Decentralized Music Licensing

Keatly Haldeman & George Howard

www.dequency.io

Abstract:

A decentralized music licensing marketplace gives audio-visual content producers the ability to buy a license directly from music creators and other rightsholders without the need for a third party company or agent. Such a system reduces fees for rightsholders and provides instant payment, while allowing the community to participate in the governance of the protocol.

Agreements related to the use of the works will be automated via smart contracts; transactions and usages will be stored on a blockchain and funds transferred via crypto wallets. However, the licensing, tracking and payment are only the core competencies. The innovation relates to developing an economy that incentivizes community curation of the catalog through crowd-sourced A&R activities to screen for quality and accuracy, as well as user-generated playlists to enhance the discoverability of relevant music for the licensee.

Introduction:

All visual productions that use music require a synchronization license (AKA a “sync”) negotiated between the parties for both the composition and the recording of the composition. A vast quantity of syncs are currently licensed through companies that act as a trusted third-party between the licensee and the music rightsowner. This system works well for complex licensing needs common in traditional media; each use has unique value and contract terms that are subject to negotiation and often-difficult rights-clearances from multiple approval parties. For example, in the case of a label-owned recording of a song written by three co-writers, each of whom is represented by a different publisher, a sync license requires negotiation between at least four different parties before it can be used.

In response to the challenges endemic to rights clearance, online music libraries offer “one-stop” pre-approved clearance and inexpensive licenses. The benefit to licensees is clear: users have affordable, easy-to-license options for their projects. However, by catering solely to the licensee, these companies alienate recording artists and music rightsowners who want to maintain some control over the value and usage of their work. Further, these libraries keep 30%-50% of license fees that would otherwise be distributed to creators and rightsowners. This fee structure often precludes high value, culturally relevant artists from taking part in online licensing platforms, thereby limiting access to such artists’ music by all but the most sophisticated licensees.

In addition to granting synchronization use rights with legal indemnifications, the music company offers the licensee a curated pool of creative options. The more relevant licensing options the licensee receives, the more likely they will consider the music company the resource of choice. The music creator also benefits from this third-party system because the music company provides licensing opportunities and expertise, negotiates best possible terms and ensures payment for the use.

The inefficiencies with the current music licensing ecosystem are analogous to the problems with traditional electronic payments processing laid out in the Bitcoin whitepaper [1]. In the same way that the traditional electronic payments system requires a trusted third party to mediate a transaction, parties on both sides of music licensing currently entrust a middle-man company to broker a fair and legally-sound deal. A trustless licensing marketplace obviates the need for a centralized third party, creates a more efficient transaction and provides the music rightsowner - and ultimately the creator - with a greater share of license fees.

Trends:

Music rights have historically been controlled by music companies, rather than the creator of the work. However, there is a trend toward creator-owned rights with revenue earned from unsigned artists forecast to grow at four times the rate of the overall industry [2]. Similarly, there has been explosive growth in content created outside of traditional media, such as user-generated content (UGC), NFT art and metaverse uses from DIY video content creators. With new technologies emerging, music licensing rights have become even more complex and difficult to navigate. In particular, the current music licensing system does not provide a solution for blockchain content, such as NFT art and play-to-earn games. There is a need for a simplified licensing structure that reduces complexity and cost for the user, and maximizes earned income for the creator.

Proof-of-Taste:

A music licensing system is only as good as the user’s ability to discover high-quality and relevant music for its projects. In the current system, the music company acts as the gatekeeper to the catalog available for licensing. Companies that rely on a self-service model, such as online libraries, curate their catalogs centrally, and assign attributes to the music, such as genre, keywords and mood, to aid in licensees’ discoverability of relevant music. To remove the need for one-sided, centralized filtering that may not favor the rightsowner, an economy must exist to incentivize community members to perform tasks to curate the catalog.

A decentralized curation system can be implemented with a proof-of-taste protocol, whereby a cryptocurrency is earned by miners, or “tastemakers,” who review music and contribute to assessments of quality, potential popularity and relevance. Tastemakers can earn tokens through various catalog curation opportunities, e.g. playlist creation, as well as quality control checks during the music upload process. Tastemakers are incentivized to provide accurate data and thoughtful feedback, as their earnings are based on public consensus in their ability to curate the catalog for maximum quality and usability.

Policing:

In the current system, the trusted third-party company ensures that the music in their catalog is free from copyright infringements such as unapproved samples or plagiarism. A decentralized system will similarly need to provide the user with confidence that all music listed for licensing is free of legal entanglements.

To protect against licensors uploading music they do not own, the system must require music uploaders to provide proof of identity and ownership by supplying all copyright information and digitally signing a warranty acknowledging their control of the music. Additionally, user-provided copyright information for newly uploaded music will be programmatically checked against public performance organization databases. Music rightsowners must address any found discrepancies before the upload is approved. Finally, as part of the proof-of-taste protocol, community members will be incentivized to participate in quality control checks for new uploads to help identify copyright infringements.

Conclusion: