revolutionise the way music royalties are distributed and help artists – writers and performers – to receive a higher proportion.
Blockchain technology can establish a direct relationship between the buyer and the artist, cutting out all the intermediaries who traditionally have taken their cut. But there's another hugely important benefit. Just as banks are finding that data on their customers help them to cross-sell, up-sell, and increase revenues, so data on who is buying their music will help artists to plan better for releases, tours, promotions and even songwriting. This could leave more time for the creative process.
Ujo Music first demonstrated the use of a musical blockchain in 2015, working with indie artist Imogen Heap to release her ballad Tiny Human. Buyers could choose between a licence to download, stream, remix or synch the song and each payment was automatically split on the blockchain and sent directly to Heap and her collaborators. Instead of receiving less than 15 per cent, they share about 80 per cent of the revenues instantly.
In Ujo Music, the buyers paid in the cryptocurrency Ethers. Using a different model, IBT, meanwhile, has been working on a system that will take hard currency. Its first distribution deal is with Rightsshare and Dutch dance DJ Hardwell, whose set on October 21 will be available to buy over its platform.
Another benefit of the blockchain is transparency. Each transaction can be recorded, ensuring that exactly the right amount of royalties will be paid. This is currently not the case with distribution platforms such as Spotify, which estimates demand, particularly for smaller selling artists, giving a disproportionate amount of the revenues to the superstars and quite possibly paying out more than it needs to avoid being sued.
An accurate tracking of demand also opens up the possibility of micropayments, shifting the model of fixed-pay contracts for streaming services to pay-as-you-listen, finally opening up a remunerative long tail.
The musical blockchain is a no brainer for its efficiency, transparency, control and data analysis. It reconnects the consumer with the owner of the intellectual property.
It's not just music where blockchain will cut out the middle man. Any sector made up of layers of intermediaries could be affected – publishing, clearing houses, banking and trade finance.
IBT originally developed its technology to apply to trade finance but banking is notoriously conservative and the company realised that it would take time to get all the relevant parties on board. Hence its look at alternative markets including visa, air freight and music.
IBT founder Hans Sturkenboom is convinced that blockchain will be the default music royalty distribution mechanism, becoming as big a protocol as email. It's just a matter of time. If he's right, that's good news for the creative industries and bad news for the middlemen. Disruption in music, how very rock and roll.