Get Ready for the Blockchain Tsunami

Lately I’ve been hearing about blockchain-related solutions to copyright problems on practically a weekly basis.  Perhaps this was inevitable, given the massive amounts of activity and hype surrounding blockchain technology, and the realization that it has applications well beyond cryptocurrency (and I’m sure others have been observing this same phenomenon in different industries at different times). But the crescendo of activity in the content industries right now is unmistakable — and I say “crescendo” on purpose, because almost all of the activity is in music.

There’s a lot to know about blockchain technology; a good read for background is The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order. Here are some relevant aspects for our purposes. Blockchain is the technology that underlies Bitcoin; it’s an open source technology that enables highly secure transactions over a network, such as the Internet. A blockchain is a type of distributed database: a “chain” of “blocks” of data denoting transactions, in which each block contains a link to the previous block in the chain. Bitcoin uses one particular blockchain; there are others.

Although secure e-commerce has been around for a long time now, blockchain technology has these advantages over older technologies:

  • It’s truly distributed. It eschews intermediaries (like banks and clearinghouses) that run servers, manage transactions, and maintain information about buyers and sellers for their own purposes.
  • It ensures that everyone who participates in a blockchain always has a ledger, i.e., an up-to-date history of transactions that have taken place on the blockchain. This has the side benefit of making transactions very hard to tamper with, refute, or roll back.
  • Its security is state-of-the-art and considered to be uncrackable.
  • The software required for building and running blockchains is all open source.
  • Most importantly of all: rivers of money, talent, and hype are flowing into this technology.

The last point ensures that systems, services, and standards will be built around blockchain technology for some time to come. In fact, the situation with blockchain technology is a mirror image of the situation with other new technologies and standards that the media industry considers: the question is not whether a critical mass of interest will lead to meaningful investment in solutions in a reasonable timeframe; the question is which any of the dozens or hundreds of proposed — and funded — solutions will prevail.

What music industry problems can blockchain technology solve? Most of the discussion is not about consumers paying for music with Bitcoin. Instead, it’s about rights and royalties applications that involve smart contracts — transactions that the technology ensures will execute according to terms that are encoded in data stored in the blockchain.

By bringing efficiency, transparency, and accountability to rights transactions, blockchain technology can benefit just about every type of entity in the digital music value chain that actually wants to play by the rules. It has the potential to eliminate ambiguity, nonperformance, and outright fraud that would otherwise require investigations and lawsuits to resolve.  The technology can make it much easier for digital music services to track rights holder information and pay the royalties that they owe. It can reduce the roles that collecting societies play, so that they can focus on rate-setting and collections rather than on the mechanics of transaction processing, while increasing the power of smaller entities (small labels and publishers, and even some individual musicians and songwriters) to get paid quickly, easily, and fairly.

Blockchain technology does have its limitations. It’s not suitable for very small entities or individuals (at least not yet) because of the infrastructure that each participant must have to house the distributed ledger and be updated on all transactions.  Small entities will still need to rely on service providers, which will compete by adding value to a fundamentally open system rather than by hoarding information and building walled gardens.

The technology also can’t (by itself) solve the problems of identifying copyrighted works and describing rights and royalty terms in unambiguous, machine-readable ways. It can’t solve “last mile” problems such as creating identifiers and metadata in the first place, or integrating them into legacy systems at record companies, music publishers, or distributors. And while it won’t turn bad actors into good actors, it might help expose them through their lack of participation.

In other words, blockchain technology can help build a plumbing system, but it can’t control the quality of the water from sources or the ways that people use it to cook once it comes out of the tap. Yet making a fast, reliable plumbing system available (on an open source basis) should help motivate progress on these other fronts.

Here’s a more relevant analogy: XML.  XML is a metalanguage — a standard scheme for creating machine-readable, text-based languages that express structured data. It was created in the late 1990s during the rise of the commercial Internet, which gave rise to a huge need for online entities to communicate structured data in standard and straightforward ways.

XML didn’t solve the problem of what the structure of the data should be for specific applications, let alone how to create such data consistently and accurately. But it led to thousands of XML-based standards that are used in just about every industry on Earth and motivated better metadata creation practices. For example, XML has pervaded every aspect of the book publishing industry, from editorial content creation to e-book formatting and physical product distribution and sales and inventory reporting. In fact, nowadays it’s virtually unthinkable to create a standard for data to be communicated across the Internet that isn’t XML-based.

There have been many attempts to create identifier and rights metadata standards for music. While a few standard identifiers are well-established, they aren’t implemented consistently and completely throughout the industry. And rights metadata standards are far behind.

Blockchain technologies can help motivate more complete adoption of standard identifiers, development of practical standards for rights metadata — with emphasis on the word “practical” — and best practices for rights metadata creation.  The solutions that succeed are the ones that solve practical problems for a reasonable subset of industry players today, not the ones that try to create Grand Unified Metadata Models and solve every problem for everybody someday; and those that are open to as many participants as possible, not walled gardens accessible only to established industry entities.

By way of example, the best hope for an industry-wide rights transaction system that I have seen was (once again) in book publishing.  It was the Book Rights Registry (BRR) that book publishers and authors negotiated with Google during litigation over Google’s huge book-scanning effort back in the mid to late 2000s. The BRR was to handle simple rights transactions on book content (not every type of transaction that anyone could think of) and be open to all service providers, not just Google.

The BRR wasn’t just an idea on paper; it had money and talent behind it. Google was to pay US $34 million to build it, and the parties had tapped an eminently qualified person (Michael Healy, then head of the Book Industry Study Group) to run it.

While the 2nd Circuit appeals court ultimately rejected the settlement on antitrust grounds, the BRR would have been the type of solution that had a decent chance of success, and of being the foundation for solutions to more complex rights problems in the future. And of course interactions with the BRR would have been based on XML.

In future articles, I’ll talk about specific blockchain-based initiatives that purport to solve copyright problems in music and beyond. There will be no shortage of material to draw from.

 

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