How Blockchain Can Protect The Artist's Right

by CXOtoday News Desk    Aug 10, 2017

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Blockchain, the underlying enabling technology developed for Bitcoin, a cryptocurrency, has the potential to become a powerful disruptive force. A survey of 800 executives suggests 58 percent believe that up to 10 percent of global GDP will be stored using blockchain technology. Klaus Schwab, founder and executive chairman of the World Economic Forum, provides this summary in his book “The Fourth Industrial Revolution“ Blockchain technology may provide several important features that could be leveraged for use in the creative economy.

“As the technology operates on a distributed, rather than centralized, platform, the implications of such features reach far beyond blockchain’s original use in financial transactions and hence find its application in the creative economy, where blockchain can redefine how artists are remunerated by acting as a platform for creators of intellectual property to receive value for their work,” he wrote in the book. Say, a common complaint lodged by artists is that, as performance-rights organizations and new intermediaries such as Spotify and YouTube increasingly insert themselves into the value chain between artists and their audiences, artists receive smaller cuts of revenue and have less say over how their creative works are priced, shared, or advertised. 

An article published in McKinsey highlights several features of blockchain that can serve as a platform to address these issues and framed these as five forces. The article, part of a knowledge partnership between the World Economic Forum and McKinsey, examines the impact of emerging technologies on the creative economy, Blockchain being a key force behind it.

Force 1: Enabling ‘smart contracts’

Blockchains can host “smart contracts” to help artists manage digital rights and allocate revenue shares to contributors to the creative process. Such smart contracts have the potential to replace conventional contracts, which can be esoteric and leave some artists with little power over the terms for the content they generate. Researchers believe, royalties could be designed to be more inclusive, offering fairer terms for composers, lyricists, and musicians—all stakeholders involved in the creative process.

Force 2: Establishing transparent peer-to-peer transactions

One of the biggest appeals of blockchain is its public nature. All of the transactions for a creative work could be seen and validated, including who accessed the work and how much revenue the work is generating at any point in time. This will allow stakeholders to have a better sense of the overall value of the creative work that is being produced, all in the form of a digital ledger provided in the blockchain, for example, ownership can be traced and creative content securely shared.

Force 3: Promoting efficient, dynamic pricing

Creative content can be mispriced. By tracking the demand for creative content, pricing could be more dynamic. Prices for creative content could fluctuate according to supply and demand. Moreover, artists could control prices and have the ability to set prices themselves without having to go through a complex web of intermediaries.

As the blockchain could provide records of who has been granted access rights to creative works, this could then be harnessed to price creative works dynamically. Perhaps more important, because artists will be closer to their creative work than before, they may have a stronger voice in the pricing scheme and could, therefore, provide discounts on their works at certain times.

Force 4: Allowing ‘micrometering’ or ‘micromonetizing’

Digital music stores such as iTunes allow consumers to purchase individual song tracks. Using blockchain, snippets of creative works could be made available for a price, for example, a few seconds of a song for use in a movie trailer. This kind of “micrometering” works by having the blockchain record the precise components of the creative work that were used, defining the smallest consumable unit of creative content.

Force 5: Establishing a reputation system

Blockchain can help link reputations to specific “addresses” on the blockchain, thus allowing both producers and consumers of creative content to verify one another. This could encourage stronger collaboration and better behavior, by promoting cooperative terms for content creators and consumers alike. Participants who repeatedly don’t fulfill terms in a contract or try to game the system would have their actions recorded, acting as a deterrent against bad behavior, said McKinsey researchers.

Overcoming challenges

Despite the benefits offered by blockchain, several challenges remain for the technology. More ubiquitous use of blockchain technology will require leaders to work around especially around business, technology, and legal challenges.

Licensing issues and challenging the status quo. While some artists such as Imogen Heap and Zoe Keating embrace blockchain as a way to release tracks with greater control over the terms of their creative work, blockchain-ready artists remain a small minority. It is not yet clear what threshold of artists will be big enough to disrupt the status quo, where distributors, record labels, and other intermediaries have established terms, including stipulations for payments and use.

While blockchain may provide creators with a larger say and stakes in the revenue generated from their creative content, questions remain as to what extent they can market and promote their creative content without the help of traditional agents, be it publishers or record-label companies. There are concerns that self-publishing or self-promoting material may, in fact, lead to less revenue for some artists who would otherwise benefit from agents’ support.

Also, questions remain about where the creative media will be stored—on the blockchain itself, as metadata, or in the form of access keys. Current technology may constrain putting creative content directly on the blockchain, while storing just the metadata of the creative content presents issues of where the creative data will actually be stored and how it will be disseminated.

According to some, governments and IP-rights consortiums will need to define legal frameworks recognizing transactions conducted using blockchain. While blockchain technology provides the means for keeping a record of the property holder, we may still need to rely on traditional mechanisms to enforce owners’ rights, especially when contracts are not upheld, said the McKinsey researchers.

There are also questions concerning whether the blockchain in the creative economy should be public or private. If the public-blockchain route is taken, the data stored in the blockchain will, by definition, be accessible to all participants in the network. This could present IP concerns if creative content is stored directly on the blockchain. On the other hand, if a private blockchain is chosen, issues around governance—in particular, permission rights—will remain. In the private-blockchain scenario, an important question is who will fund the new system? If traditional agents, such as record labels, develop the infrastructure, then there may be little change in how artists are remunerated.

Finally, while blockchain may allow for more transparent and dynamic pricing, such pricing mechanisms, based purely on market demand, may miss the subtleties of how creative works are also valued based upon their cultural, societal, or political value. This could lead to further commoditization of creative works. How blockchain can digitally ascribe these subtleties to creative works remains to be seen.

Blockchain holds enormous potential to break down barriers that could lead to more efficiency, greater accountability, lower costs, and increased remuneration for artists. To reap these benefits, however, the technology will need to be developed responsibly within the right regulatory frameworks.