blockchain technology concept Courtesy: Alexander Yakimov/Shutterstock.

 

This article appeared in Entertainment Law & Finance, your monthly source for real-world news and strategy from major players in entertainment, contract and intellectual property law — serious analysis of the issues and case law that affect your practice.

 

Leslie Jose Zigel is Chair of the Entertainment, Media & Technology Group at Greenspoon Marder, which recently launched a practice area focused on blockchain. Zigel, who is based in the law firm’s Miami, FL, office, has included many high-profile recording artists and labels among his clients. In this interview with Entertainment Law & Finance Editor-in-Chief Stan Soocher, Zigel offers his thoughts on the impact of blockchain technology on the music industry. He can be reached at [email protected].

Q: What are some plusses and minuses of using blockchain?

A: On the plus side, the use of smart contracts [i.e., self-executing contracts based on blockchain code] and blockchain-payment methodology allows fast processing of payments. This is far more efficient to stakeholders receiving micropayments from digital-content streaming providers.

A limitation in using smart contracts and blockchain is once you put in metadata, it’s very challenging to correct it. For example, with analog music-publishing processes it’s relatively easy to adjust a writer’s share of authorship from, say 10% to 15%, and another writer’s from 15% to 10%. Thus, one of my big concerns in implementing blockchain is making corrections with retroactive effects.

Q: How does blockchain technology affect royalty audits?

A: In general, if you have metadata that is very clear as to how someone gets paid, it will make royalty audits easier because there’s much less manual processing. The challenge is how the cash is going to flow. For example, Spotify Europe passes along to Sony/ATV Europe 100% of the royalties for a particular song, and the writers’ split is between the United States and Latin America, and Sony/ATV sends the money to their centralized system for disbursement. A royalty audit has to follow that chain. But does Spotify have all metadata directly or does it go to Sony/ATV Europe as a clearinghouse? Would you have to audit all the payors if there’s no central intermediary?

Q: But does the blockchain metadata help with accuracy?

A: Yes from an efficiency standpoint, but it will only be as good as the data that’s inputted.

Q: How can blockchain technology affect rights approvals?

A: One of biggest hurdles in the music sync world is not having a centralized repository of data where people know where to go to license songs. So much of this licensing process has been handled through an institutional memory construct. When we finally get to the place where all this information is available at the touch of a button, it can help all rights holders get more licenses and dollars

A lot of DJs make music remixes. Right now it’s a laborious process to get the approvals by finding the publishers, the master owners, having to determine whether original artists have approval rights, etc. Meanwhile, the remix is already being played in clubs around world, it goes out anyway. So if you have the information readily available through blockchain, it’s very useful for increasing clearance efficiencies. Most remixes are not monetized. Blockchain systems can eventually help with that.

Q: How will the database the Music Modernization Act (MMA) mandates impact this?

A: It will be a big help by including writers’ data. It gets rid of the black box money out there so that writers and publishers will be better paid.

My global view of blockchain is that it’s like “e-commerce” was in 1997. There are lots of pumped-up company valuations, but we’re still several years away from blockchain and its potential being fully instituted.