The media industry is in turmoil. Digitalization is rapidly changing how media is created and delivered. It’s expected that the global media and entertainment market will grow to $2.2 trillion by the year 2021. But with the disruptions caused by digitalization come new challenges.
In the music industry, creative artists are entitled to rights and royalties for their work. There are different categories of licenses and corresponding royalties (mechanical licenses and royalties, performance rights and royalties, synchronization rights and royalties, and print rights and royalties). When an artist creates a song, a mechanical license is granted to mechanically reproduce music onto some type of media (CD, digital format. etc.) for public distribution. The content provider (often a third party such as a record label, but it can also be the artist) grants permission for the music composition to be reproduced. The mechanical royalty is paid to the recording artist, songwriter, and publisher based on the number of recordings sold.
Fortunately, there are new technologies to help with media rights and, in the case of streaming, advertising revenue management. While originally developed for tracking secure financial transactions, blockchain offers exciting possibilities for media and monetization of rights. Now blockchain’s distributed ledger is seeing new life in a wide range of industries. Here’s a look at how this technology has the potential to change one of the oldest, most complex processes in the media industry.
Using blockchain for media rights management and advertising revenues
In 2014, singer Taylor Swift made headlines when she pulled her music off media streaming service Spotify, saying it was returning a very low rate on each stream. U2 singer Bono also broached the issue in Rolling Stone magazine, saying the problem was not the new digital technologies such as Spotify. “When people pick on Spotify: Spotify are giving up 70% of all their revenues to rights owners. It’s just that people don’t know where the money is because the record labels haven’t been transparent,” he said.
According to Bono, while this can seem challenging and difficult, it’s also a very exciting time to be in music because of disintermediation caused by digitization that’s changing how we purchase media. This applies to a wide range of media, including newspapers, e-books, television shows, movies, and songs, as well.
It’s also changing how artists are paid. A few years ago, if you wanted to watch a specific episode of a television show, you would have to buy the entire season on DVD. Today, you can purchase the single episode, often within a few hours of its initial broadcast, through a digital stream or download. This opens up the market for consumers to make a smaller investment in only the media they want to consume.
There are many intermediaries making micropayments for these small purchases to the original artist from the point of sale. Agents, production companies, and management firms all take a share of the revenue as it passes through the value chain. Streaming services make the process even more complex, as they are often paid from advertising revenue instead of the media sale itself.
To overcome this issue, blockchain technology can connect artists/content creators/rights owners directly to the consumer. At the same time, the technology monitors the flow of money from the rights owner to the end artists. It helps track digital rights across the process while ensuring artists and content providers receive the proper compensation. It can also remove less value-added steps from the value chain, allowing more of the money to flow to the content creators.
How does this work?
When a piece of content is consumed, a blockchain stores a cryptographic hash of the digital asset and associates it with the creators’ addresses and identities. It may also store instructions on how to compensate the artist through smart contracts, which facilitate or verify the performance or negotiation of a contract. It also allows artists and the rights owners to set rules on exactly where and how the content may be used.
Imogen Heap, a British musician and developer, has used and is a strong proponent of blockchain tracking technology. A recent experience with a video producer has made her even more vocal in her support. The video producer had included a half a minute of one of her songs in a video. However, her music label had exclusive rights on the song and demanded that the producer take down the video, then spent several weeks negotiating the song’s use.
Placing smart contracts in the blockchain itself is a better solution. “Listening to a song might automatically trigger an agreement for everyone involved in the journey of a song with anyone who wants to interact or do business with it – whether that’s a fan, a DSP (digital service provider such as Spotify or iTunes), a radio station, or a film production crew,” said Imogen.
The adoption of blockchain technology could create a secondary digitization wave. However, consumers downloading or using the streaming services probably won’t notice much of a difference because it is still compatible with digital music distribution. Blockchain creates the opportunity for content creators and licensing organizations to be on the forefront of change and drive maximum value from their content by radically simplifying this complex but critical process. Swiss tech startup DECENT is already helping artists to build a secure and trusted distribution content platform.
Blockchain platforms make it easier to manage ad revenue and media rights. Unlike many digitization challenges, the associated issues of tracking and collecting statistics are becoming easier. Is your media company ready for these changes?
For more insight on digital leaders, check out the SAP Center for Business Insight report, conducted in collaboration with Oxford Economics, “SAP Digital Transformation Executive Study: 4 Ways Leaders Set Themselves Apart.”