Problems in the Music Industry
In a previous post, I explained how the business model of streaming platforms came to rescue recorded music from the grips of piracy and peer-to-peer file sharing indeed. Thanks to streaming, music today is much cheaper, more accessible to users, and the revenue from recorded music has steadily risen in recent years though. However, the digitalization of music has also triggered lower payments to artists. Intermediaries take a grossly large cut of the revenue, and there is no transparency about it due to non-disclosure agreements between the streaming services and major record labels.
According to the leading Citigroup GPS report on the music industry conducted in 2018, only 12% of all the revenue generated in the music industry made it back to the artists, and that mainly came from touring. Another recent report from US analytics firm Alpha Data, reveals that the top 10 % of artists (160.000 artists) accounts for 99.4% of music streams, leaving the remaining 1.4 million artists battling for the last 0.6 %.
Another problem is that intellectual property rights are difficult to manage and assert in the digital landscape. The uncertainty regarding ownership rights leads to a lack of attribution to rightful copyright holders, also lack of payments, and unfair copyright takedowns.
However, there is no real incentive for consumers or stakeholders in the music industry to change the status quo. From the consumer’s viewpoint, streaming music is convenient and cheap, and there are major stakeholders that benefit greatly from keeping things the way they are. For example, the CEO of Spotify, Daniel Ek, posted Spotify’s earnings from Q3 2020 on Twitter which amounted to EUR 1.97 billion in total revenue. Meanwhile, making money out of music as an artist gets increasingly harder, and the terms of making music get still more unfair. As a result, good music will not be heard or celebrated, and more creative talents will dry out without a chance to prosper.
Evidently, the established music industry cannot develop in a direction that substantially favors 90% of artists. The only option would be to build up another music industry from scratch with a whole new economic ecosystem. What needed? A new way of distributing digital music where the artists and listeners can set the terms of the streaming platform in close communication with each other. That is what two new blockchain initiatives, Music Distribution 2.0 – Audius and ROCKI, strive to achieve.
Why You Should Care About Blockchain Music Streaming
Blockchain technology can help to solve some of the major challenges that the music industry faces today. The key properties of blockchain technology (data integrity, immutability, decentralization, etc.) can namely be used to ensure fair and direct payments to artists, full transparency, fair distribution of revenue, no censorship, or unfair copyright takedowns, and fans can be rewarded for listening.
When users listen to music on a blockchain-based service such as Music Distribution 2.0 – Audius and ROCKI, the artists receive direct payment. In other words, artists can see their paycheck for the previous day each morning when they wake up. Payments are based on minutes of listening, and via tokens, the artists can set the price of their own music.
You do not need to be a “blockchain-geek” or have any technical understanding of how blockchains work to use music Distribution 2.0 – Audius and ROCKI. However, if you are interested, all the relevant transactions, copyrights, metadata, number of streams, etc. can be found “under the hood” if you are looking for it.
Smart Record Contracts
When several copyright holders involved in making a song, the revenue distributed automatically between the contributors via a Smart Record Contract. The revenue can either be divided equally or according to different, predefined shares of earning. The Smart Record Contract cannot be changed unless all parties agree to it.
Intellectual Property Rights
One of blockchain technology’s masterstrokes lies in the fact that content on the blockchain cannot be tampered with or censored by a third party. There is no centralized entity to control the network. Individual uploaders can be held liable for copyright infringement offline through court proceedings, but the content itself cannot be removed. For the same reason, you can only upload music to Audius or ROCKI that you own the full rights to as an independent artist. Copyrights marked by tokens on the streaming platform.
Earn tokens for listening
The blockchain platforms offer advantages for music fans as well. As a listener, you can get rewarded with tokens for listening to promoted music or advertisements. It is also possible for artists to share revenue with their core fanbase via Smart Record Contracts.
Combining Music Streaming with Blockchain
The idea of combining music streaming with blockchain technology is not new.
