From AI generated voices to music created by AI, we see technology advancing too quickly and impacting so many different industries. We never saw artificial intelligence advancing so much and taking over different industries that it is scary to see how much technology in general is affecting the music industry as a whole. Not only has the advancement in technology changed the way that musicians create their music, but there are so many parts of the advancements that affect the music industry in a different way.
NFTs, or non-fungible tokens, have been taking over different industries in the past couple of years. Besides NFTs, blockchains are also something that have been affecting the music industry. In the music industry, blockchains can be used to solve many problems existing in the music industry. This includes issues “related to rights management, licensing, copyright ownership, royalty tracking, ticketing and scalping, piracy and live performances.” (Gatto&Bear). One case that stands out regarding the legal issues of these blockchains is when Spotify, one of the largest streaming platforms, acquired Mediachain Labs, a blockchain startup. Mediachain Labs was developing a blockchain technology protocol for “automatically registering, identifying. And tracking creative works online, including automatically resolving media to who made it, what it is about, and where it originated.” (Gatto&Bear). This type of technology rewarded creators for their work through cryptocurrency and the content identification technology.
In 2016, Spotify and the National Music Publishers’ Association (NMPA) got into a dispute regarding Spotify and “its constituents over unmatched (songs that haven’t received payment because Spotify didn’t identify their publishers) and unpaid song royalties.” (Christman). Spotify is required to pay a licensing fee to artists, where Spotify contracts this process out to the Harry Fox Agency, the provider of rights management and collector and distributor of mechanical license fees on behalf of music publishers in the United States. This case began when Spotify failed to pay song owners their royalties from the mechanical licenses, which grant the right to reproduce and distribute copyrighted musical compositions. With Spotify being one of the leading music streaming platforms, this issue was interesting to look at because of how big of a company they are.
Despite how big of a company they are, it does not dismiss the fact that they failed in receiving the needed licenses because the process of obtaining and processing royalties is standardized. Spotify and all streaming platforms must obtain two licenses from the music publishers, a mechanical and a public performance license. While public performance licenses are easily obtainable, mechanical licenses need to be obtained from the music publishers directly. Spotify used HFA’s services to obtain mechanical licenses, then sent their streaming data to HFA, where HFA matched the data to the songs their publishers own and calculated the publisher’s share of the royalties for the matching compositions. However, this dispute came into place when Spotify began “infringing the publisher’s rights when royalties for every song streamed from Spotify’s 40 million song database could not be calculated and paid to the song owners, as a result of Spotify’s inability to properly match songs to their copyright holders based on data from HFA.” (Irons). The NMPA interfered by bringing light to these unpaid publishers and fought for these publishers to receive what they deserved. Unlike other legal cases involving artists and royalties, this case was able to reach a settlement between NMPA and Spotify.
The settlement included publishers being able to claim past royalties owed and ensure that future royalties were paid when due. NMPA and Spotify reached a $30 million settlement with a $5 million penalty, where Spotify promised to make a “reasonable effort” to match all music streams with rightsholders. This settlement process began in early April of 2016 with a “three-month opt-in period that will allow NMPA members to participate in the disbursement of an estimated $30 million payout pool.” (Christman). Publishers will be able to be paid their share from actual plays of those songs to be drawn from that $25 million by claiming and proving ownership of songs in the unpaid and unmatched pool of songs. The case reached a civil and fair settlement where both sides of the party were able to fairly bring justice to the unpaid publishers.
Now, where does the blockchain technology that Spotify acquired come into place? After this lawsuit, Spotify acquired Mediachain to use that blockchain technology to fairly pay the music publishers. Blockchain technology has been being used to “enable the bitcoin cryptocurrency to flourish through a decentralized database, where the ownership of specific tokens and their values are recorded. With this technology, the CEO of Mediachain stated that they were in the process of creating a music blockchain where it “would be a single place to publish all information about who made what song, without having to trust a third-party organization.” (Sawers). Spotify realized their mistake in not paying music publishers the amount they deserve and used another way to assure that these publishers got their rightful pay for their compositions.
When thinking about blockchains, it seems like it does not mean much to the music industry, however, it has been becoming the new way of payment throughout the past couple of years. This marks a new era in the music industry, using technology to our advantage, instead of in a way that is harmful to the industry. Especially with artificial intelligence becoming so advanced, you would expect that all sorts of technology can end up being harmful to the music industry. However, I think blockchains could be something helpful and harmless to the music industry. Although there are its downsides, I think with this blockchain technology, it could help artists receiving the pay that the deserve. I think with this technology it encourages more direct and open relationships between end users and music producers.
Citations
Gatto, J. G., & Bear, A. L. (2018, September). Overview of Legal Issues with Blockchain for the Music Industry. Sheppard Mullin. Retrieved from chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.lawoftheledger.com/wp-content/uploads/sites/15/2018/09/Overview-of-Legal-Issues-with-Blockchain-for-the-Music-Industry-Article-0918.pdf
Christman, E. (2016, March 20). Spotify and publishing group reach $30 million settlement agreement over unpaid royalties. Billboard. Retrieved May 7, 2023, from https://www.billboard.com/music/music-news/spotify-nmpa-publishing-30-million-settlement-unpaid-royalties-7263747/
Irons , K. (2017, January). The Spotify settlement with NMPA: What it means for music publishers. RSS. Retrieved May 7, 2023, from https://www.foster.com/sports-entertainment-beat/the-spotify-settlement-with-nmpa-what-it
Sawers, P. (2017, April 26). Spotify acquires Mediachain to develop blockchain technology that matches royalties with rightsholders. VentureBeat. Retrieved May 7, 2023, from https://venturebeat.com/mobile/spotify-acquires-mediachain-to-develop-blockchain-technology-that-matches-royalties-with-rightsowners/