The Music Industry Is a Slowly Sinking Ship Beset By Complexity. Water & Music Guides Web3 to an Alternative
A primer from the latest Water & Music academy on global music rights
“Music innovation only stays innovative until they start to touch rights and licensing.”
In 2015, Hypetrack hosted an interview between Quincy Jones and Kendrick Lamar, luminaries representing two different epochs of music. The whole conversation is worth watching, but Jones’s assertion that “the last things to leave this planet will be water and music” is particularly resonant. That sentiment became the namesake of Cherie Hu’s seminal writing project – and now 2,000-member decentralized autonomous organization (DAO) – Water & Music.
Over the past few weeks, Water & Music hosted its third academy, this one dedicated to Global Music Rights, a seven-class course that examined “the increasingly nuanced and complicated world of music rights” through a global lens.
The course covered four major markets outside of the typical western focal points of North America and Europe: India, Latin American, Africa and China – as well as the way technology affects this system. The academy concluded with a particularly fascinating examination of post-royalties, contemplating the future of a broken industry by outlining both the points of disconnect and the beacons of hope, from innovation obstacles to the sandbox of web3.
In the kickoff session, Hu and project lead, Maarten Walraven, laid the groundwork, outlining the chaos that’s arisen from the antiquated rights systems, global coordination issues and an “ouroboro” of corporate ownership – as you can see below, the question of who owns what is not straightforward.
In fact, very little about music rights is straightforward. To briefly consider the complexity, we need to look at the origins of copyright, way back in the fifteenth century with the invention of the printing press. It was the first time original works could be copied at relative scale, and it introduced a perilous question: what are the rights attached to these copies and what does that mean for the creator(s) of the original work?
550 years of analog development ensued, culminating in a fairly static system that – in the face of digital advancements – continues to shoehorn solutions that reference that system rather than update it (to be fair, it’s not the only place we cling on to archaic sources of truth – see: the bible and the U.S. Constitution).
For music, that system works like this. Every song has two distinct pieces of copyright – one for the composition and one for the recording. Both pieces have two primary stakeholders. For the composition, it’s the composer and the publisher, and for the recording, it’s the artist/performer and the record label. Each of those can be further divided if there are multiple songwriters, publishers, artists, etc.
What happens to those songs – their circuitous and variegated paths to our ears, and the subsequent financial gains that route back to the artists and other stakeholders – is where the muddled web emerges. And with each new technological advancement, more muddle. In broad strokes you can see that mess illustrated in the graphic below:
image from maze
Now consider the World Intellectual Property Organization acknowledges 193 different jurisdictions – and consequently 193 different sets of music rights and regulations. That adds issues of consensus to this thicket of mayhem. Now we have to define common methods of usage – like is a stream a sale or a broadcast? In different territories, there are different answers, and different splits between the two, and there has to be consensus for anyone to get paid – a problem one of the course’s students likened to “whackamole.” And consider new formats like linear TV, streams, downloads, on-demand and non-fungible tokens (NFTs) – how do they fit into legacy systems?
Walraven posed the question whether companies built around analog music rights are best suited to collect and manage digital rights at all. That dissonance was on particular display during the post royalties session. Consider the reality, for example, that there are 100 million songs on streaming services but less than 10 percent of them are in the databases of European collection management organizations (CMOs) – some of the folks charged with enforcing the conditions of licenses and gathering fees for their holders.
“We’ve got a collections infrastructure built for an analog world, where releasing music into each country was throttled by shelf space,” commented speaker Becky Brook, a licensing and strategy consultant at JAAK, a London-based tech company building blockchain-based solutions for intellectual property industries.
It’s a global coordination issue built atop outmoded frameworks. And unfortunately it’s inherently resistant to innovation – something Brook dove into with fellow speaker Dan Fowler, director of Open Source Projects at HIFI Labs and author of the excellent newsletter Liminal Spaces,
Brook and Fowler cited David Guetta’s appearance on Roblox as an example, when he had to declare rights for 143 different songwriters. “It’s so complicated to do even basic level innovation,” said Fowler. “A stream on Roblox isn’t setting off a rocket, but it’s so tough to do in the structure that we have.”
And that extends to startups. To be fully licensed, for instance, a startup would have to speak to about 150 entities and spend between $500,000 to $750,000 in legal fees, Fowler said. And being licensed then means you have to pass about 85 percent of your revenue straight to the rightsholders – one of the reasons Spotify has such slim margins.
So unless you’re a massive platform with a savvy team, there’s not much you can do to disrupt entrenched power dynamics. “Music innovation only stays innovative until they start to touch rights and licensing,” Fowler said. “Is it any wonder that the last great innovation was Spotify?”
That reality has driven Fowler – and many others – to design in web3. During the session, he highlighted three interesting use cases. The first was the artist Xcelencia, who’s using web3 to generate capital and then investing it in marketing to support his streaming career. Then he uses that position to go back to web3 and continue building. Fowler also mentioned the artist Black Dave, who recently launched his own token as a blockchain-enhanced “riff on the creator economy,” and The Park, a collective that builds community by bringing in artists to do sessions and NFT releases.
The commonality is they’re all “building an economy that they own that’s separate from the money coming in from streaming.” It’s impossible to distill the sheer breadth of information and resources presented over the course of the academy, but if there’s one major takeaway for web3, it’s that. The legacy industry is a slowly sinking ship – an analogy Fowler used – drowning in its own complexity. Nobody’s sure who the captain is or even which direction to steer; everyone’s too busy bucketing water and tossing it over the side to prolong the pitchpole.
Web3 is introducing an opportunity to build something that can exist in parallel. It’s the little dinghy in the ship’s wake, tossing lifesavers to the tired curios interested in making something more human, and better connected. “The internet has allowed us to have connections with everybody, but the most exciting innovation is technology that can scale the depth of those relationships,” said Fowler.
At its best, web3 can do that. It’s a sandbox that champions principles of community and decentralization. Theoretically it can ameliorate issues around provenance and consensus, and even increase top-line revenue by tapping music consumers who are willing to pay more to deepen those relationships.
But let’s be wary of the virtue signaling of the powers that be, vying to make web3 in their own image. We don’t want to build another version of the same ship. No matter what – heeding Quincy Jones’s words – the water’s going to be here long after we’re gone. If we can learn to float together, maybe the music will still be here too.