Several more or less successful attempts have been made in the last few years. Examples are Ujo Music, Choon, eMusic, Blokur, Voice, Musicoin, Opus, Revelator, Peertracks, dotBC, and Paperchain.
It gained a fair amount of public attention when the British singer-songwriter Imogen Heap launched her single “Tiny Human” on Ethereum’s blockchain in 2015 with assistance from Ujo Music. She decided to take matters into her own hands, after being fed up with hearing artists, herself included, complaining about the current state of the music industry. In Harvard Busines Review (2017), she describes her struggles (resonating with the findings of my research):
“As a musician, I want to encourage other artists to collaborate with my music. But recently, a visual artist had all of his Vimeo videos taken down for using just 30 seconds of one of my songs. The label that exclusively licenses one of my songs likely had a bot looking for copyright infringement that automatically took it down. I hear the artist now has them back online after a few weeks of hair loss and negotiations. I’d personally like to avoid these types of situations in the future, which means providing an easy way for others to license and collaborate with my music.
A major pain point for creatives in the music industry — such as songwriters, producers, and musicians — is that they are the first to put in any of the work and the last to ever see any profit. They have little to no information about how their royalty payments calculated and don’t get access to valuable aggregate data about how and where people are listening to their music.
One of the biggest problems in the industry right now is that there’s no verified global registry of music creatives and their works.”
Imogen Heap launched her own blockchain-based platform “Mycelia” in 2018. As far as I can see, the platform suffered the same bitter fate as many other blockchain projects in the music industry; they not used much and eventually abandoned. However, the promise of a decentralized music industry lives on.
Music Distribution 2.0 – Audius and ROCKI both published their respective white papers in the latter half of 2020. They share the same vision that Imogen Heap had more than five years ago. And they each seem to pursue it with renewed energy and fighting power. of course, I am not claiming that these platforms necessarily are the answer to the problems in the industry or the savior that musical artists have been waiting for.
The platforms are still in their infancy and it is far from given that they will stick or eventually be able to compete with the monstrous commercial strength of more established streaming services such as Spotify, Apple Music, and Amazon Music. The beautiful thing the blockchain platforms cannot be shut down. The music on them will live on, even if they abandoned by all users. If you are an independent artist or just a frequent music listener, I would definitely recommend you to create an account on Audius and Rocki to experiment.
In the following sections, I will explain the basic features of the individual platforms.
Audius is free to use. The user interface is similar to Twitters or Facebook’s. Also, you have an account page with a profile description, profile picture, and cover photo. You can gain followers and follow others, share playlists, post songs if you are an artist, and repost songs if you are a fan.
$AUDIO and uploading of tracks
The Audius protocol powered by the Audius platform ($AUDIO). Currently, $AUDIO cannot be purchased with fiat currencies (“normal money”). To acquire $AUDIO, you will have to buy cryptocurrencies such as Bitcoin or Ethereum on a major crypto trading platform such as Binance, and then exchange them for $AUDIO. Instructions on how to do this can be found here. Additionally, $AUDIO can be claimed as a reward on behalf of the most active users.
Essentially, the holders of $AUDIO are not users, but owners of the platform. Similar to how holders of bitcoins own a “stock” in the Bitcoin network. However, when you buy an Audius token, you also have voting rights in the system when changes and updates proposed along with access to special features. Audius tokens are also staked by node operators to run the Audius protocol.
Audius distinguish between content nodes and discovery nodes. Content nodes maintain the availability of content and metadata in Audius, while discovery nodes index and hashes the content. In return, the node operators have the opportunity to earn part of the ongoing Audius token issuance and pick-up fee pools.
- That content uploaded to a Content Node.
- The data gets transcoded and returns a reference code used to identify the track (hashing)
- The data linked by the reference code replicated to two other Content Nodes on the network.
- An on-chain transaction published signifying that the track exists on Audius and that the metadata attached to the profile that uploaded the track.
- The transaction picked up and indexed by a Discovery Node
- The client returns that the track successfully published when it shows up on the Discovery Node, marking the upload complete.
