Anyone familiar with the music industry knows there are copyright and royalty payment systems enforced in most countries through government regulation. This is to ensure musicians and artists are compensated for the use of their performances.
For an artist to benefit from these royalty regimes they must be a member of a recognized rights performance organization (for example, SOCAN in Canada and SoundExchange in the United States, which collects online broadcast payments through a membership system for multiple performance rights organizations). To offset the costs associated with these payments to artists, large online radio networks that broadcast music have monetized content using subscription systems, membership perks and traditional broadcast advertising.
Problems with the Current Royalty System
The problems with the current model are notably described in a report from the Rethink Music initiative at the Berklee College of Music’s Institute for Creative Entrepreneurship. The report outlines several issues, including:
- The difficulty of tracing who owns what performances. The report states “20–50 percent of music payments don’t make it to their rightful recipients.”
- Money flows in the music industry are very complicated and not well understood by most artists.
- Record and publishing companies deliberately try to obscure what they owe and to whom, and pay what they own very slowly.
Independent Artists Left out
On top of these problems is the fact that independent artists around the world are typically left out of the royalty system altogether because they are not signed to a distribution label and not a member of a professional rights performance organization in their country. This leaves independent artists unable to benefit from royalty regimes, even if they are flawed.
Blockchain-Based Online Radio Can Help
While no single blockchain-based solution has yet been able to tackle all of these issues with the music industry, there are some interesting beginnings. The one I want to highlight is a new partnership between Cyber-FM Radio and Mainstream for the Underground (MFTU), which is a blockchain performance rights organization. Through the use of blockchain technology, Cyber-FM and MFTU are fusing into one platform and combining listeners’ access to music and the management of artists’ royalties.
I like this project because it is not profit-driven. It is focused on helping music lovers discover new artists and helping artists benefit from the value of their performances.
For the past 10 years, Cyber-FM Radio has been providing listeners all over the world access to music that is not normally available on mainstream radio, and it has been doing it at no charge. With MFTU it will create a new royalty system in which everyone (listeners and artists) are rewarded for each song listened to. Artists are able to join the MFTU community free of charge, have their music distributed through Cyber-FM, and get paid for each time it is listened to. Meanwhile, listeners get unlimited music streaming and access to music through mobile applications.
Membership in MFTU is not restricted to artists registered with a recognized performance rights organization. Independent artists can equally benefit. Their songs are also aired to hundreds of thousands of people all over the world.
To ensure it can operate globally while being compliant with local government regulations, the MFTU and Cyber-FM system uses a dual token approach. The CYFM token is for artists who are registered with performance rights organizations. It will be used for payment to government regulatory agencies, which means the CYFM token will not be totally decentralized as it will have to conform to regulatory requirements in different countries.
The MFTU token is similar to CYFM, but it is architecturally decentralized and as such represents the only truly international performance rights royalty system for independent artists. Any artist can register with MFTU, have their music broadcast on Cyber-FM and receive royalty payments in MFTU tokens regardless of their membership in a performance rights organization.
Both tokens were also distributed free to members of the community through sign-ups and airdrop participation. There is no ICO or any such related activities.
The partnership between Cyber-FM and MFTU is intriguing. While the plan is limited to online radio broadcasting, it will help address some of the issues outlined in the Fair Music report mentioned above. The use of a distributed ledger for royalty tracking makes it easier to trace who owns what performances and to make sure they are paid what they deserve. Blockchain technology will also make the money flow transparent and impossible to obscure how much artists are owed for their performances.
The MFTU and Cyber-FM partnership could also disrupt the music industry more generally. Cyber-FM already has an established record of bringing independent music to listeners and promoting artists. The partnership provides a way of protecting these artist’s rights across the globe while they maintain current copyright registrations locally.
At the same, however, it also gives a way for independent artists who are not officially registered the chance to have their music broadcast on Cyber-FM and be paid royalties as well. With this hybrid approach, the ecosystem will be able to function in the current context of government regulation of copyright and royalties, while also helping to usher in a new era of decentralized and global royalty payment processes that function outside of government-regulated channels.