The Music Industry Isn’t Ready for the Blockchain

blockchain

The blockchain cannot solve the music industry’s problems, before the industry figures out a way to solve them themselves.

Blockchain and its promise

The blockchain is the distributed database model underlying cryptocurrencies like Bitcoin and Ethereum. It takes peer-to-peer technology to data records. Instead of having all data on one computer, it lives on the computers of everyone who participates in the database. You can only write to it: this means that if you want to change data into the database, you declare what the new info is, but the old version remains in the system, so that the change is transparent. A bit like with ledgers.

ft-blockchain
FT chart explaining blockchain enabled payment transactions

In short, it gives a certain guarantee of transparency and security, by utilizing decentralized technologies. Every day there are headlines about companies in the banking industry employing blockchain technology. Technologies like this could make the music industry more fair and transparent, and reduce a lot of friction around rights and payments, leaving more money to flow from fan to creator. The biggest obstacle, however, is the music industry itself.

Adopting blockchain

In the week-long Blockchain Labs sessions at Music Tech Fest Berlin, we identified 3 domains for the Blockchain in the (recorded) music business:

  • Metadata: the type of data that goes into ID3 tags in MP3s, like who created the song, lyrics, artwork, but also data types that are currently uncommon to find in such tags, like instruments used.
  • Rights: who has rights to what and where. Rights can be really complicated in music, and simply adding transparency around this can reduce a lot of friction in licensing, but also in resolving disputes. This would enable smart contracts.
  • Payments: the blockchain can function as a ledger, so it could record transfers like payments.

The problem in getting the music industry to adopt the blockchain for anything beyond metadata, is that there are competing interests. For instance, if you’ve invested a lot of money into marketing a sub-licensed work in a certain territory, you wouldn’t want everyone to be able to see when your right expires… because then you’ll have a lot of competitors who might try to secure those rights.

There’s a lot of interest in making payments transparent, so that it becomes clear how much a party like Spotify actually pays to certain labels, and what happens to that money along the chain to the creators. Creators are likely to have privacy concerns about having their income being public though.

Other organisations have a risk of redundancy — although they might secure a new role for themselves by participating.

Moving forward

There are two likely ways in which this can play out:

  1. The music industry gets together in sessions and makes a real effort to make rights and payments more transparent and more fair, on a global scale. This will be a transparency conversation, not a blockchain conversation.
  2. A new generation of companies come up and show creators, entrepreneurs and fans that another value chain is possible, that is more rewarding for both artists & listeners. Not only is it more transparent, but it is able to reduce a lot of friction, so that as it scales, it becomes more efficient than the legacy music industry.

Things can change fast. When we refer to the music industry, we’re actually referring to an area of the business dominated by the recording industry, but the recording industry has only acquired this dominance in the last 80 years.

What about the next 80 years?


Written for my weekly newsletter MUSIC x TECH x FUTURE. If you enjoyed reading this, please consider sharing and subscribing.

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Humans as Curators of Artificial Creativity: the Implications of Algorithm Guided Music Creation

Developments in machine learning and AI will make it possible for bedroom producers to use algorithms to guide music creation. Not 10 years from now, but in the next 2 or 3 years — at the most.

We’re slowly going to shift from a remix culture of sampling, to a more generative culture. Instead of sampling that perfect bassline, and risking a takedown, you can have AI generate one with the click of a button and have something decent.

To many, this sounds like a terrible prospect. One argument is that music with less human input is ‘worse’. I think it depends on the application of technology and how you look at music.

Music as a means to communicate ideas

Most bedroom producers’ music will not be heard by more than a few thousand people. They engage in online communities where music is created and spread like memes. Their music exists to communicate ideas. Sampling and remixing are tolerated practices, because they are legitimate means of reinterpreting someone else’s idea and taking it in a different direction. Algorithms will speed up the creation process and the communication of ideas. Humans will become curators of the AI’s output. The curator will take the ‘artificial creative output’, filter, and remix it.

It further democratizes music creation for people who don’t know how to ‘make music’. For example, communicating remix ideas: “this song would work really well as dubstep” no longer has to be limited to the imagination. You can go home (or just grab your mobile device), generate a bunch of remixes until something good comes out, and send it to your friend.

Participative culture paradox

Through advanced music creation algorithms, like the dubstep example above, it will be easier for more people to participate in our culture. Instead of being a listener, people will be able to touch and taste the creative process, at least as a type of curator or director.