Audius claim that around 90% of the revenue flows straight from the listener to the uploader. While the other 10% will flow to people operating nodes. According to Audius’ whitepaper, it will likely leverage 3rd-party stable coins as well as artist-specific tokens to unlock additional functionality in the future.
Stablecoins are cryptocurrencies that attempt to limit the infamous volatility of cryptocurrencies by pegging their market value to some external reference such as the dollar or euro. Artist-specific tokens could have the ability to distribute a unique token directly through Audius, giving fans who hold a specified amount of the tokens the ability to access exclusive content from the artists.
ROCKI is currently in its private testing phase but will open for public access momentarily. According to ROCKI’s founder and CEO Bjorn Niclas. Over 5.000 artists have already uploaded over 3.000 pieces of original music onto ROCKI. Some of ROCKI’s defining features are Smart Record Contracts, Non-Fungible Tokens (NFTs), and a streaming-as-mining concept.
ROCKS tokens are ROCKI’s native currency that powers the platform. Also, ROCKI consist of three interactive blockchains :
- A public blockchain, where the issued ROCKS tokens circulating and can be bought and sold.
- Private Ethereum blockchain, which used to perform all the transactions within the system (i.e. payment from the ROCKI payment system to artists, tips from listener to the artist, etc.)
- NFT blockchain, copyright of every piece of music marked by a unique NFT token in the ROCKI ecosystem for protection of music creator and its corresponding income. The tokens are tradable making creations transferable and investors/fans able to enjoy income generated by the music.
There are two types of NFTs on ROCKI:
NFT-ERC721: Marking ownership and right for income sharing of the music,
NFT-ERC1155: Marking the rights of exclusive music listening.
Any artist can issue NFT tokens to mark their music as long as they meet the criteria of the platform. ROCKI’s first NFT was recently sold for 40 ETH (over USD 26,000) for 50% of future royalty rights to the Malta-based house musician Guy J’s track “Cotton Eyes”.
ROCKI’s node infrastructure and decentralized system developed in cooperation with the Ankr team. Allegedly, ROCKI will apply a streaming-as-mining concept, but details regarding this feature have not yet been publicly announced.
In contrast to Audius, ROCKI’s payment structure is a hybrid between ROCKS and fiat currency. The idea is that users should be able to fund subscriptions, tips, and promotions with their credit or debit card. And directly withdraw funds earned on the Rocki Platform as well.
Similar to Spotify and YouTube, the basic edition of ROCKI is free and ad-supported. While unlimited music streaming without ads is 8 dollars a month. Alternatively, a premium subscription can be paid with ROCKS tokens for a 30% discount. Moreover, 70-80% of the revenue from subscription fees goes directly into the pockets of artists. Also, the premium subscriber revenue will exclusively go to the songs/artists they listen to.
 ROCKI: A Hybrid User-Centric Music Streaming Ecosystem Powered By The ROCKS Token Promotions (Whitepaper 1.0), August 2020, pg. 5.
 See https://builtin.com/blockchain/blockchain-music-innovation-examples (05-01-2021).
 https://medium.com/audius/welcome-audio-to-mainnet-409009bc130c (opened 24-01-2021).
 Audius, A Decentralized Protocol for Audio Content, Roneil Rumburg, Sid Sethi & Hareesh Nagaraj, Last Update: October 8, 2020, pg. 4.
 Ibid. pg. 6.
 https://twitter.com/AudiusProject/status/1238205093524078592 (opened 17-01-2021).
 Rumburg et al., pg. 4.
 https://www.investopedia.com/terms/s/stablecoin.asp (opened 17-01-2021).
 Ibid. pg. 5.
 (https://medium.com/rockiapp/rocki-re-design-update-1b716662a70c). (30-01-2021).
 ROCKI Whitepaper (2020), pg. 4.
 Ibid. pg. 5.
 ROCKI Whitepaper (2020), pg. 5.