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The blockchain has been one of the technological subjects everyone has been talking about in 2016. Its application possibilities are being examined beyond industrial frontiers - also in the music industry. IT experts have been discussing the use of this technology for seamless and safe transactions; some of the first business models are already being tested in the music market. Enough reason to take a closer look.
The blockchain is all around: Whether in the media or at expert panels – they are all busy discussing the technology which is supposed to provide totally new standards in terms of data security, resistance to fraud and transparency of digital exchange processes. Bitcoins are probably still the most familiar application of the blockchain which has been operating behind this digital currency for eight years. The process is thus not new, but still needs some explanation. The blockchain is a link of data blocks which, together, build a kind of digital ledger. Such a ledger could possibly also act as the work documentation for collective management organisations according to the vision of the blockchain masterminds. In this ledger, the repertoire of musical works with all information such as author, playtime, publisher and shares could be registered. The advantage of the blockchain now lies in the fact that the data stored in it are not physically on the hard drive of a server but simultaneously and identically spread on a number of computers. It is the distribution of the data that makes the blockchain currently so attractive as it makes transactions much safer by far. How does the blockchain work? Based on the blockchain technology, various transactions can be carried out digitally. Whether it is trading money for goods or the business with immaterial values such as certificates, information and licences. One example is the diamond trade where the blockchain technology is already being used. The properties defining the authenticity of a diamond as well as the information on its legitimate owner are bundled in a block of the chain and saved in encrypted format. Also recorded in this block are the conditions governing the sale and the transfer of rights. Another block is created when a certain number of new transactions takes place. They are bundled next to the new block which gets integrated into the chain. Apart from the data on the current processes, this block also includes a code (“hash”) which consists of pieces of information of the preceding block. By way of of this connection between the link chains, transactions are supposedly immune against manipulation or rights abuse. Each transaction or data change also requires the “OK” of all specified computers of the blockchain cycle. Sales and change of owners of a diamond can therefore be processed in a fraud-proof manner. The trader as a neutral testing and checking instance could be obsolete. The blockchain in the music industry Similar to diamonds, the creative work of music authors is a valuable goods. That’s the reason why the multiple security checks make the blockchain very attractive, also for the music industry. How it can be used for licensing purposes of a work between the author and the music user, is already being fathomed by pilot projects. A much-quoted example is the cooperation of the British artist Imogen Heap and the platform “Ujo”. Since February of this year, she has been selling the song “Tiny Human”, (music and lyrics written by herself), to music users via Ujo based on the blockchain technology (more at: www.ujomusic.com). She determines the licensing conditions herself. This is a well functioning individual case which makes blockchain enthusiasts believe that this technology is the key for a more transparent music industry with faster and simpler processes in the artist/fan relatioinship. GEMA has been monitoring this development within the sector with a lot of interest and is checking out possible usage options of the blockchain for itself. “From a technical point of view, the blockchain is a very exciting topic. Especially with a view to the safe encryption and storage of data this is an entirely new approach”, says Dr. Markus Grimm, Director of GEMA’s IT subsidiary IT4IPM. He also explains what the challenges are: “We still do, however, have to address a number of questions such as how the validity and quality of the data which form the basis for these transactions can be safeguarded.” In 2015, about 1.2m works were registered with GEMA, and 180,000 registered works underwent changes. This provides a rough idea how elaborate the data management of music authors is. If you wanted to launch an international “rights register” in future which is based on the blockchain technology, as currently being discussed by blockchain masterminds, the necessary data would have to be imported from various sources into the blockchain initially, then validated and continuously updated. “When it comes to all of these deliberations, you must also take into consideration that the technology does not replace the development of a corresponding set of rules”, explains Thimo Prziklang, Director of Strategy and Development at GEMA. This applies to cases such as how to deal with discrepancies between two conflicting information sources. Thimo Prziklang does, however, see fundamental potential for the blockchain as a technological alternative at GEMA: “If the application of the blockchain enables faster, more transparent and more efficient distribution and licensing processes, the technology is, of course, of great interest to GEMA.” The upshot is: Chances vs. challenges The technology holds a high performance potential which is being examined in the entire sector, including by GEMA for its applicability. Whether the blockchain really can change the music industry remains to be seen. All involved parties are still at the beginning of the process. At this juncture, GEMA will always keep an eye on the security and quality of its members’ data – one of the aspects that are particularly important to GEMA as a fiduciary for the intellectual property of music creators. Written by Nadine Remus