While AI could put some people in the music creation process out of work, it can ultimately make music more inclusive, involving more people in a participative way.

Examples
  • Reflexive Looper: interactive AI assisted music jamming
  • Ditty: a ‘text to song’ engine + messenger for iOS & Android
  • MusicMixer: a computer-aided DJ system
  • #NeuralBeats: generative techno with recurrent neural networks

Many more examples over at CreativeAI. (Thanks for the tip, Jelle — who’s about to launch a great newsletter on UI programming)


Written for my weekly newsletter MUSIC x TECH x FUTURE. If you enjoyed reading this, please consider sharing and subscribing.

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Gaming Industry Lessons for the Music Biz #1: Season Pass Subscriptions

If you want to know the future of music, look at the gaming business. They got into the same mess at the same time, but have found incredible ways to deal with today’s networked reality. I’ll be exploring successful concepts from the gaming industry and explaining how they can be applied to music. Starting off with the Season Pass.

What’s a Season Pass in gaming?

By default, most gamers now play games from ‘connected devices’ meaning smartphones, PCs or consoles with an internet connection. This has made iteasier, and more lucrative, for gaming companies to ship updates and expansions. During the game’s creation process, the companies around it will talk about what the game is going to include and what the ideas for future expansions are. These expansions are sold on a per-piece basis with varying prices although they mostly fall in the $10-40 range.

Fallout 4 Season Pass

A Season Pass will get you all of the expansions for a fixed price. Pre-ordering the game, prior to release, might get you a Season Pass included in the standard price of the game. Buying a Season Pass before the first expansion comes out might only cost $20, whereas the planned expansions will total $80. Buying a Season Pass later will cost you $40, etc. Prices here are made-up, but have a look at the Steam store if you want to get a sense of price points. Notable examples of games using this strategy are Fallout 4 and the Call of Duty series.

How can a Season Pass be applied to music?

Game studios realize that games are never finished. For one, they may contain bugs, however they’ve also realized that selling expansions to a popular game is more lucrative than creating a completely new game.

I am not sure if he’s the first to do so, but Kanye has adopted a similar strategy with his newest album. Kanye’s label, Def Jam:

An innovative, continuous process, the album will be a living, evolving art project.

Works of music or art no longer need to be static or finished, they may be updated and expanded. This creates new opportunities for a lot of players in the digital ecosystem.

Music streaming services
Let’s look at some of the potential models. You can have all the music you want, ad-supported, or for a premium, but if you want to access the latest updates to releases you should:

  • Buy a Season Pass on a per-release basis
  • Buy a Season Pass on an per-artist basis (this probably ties in best with the current ‘follow’ functionality on Spotify, Apple Music / Connect and other services)
  • Buy a Season Pass on a per-label basis (probably too abstract for most music consumers)
  • Buy a global Season Pass at an extra premium, allowing you to accessall updated releases

Direct-to-fan
More interesting are the opportunities this gives artists to directly connect with and monetize their audience. You could release an album inside your own artist / fan club app and then:

  • Make it free for all fans
  • Let fans buy a Season Pass to be able to hear updates or expansions
  • Free Season Pass included for those who buy physical copies, like vinyl, or merch
  • Let the top fans hear new versions for free, or ahead of the official updates
  • Give Season Pass holders discounts on merch
  • Involve Season Pass holders in the creation process — perhaps give them ways to influence your decision-making

The list could go on and on.

I’m very eager to see responses to this article. Let’s see you come up with some cool examples of applying the Season Pass to the music business!


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The Rule of Seven for Music and Why You’re Probably Getting Discovery Wrong

Having a large fanbase or userbase opens up a lot of opportunities. You can experiment with monetization, referrals, and you won’t feel like you’re speaking to an empty room when using social media channels. Before getting there, you must get people to discover you and it’s this crucial first step where a mentality problem leads to many great musicians and startups never really taking off.

An impression is not enough

You have a “killer app”. Or you make insanely good music. Surely, upon seeing or hearing it, people will instantly fall in love and become your fan. Not quite.

We live in a noisy age and people will quite simply not be paying enough attention the first time. If you want to convince someone to change their habit and use your service, you’ll often need more than 1 impression. Don’t think you’re excluded as a label or musician: most people prefer listening to music they already know, so they have to make you part of their habit.

Music discovery chart MIDiA

The Rule of Seven

In marketing, there’s a general rule of thumb that people need to hear your message seven times before most will make a purchase decision. Seven is soft and it varies from business to business, so it might be five or twelve, but the most important takeaway is:

You’re probably not going to stand out on the first impression.

This means you have to adjust your strategy. The goal is to get heard or seen by a relevant audience multiple times and to then connect them to your channels or service, so that it’s easy to get their attention again and monetize them.

The Rule of Seven for Music

I follow the fanbase as an ecosystem model by default and will be using that now. It means you connect your fanbase, play a central role in it, understand who the people are, and develop new business models and revenue streams with them (it can be as simple as just asking). It goes:

  1. Be discovered
  2. Retain attention
  3. Connect (with) fans
  4. Nurture the connection
  5. Listen (and build business models)

So to master step 1 and 2, assume you need to be heard seven times before people really start to care.

Step 1: make really good music and lots of it.

Step 2: understand who your listeners are and whether there’s a ‘scene’ (can be an internet scene, too).

Step 3: identify the main channels & curators where those listeners go. Try to get in touch with these playlist curators or YouTube / Soundcloud channels (or blogs) and try to get your music on there.

Step 4: ALWAYS add proper metadata to songs so people can easily identify you.

Step 5: ALWAYS be guiding people to your OWN channels. Whether that’s newsletters, social networks, music services, whatever, you need to get people to places where you can get in touch with them again. Give people a choice: not everyone wants emails, some people prefer social network X over Y, etc. Don’t give too much choice: keep it manageable for yourself.

Step 6: keep going. Results are going to be coming in slow and unpredictably, before it steadies out. You don’t want to leave people hanging on the fifth impression… Keep going.

Step 7: learn, network and spread. Every scene has its own ways of reaching new listeners and leveraging other people’s audience. In hiphop and dance music, it often comes through collaborations and mixtapes. Where hiphop has freestyle sessions on (online) radio channels, dance music has DJ slots. Talk to people, work on your skills, produce quality and NETWORK.

Networking is an important and underestimated skill in music. It might not be hard to get your music heard, but it’s much harder to get your music heard seven times by the same person. Curators, club owners, radio programmers, YouTubers, game streamers, bloggers, Twitterati, videographers, and other artists can all help you do this, so you need to get good at building valuable connections.

Be consistent, be everywhere where your audience is, and stay persistent.

Hat tip to Jesse Dijksman of Dutch crowdfunding subscription platform Lukida, who keeps repeating this rule to makers who are part of Lukida.

Three Game Mechanics for the Music Business

It’s a point I repeat frequently: the gaming industry got into the same mess as the music industry at exactly the same time.

Suddenly, people started communicating digitally through networks. Everything that could be made digital was now communicable (at near-zero cost) through these networks. Confusion about what the product is slowed down progress. Music was never the product; the carrier was. Since games are an interactive medium, it didn’t take people long to figure out how to use interconnectedness to find new revenue models: online play, subscriptions to games, microtransactions, free-to-play with purchases to unlock things faster, etc.

While the music industry’s revenues have finally stabilized, the gaming industry’s revenue has soared. Not only that.

Twitch Graph

New platforms like Twitch, which are rapidly growing in popularity, are creating new revenues for the gaming industry by enabling ‘superfans’ to make money playing the games they love.

When I started out at Zvooq, I spent some time researching gamification, game mechanics and design, in order to understand the psychological processes behind the gaming’s ability to monetize users. I was specifically interested to learn how these concepts could be applied to music services. I’ve cherry picked 3 concepts, but if you’d like me to dig deeper in an article or specified to your product or service, let me know.

Vanity & Identity

Revenues are not the only thing the internet has ‘taken away’ from the music industry. Music has also lost its cultural significance. Pre-internet, music was sometimes the only way to find out that there were other people in the world who had the exact same thoughts you had. For an industry with such a strong background in giving people ways to explore and express their identity, we’ve done a piss poor job of taking that into the digital age.

Identity is omni-present in (social) game environments. From game-like virtual worlds such as Habbo and Second Life, to full-on MMORPGs like World of Warcraft and Runescape, to social time management games like Clash of Clans & Farmville (farm layout counts as identity), and even single player games like The Sims or Fallout 4 (people share their characters and stories in online communities). And of course Minecraft with its massive economy in terms of games sales revenues, ad revenues from Twitch streamers & YouTubers, server rental, mods, skins, etc.

What are the mechanics?

