Smart Contracts For the Music Industry

In Soviet times, there was no problem regarding royalties in the music industry. There was a pool of official composers, poets and performers with fixed royalties, and no one had ever heard of music licensing.

Today, a lot of money is circulating in this area, but issues with intellectual property rights are growing like a snowball.

A whole team usually participates in the creation of a track, and each member of the team expects some monetary reward. At the same time, we cannot confidently say that a copyright to a work belongs exclusively to authors and performers: other interested parties are involved here, including the music label, sponsors, managers, production staff.

The second aspect is monetization itself. If everything is more or less clear with concert activities and with the sale of copies, then everything is much more complicated  when it comes to commercial distribution of music via the Internet. The simplest, but by no means the best in terms of getting profit is the use of services like Apple Music. The option of transferring the rights to musical composition distribution to a company specializing in non-contractual copyright management is also far from being optimal.

Both of these problems can be solved by the use of smart contracts, that is, the transfer of the music distribution scheme to a decentralized platform. Many decentralized apps can serve as a basis for this, and one of such platforms is DecimalChain. Decimal allows you to create your own smart contracts for any specific application.

Prep for Blockchain in Your Industry

The lack of a unified copyright database is the main obstacle to the promotion of new works by young musicians. The use of Blockchain music in the aspect of compliance with intellectual property rights allows us to solve this issue. A lot of opportunities have opened up due to the integration of blockchain technology in our lives. On the decentralized registry itself, you can store a constantly growing list of copyright holders, and license agreements may be kept on smart contracts. Of course, the benefits of using smart contracts are not limited to this:

• with the help of SCs, you can automate the procedure for granting commercial licenses. Here you can also prescribe a scheme for distributing income from the sale of musical works;
• smart contracts can be delegated rights for the coordinated management of licenses via the voting mechanism;
• SCs make it possible to use the Pay Per Play to make microtransactions;
• a musician can finally get rid of the protectorate from the label or the influence of the copyright communities;
• Finally, copyrights themselves can become a subject of trade like ordinary stock exchange shares.

Of course, the process of creating smart contracts is expensive, but these are just one–time costs. As a result, the once-created mechanism of monetization or voting will only need to be adjusted for each new piece of music. Platforms like DecimalChain may help you to significantly reduce costs when developing a SC.

Business scheme providing transparent conditions

It is customary to protect copyrights to a musical work with the divisibility of copyright mechanism, which we talked about above – this is divisibility, or the division of the exclusive right to musical composition.

Several operations can be performed with this copyright:

• transfer it to third parties in its entirety (legally this is alienation of copyright);
• providing a permission to use (licensing);
•  transferring copyrights to a part of a musical composition. In this case, copyright holders for content will be both counterparties, with the relations regulated by the contract.

The third point is rarely used, since the conclusion of the relevant contract is a long and expensive process. But if you use a smart contract, the physical  contract becomes unnecessary, which greatly simplifies the implementation of the DOC mechanism. Now copyrights can be divided into any number of parts, regardless of their volume.

Using a ready-made designer of decentralized labels based on a smart contract, it is possible to delegate the rights of management /administration of copyright parts to such labels. As a result, both authors of intellectual property objects and copyright holders receive complete freedom of action.

This scheme will be especially beneficial for young musicians who lack real experience in managing their works. This is where blockchain technology is especially beneficial. Using a smart contract greatly simplifies the task. It is enough to upload a track to the blockchain and fine-tune the copyright in order to monetize sales. This is how you create blockchain music. You can distribute the income among other participants in the project of creating a musical work.

About monetization

So, royalties can be obtained both from the sale of licenses and for listening to music. In the latter case, the Proof-of-Listen mechanism is used (a protocol that implements proof of listening). This allows you to significantly increase income and eliminate the need to conclude expensive contracts.

Of course, the method cannot be called perfect– authors and musicians will have to abandon the usual scheme of working with fiat money. However, working with cryptocurrency is not a difficult task, it is enough to create a wallet and learn how to withdraw digital assets.

Especially advanced ones can use ICO for each track, getting additional financial benefits and allowing their fans to get a novelty faster than others. In other words, your fans will be your shareholders.

How do smart contracts relate to NFTs?

Of course, all of the above is already working and is in high demand. We`ll cite several projects that actively use decentralized technologies in creating Blockchain music.

• Digimarc. One of the most successful startups using NFT smart contracts to license music intellectual property (including video clips). As a copyright protection mechanism, Digimarc Barcode technology is used, which employs a digital analogue of watermarks to mark a work. NFT smart contract is a perfect way to avoid illegal copying;
• Vezt. A project that provides an opportunity for music lovers to be investors of their favorite artists, in return receiving royalties for listening to music in the form of royalties. The smart contract uses the ISO mechanism for this, distributing the music fee among all license holders.;
• MediaChain. A music application in the form of a SC, whose task is to provide data for exchange between interested counterparties and other smart contracts. In addition to collecting music metadata from open sources, it has the function of paying royalties to artists;
• OPUS. A platform that aims to maximize the profits of musicians. If classical streaming projects deduct a maximum of 20% of income to artists, then OPUS allows you to increase this figure to 80-90%. The project uses blockchain technology to host tracks, search for data and listen to music;
• Musicoin. Performs approximately the same functions as the previous project. A distinctive feature of the platform is the use of the MUSIC token, which is increasingly being used as a universal cryptocurrency for transactions related to the music sphere.

Summing up

Although all of these projects cannot be compared in popularity with such giants as Apple Music or Spotify, they are highly promising, providing a number of advantages over classic online music distribution schemes. Not to mention nft smart contract that can significantly simplify the process of registering and transferring ownership.This means that it will take approximately 5 years, and the use of SCs in the music industry will become the de facto standard, and blockchain technology is actively contributing to this. And we’d better start preparing for this right now.

One of the forward-looking projects in this regard is DecimalChain, employing its own token Decimal together with other cryptocurrencies for SCs development in all spheres. Decimal is a good solution for both experienced blockchain users and newcomers.