One of the most feverous conversations happening around digital music is the ability for artists to maintain ownership and attribution for their work. It’s no surprise that blockchain technology—in particular Ethereum, with its use of smart contracts—has driven a surge in music technology startups attempting to solve this problem.
Everyday we’re reading about startups coming up with wonderfully creative applications of the technology in order to solve a similar pain point.
All of these companies are doing great work in finding creative ways to solve a very real challenge.
The conversation around artist royalties has also creeped into the wider public conscience through the marketing communications of new players in the music streaming service industry (Tidal) and high profile litigations—with Spotify recently having to pay out $21m for unpaid royalties.
Artists are right to demand compensation for their work—especially when it is their work that drives subscriptions and streaming platform revenues. Publishers and labels should also be compensated. Royalty collection societies also play an invaluable role as the infrastructure that facilitates royalty payments between streaming platforms and artists. And as the builders of the infrastructure that provides the access and sales of of the music, streaming platforms require revenue to maintain the service they provide.
Within all of this is an argument around how much compensation should be provided. As technology developers, we’re not in the business of entering this debate. We can only acknowledge that the arrangement for payments is required, as is the infrastructure to manage those payments. Streaming revenue is fast becoming the greatest source of sales revenue for artists (yet to surpass physical sales but it is only a matter of a year or two before this changes). And yet the data mechanism for royalty reporting suffers from a large problem mostly related to standardisation and communication.
From 2012-2014, streaming services misallocated or failed to pay nearly $100 million in royalties. Over the past ten years, this figure is estimated to be closer to $400 million. At any given time, 10% of a streaming service’s music catalogue is made available without the publisher or rights administrator knowing. And not so long ago, an investigation into the royalty payments for Victory Records found that Spotify paid royalties to the label only 79% of the time.
This isn’t a problem unique to Spotify. And it’s not that streaming platforms want to avoid payments.
Song metadata provided to streaming platforms can be inaccurate and outdated. Sales reporting from streaming services to royalty collection societies differs by each platform, and can range from quarterly to half-yearly and yearly. Data formats also differ across each platform.
So not only are there revenue black boxes due to inaccurate data, but there are inconsistencies in the timings of payments and a lack of standardisation in the data provided.
As the facilitators of royalty collection payments, we can use royalty collection societies (APRA AMCOS, ASCAP, BMI) as proxies for a source of truth when it comes to song metadata. But there is currently no mechanism to validate streaming platform metadata for any given song to the metadata stored within a royalty collection society’s database.
That’s what Paperchain is.
Paperchain is standardised song metadata collection, storage and reporting platform for the music industry using blockchain technology.
Utilising smart contracts on the Ethereum platform, Paperchain becomes a mechanism for data validation between the metadata records held by streaming services and royalty collection societies.
We ingest the song database of the royalty collection societies, and this data is used to create a smart contract. The contract hash is appended to the royalty collection society database. We then ingest, match and append the contract hash to the streaming service metadata.
The validation happens at the point of the song stream. Using the contract hash, the app makes a call to the contract to validate the app’s metadata against the contract’s metadata. If the validation is successful, the song is played. If the validation is unsuccessful, the stream is not allowed and an alert sent to the streaming service and royalty collection societies.
The ledger logs are then made available to the collection societies through their login to the Paperchain app, providing real-time sales reporting.
We’re focused at Paperchain on metadata validation because we see it as the core challenge to the issue of misallocated and unpaid royalties. It allows to build a solution that can realistically solve the challenge, as we’re dealing with .txt and .csv files, not media files. We’re not trying to build a digital library. We can avoid the high costs of running a compute engine required to run blockchain networks that need to store media files. Integration doesn’t hinge on the adoption of a new codec or re-wrapping existing media into a new codec.
Paperchain is a solution that directly addresses the needs of royalty societies to better service their members and expand their revenue opportunities.
PRODUCT ROADMAP & ARCHITECTURE
After initially publishing a proof of concept Dapp on our testnet running an EC2 instance on AWS, we are in the process of migrating the POC Dapp to Google Compute Engine. The reasoning is mainly financial—as a bootstrapping startup we need to find the greatest efficiencies in running our early technology implementations.
While we finish this migration over the next two weeks, we will be finalising the standard data format that all incoming data will be transformed to match on ingestion into the Paperchain app.
A detailed Trello board will soon be made public.
- minimum gas to facilitate blockchain transactions
- validation times
- network strength (Paperchain uses private networks so need to work with stakeholders to build a strong blockchain network)
- scale (our testnet works fine but is only making one call at time. Spotify alone has 25 million plays a day)
We’re particularly interested in working with royalty collection society in our early release. If you work for a collection society, we’d love to hear from you. You can contact us on info [at] paperchain [dot] io or sign up to the platform on the Paperchain website.