Identity in virtual economies is most-often expressed through vanity and functional goods, such as items that are unlocked when reaching a certain level or accomplishing a certain feat. To keep gameplay interesting, some items may be earned while others have a random factor to them, meaning they only ‘drop’ a small percentage of the time after killing a difficult boss.

These goods provide a way to display social status in online communities. Some online games, like online collectible card game Hearthstone, only allow players to unlock certain hero portraits (pure vanity) by paying real world money, whereas other vanity items like golden cards are unlocked by playing a lot and having some luck with the random factor.

How music services can apply this

The last social platform that really emphasized music as a means to display identity was MySpace (edit: ok, and Last.fm). People would carefully compose lists of artists and bands to show off their music taste and connect to strangers. We’ve come a long way since then.

Online fan communities that are focused on certain artists or genres provide an excellent opportunity for expressing and exploring identity. This could be done inside, or on top of, existing music platforms like Apple Music (there’s an API), Spotify or YouTube. It could also be done in dedicated artist apps.

Rival Goods

A popular concept in games is rival goods: resources which are valued by gamers, but which can be (temporarily) depleted. This may be vanity items, but also functional items like health packs, resources which enable certain abilities, or pieces of equipment. The mechanics they inspire include social competition, but also collaboration as goods might be hard to attain on your own.

How music services can apply this

Music can be reproduced infinitely at zero-cost and does not perish. Creating scarce experiences is immensely valuable in the social web. You may let people compete for rival goods such as being on an exclusive artist newsletter or weekly Periscope session, the ability to vote on things artists or services have flexibility over, but also vanity items as pointed out in the previous section. These goods could be competed for whilst someone is holding them, could be spent or depleted, or they may perish after a certain amount of time. This means you don’t lose a monetization option as soon as somone pays for it once.

You can let people collaborate to unlock other types of rival goods, like: 100 tweets unlocks the next track to download from my upcoming album, but the first 70 people to tweet will get a special video as a thank you. Or you can offer autographed stuff, or something else people will value. Remember to ask!

Virtual Economies: Time-poor & Money-rich vs Time-rich & Money-poor

To me, the most interesting thing gaming has figured out is how to create environments in which people who will spend lots of time, but no money, can create value for those who have less time to spend, but are willing to pay to take a shortcut.

This can take on various forms of complexity. Here are two examples:

  • Hearthstone & Farmville: free players provide a big player base, so paying players always have other players to play against.
  • Games with marketplaces: free players ‘grind’ and sell resources, whereas paying players might spend real world money to purchase those resources.

The latter creates an interesting situation, because it creates an exchange rate for real world currency to in-game currency, even when in-game currency can’t be purchased directly. This provides an option to let free players ‘cash out’ or you can leave them to spend their in-game currency inside the virtual economy. Cashing out might reduce inflation, but rewarding people with extrinsic rewards will decrease the person’s intrinsic motivation for the gamified behaviour.

How music services can apply this

There are a lot of opportunity to create music-based virtual economies at scale on existing platforms. I think we’re going to see this when the competition for new listeners for streaming services dies down. Too many resources are currently stuck in marketing and expansion, instead of finding new revenue sources. One obstacle might be some record labels, as they might want to have a piece of the pie, whereas artist managers might feel that virtual goods related to artists or bands should not count towards recorded music revenue. This dispute doesn’t sound like it involves the services, but due to terms in contracts which allow music companies to gatekeep features, it’s very relevant.

If you’d start out as a new platform which is happy to have an incomplete catalogue (which can work fine if you don’t position yourself as a one-size-fits-all service), then a virtual economy can solve:

  • How to give people a distinct sense of progress;
  • How to add value to this progress;
  • How to create a platform that’s attractive to creators;
  • How to stimulate users to behave like (value) creators.

Just imagine: the money spent by paying users sets a value of virtual currency. Free users that provide a lot of value can use this currency to buy ‘real world’ stuff, like tickets to shows or even merchandise. As the free users’ lifestyles change, eg. student → yuppie, they’re increasingly going to make time-poor, money-rich decisions leading to purchases and payments around things that are easy to scale globally (compared to tickets & merch) like features and unlockables.

Further reading

I implore people in music to look at the gaming industry and see what mechanics can be applied for your product or concept. Here’s some further reading to help you along:


Originally published in my weekly newsletter MUSIC x TECH x FUTURE. If you enjoyed reading this, please consider sharing and subscribing.

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