Putting the record industry on Bitcoin: Why this won’t work.

Musicians get paid last, and have been forever. Also, musicians are good at music but actually worse than any normal human at business. With radio largely replaced by streaming, this hasn’t changed. So Bloomberg has put up a breathless piece of hype based on a report from the most speculative unit of the Berklee College of Music, suggesting that doing it all on THE BITCOIN BLOCKCHAIN will shower money on all.

Here’s the download link for the original report. Plus point: it is indeed from Berklee. Minus points: it’s made of squirrels and crack.

 

You may have heard of Bitcoin: magical Internet money, whose only actual use case so far is buying drugs. It’s an interesting technology, but “interesting” doesn’t mean “useful” or “feasible”. It was an asset bubble that burst a year ago, and everyone involved in it trying to get your interest in 2015 is a bagholder looking for a greater fool. Pretty much every single person or organisation still involved are crooks. I wrote most of the RationalWiki article on the subject. The short FAQ gets the point across.

The “interesting” aspect is that it runs on a (theoretically) decentralised transaction ledger, the blockchain, where every entry is cryptographically verified and the whole thing remains publicly viewable back to the start — and where you don’t have to trust anyone else as to the ledger’s veracity.

The report talks about Bitcoin to introduce the concept of a cryptocurrency-based blockchain. The actual proposal is of some magical blockchain with sub-second transaction confirmations and no costs (or none that can’t be externalised) that will fully implement the record industry’s most maximalist micropayment dreams:

A database of accurate rights ownership information, like the one we have proposed, could form the foundation of a similar cryptocurrency log. In addition to rights ownership information, the royalty split for each work, as determined by a mixture of statute and contracts, could be added to the database. Each time a payment is generated for a given work, the money would be automatically split according to the set terms, and each party’s account would instantly reflect the additional revenue. For example, suppose a song is purchased from a digital music store, such as iTunes. After the store takes its cut, for ease of demonstration, we will hypothetically assume the revenue generated by the purchase comes to US$1.00. This money would be split between the two different works contained in the song, with a 9.1 cent mechanical royalty going to the musical work, and the remaining 90.9 cents going to the sound recording. Next, if the contract between the publisher and songwriter specifies a 75/25 split of revenue from downloads, the publisher would receive 6.825 cents and the songwriter would receive 2.275 cents. With an identical split at the record label, The label would receive 68.175 cents, and the recording artist would get 22.725 cents. The blockchain network could also further divide this 22.725 cents between the members of a band, if applicable.

This entire process would take place in less than one second, allowing all parties to access their money immediately after it is generated. Further, this payment system is fully trackable and would ensure that royalties are not held by third parties, such as labels and publishers, before being passed to the artist and songwriter. This would eliminate concerns about accidental or intentional underpayment of royalties.

The carrot here is to musicians: “hey, you might finally get paid without the leeches sucking out every penny first!”

It’s just unfortunate it relies on things that aren’t feasible:

• The Bitcoin blockchain processes transactions every ten minutes minimum; a recent “stress test” (or spam, really) drove transaction times up to several hours. Sub-second confirmation times aren’t a happener. The transaction limit is a maximum 2.7 per second (in ten-minute lumps), for all Bitcoin activity of any sort worldwide. Basically, it doesn’t scale.
• The “trustless” aspect of Bitcoin requires competition to provide “proof of work”, which actually means people wasting stupendous amounts of electricity doing nothing but computing cryptographic hashes. Bitcoin’s power consumption is on the order of three Irelands; that works out to several dollars per transaction. In Bitcoin, this is paid for by subsidies to miners, inherent in the setup; it is unclear where this would come from for the mooted record industry blockchain.
• Every other problem Bitcoin has, i.e. that it’s a completely unfeasible right-wing-libertarian fever dream that’s saturated with scammers.

Apart from the technical implausibility, there’s literally no benefit in this for the record labels themselves: their business model is uncheckable rapacity enabled by obfuscation at all levels. For this to work, you would need to convince the people it’s directed against to agree it’s a good idea.

tl;dr the record industry has no understanding of technology, and musicians the least of all. This is more snake oil. Though at least it’s less detached from reality than DRM.

Update: New hype: PeerTracks, a company offering this made-up rubbish.