IMPROVING MUSICAL COPYRIGHT PROTECTION AND ROYALTY PAYMENTS IN NIGERIA WITH BLOCKCHAIN TECHNOLOGY

INTRODUCTION

The Nigerian music industry is one of the country’s fastest-growing sectors with an estimated worth of $39 million as of 2016 and projected to reach a 73 million dollar figure by 2021 according to a PWC report. The industry’s huge prospect has attracted global attention and direct involvement of the world’s biggest music labels. The viability of this industry as a source of creating wealth for the country’s vast young and creative population is however threatened by the unstructured nature of the industry and increased infringements on the copyright of creators of musical works. This piece will therefore be tailored towards examining the potentials of blockchain technology towards revitalizing the Nigerian music industry.

THE MUSIC INDUSTRY STATUS QUO

The developments and evolution in the music industry is one that has been greatly influenced by changes in technology evidenced by the move from the player piano to the vinyl disc, from reel-to-reel tape to the cassette, from the CD to the digital download, these formats and devices changed not only the way music was consumed, but the very way artists created it.[1]

The adoption of digital downloads and the use of online streaming platforms as the medium of choice for music consumption around the world has been instrumental in curbing piracy, making music cheaper and easily accessible to consumers. It has also strengthened the institutionalization of industry players like distributors and Collective Management Organizations (CMO) who are often entrusted with the management, enforcement and monetization of the copyright of right holders. With the existence of these middlemen and the critical role they play in copyright, management comes challenges like inadequate copyright data, lack of transparency, delayed and inaccurate royalty payments to right holders.

 In Nigeria, the Copyright Society of Nigeria (COSON), a CMO licensed by the Nigeria Copyright Commission (NCC) has been accused by industry stakeholders of corruption and mismanagement of right holders’ royalties. According to the Performing Musicians Employers Association of Nigeria (PMAN) “A recent report from the auditing firm, KPMG revealed that COSON collected over N1.1 billion in royalty and licensing fees from users in 2017, but claimed it only distributed N225 million to holders, while over N800 million is unaccounted for.”[2]  

This lapse in the system has necessitated the need to create an alternative that guarantees accountability and transparency in copyright management and royalty collection. Copyright management has a direct impact on royalty distribution in the current digital dispensation. Copyright ownership of a song entitles the right holder to two types of royalties when a song is played: one is for the sound recording and the other is for the lyrics and composition of the music which compensates the songwriter (mechanical royalties).

The use of digital streaming platforms has escalated the difficulty in the optimum distribution of royalties generated from digital downloads or streams. While these streaming service platforms pay royalties on the sound recording to the artistes or labels, many of them lack the technological infrastructure to calculate and pay the royalties due to songwriters. They contract third party companies to provide the tedious task of matching the millions of songs on their platforms to their musical compositions and then to the writers of that composition. The difficulty in the task has resulted in unpaid royalties to songwriters. A platform like Spotify has been sued by Eminem and has had to settle a $1.6bn lawsuit over songwriters’ rights.[3]

 Blockchain technology has been presented by experts as the perfect alternative which will enable right holders to transact with end-users without the middlemen thereby allowing artistes to interact directly with consumers.

BLOCKCHAIN TECHNOLOGY: THE BASICS

Blockchain technology has become widely known as the technology behind the development of cryptocurrencies like Bitcoin and Ethereum but what most people don’t know is that the technology can be employed for other purposes. Fundamentally, blockchain exists as an open ledger of information that can be used to record and track transactions, and which is exchanged and verified on a peer-to-peer network. Blockchain and other distributed ledger technologies create a trustworthy and transparent record by allowing multiple parties to a transaction to verify what will be entered onto a ledger in advance without any single party having the ability to change any ledger entries later on.[4]

The integrity of the decentralized ledger is maintained by a unique system that allows the continuous update and maintenance of records of every transaction which are grouped into blocks with distinct components known as the cryptographic hash to prevent manipulation of information stored on the ledger.[5]

 It should be noted that a blockchain network may be open or operated within a private group (permissioned blockchain). Private blockchain affords users the opportunity of restricting those who can have access to the network. However, the most striking feature of the blockchain technology that is most suitable for the music industry is “smart contracts”. This feature alongside other functionalities of the blockchain technology fit for the music industry will be discussed subsequently.

ADAPTABILITY OF BLOCKCHAIN TECHNOLOGY TO THE MUSIC INDUSTRY

To put things in perspective, copyright management relates to a system of controlling copyright material which in this case is music. Royalty distribution on the other hand deals with the allocation of revenue to individuals who have contributed to the composition of a musical work. Blockchain technology by its very nature possesses certain intrinsic features some of which have been mentioned earlier. For the purpose of the music industry, two features of blockchain technology stand out in providing solutions to challenges currently undermining the industry. These are:

  1. The decentralized nature of blockchain technology.
  2. Smart Contracts

THE DECENTRALISED NATURE OF THE BLOCKCHAIN TECHNOLOGY

The music industry involves various players operating different databases; the CMOs, digital streaming platforms, music distributors, record labels all operate different proprietary databases for the different rights they manage (for instance CMOs manage performance rights while digital streaming platforms manage mechanical rights). The multiplicity in databases inhibits transparency making it difficult for right holders to keep up with who is using their music and who owes them royalties. The decentralized database structure of blockchain means it does not depend on one single server to verify and monitor data.[6] Instead, databases interact together to maintain a decentralized structure that allows right holders to have direct access to copyright data on the ledger. This makes the roles of middlemen superfluous and puts control of copyright management directly in the hands of right holders. The decentralized nature of the technology allows data records accessible to users while maintaining the integrity of such records.

SMART CONTRACTS

A smart contract is a computer program that is capable of facilitating, executing, and enforcing the negotiation or performance of an agreement—the contract—using blockchain technology.[7] Smart contracts allow right holders to interact directly with consumers creating an environment where consumers pay directly for the usage of music based on conditions inputted on the blockchain network. Ujo is one good example of music applications utilizing a blockchain platform that allows artistes to upload their works, self-publish, control licensing options and manage distributions.[8]

As earlier mentioned, the task of matching a song on a streaming platform to its corresponding musical composition ensuring that contributors to that piece of music get paid royalties due to them can be a difficult one and sometimes almost impossible. The smart contract feature of blockchain technology is a key to easing the task of attributing royalties to all right holders.  Mediachain is an example of a blockchain platform developed for this purpose. The tech startup has been acquired by Spotify to improve its royalty payment obligation.[9]

CONCLUSION

The intrinsic features of blockchain technology make it a veritable tool in improving copyright management and enhancing optimum royalty payments to the right holders. What the technology does is to put control directly in the hands of artistes bringing them closer to their fans. For Nigeria, a move to a digitally serviced industry is in its developing stages, piracy is still endemic as a reasonable number of consumers rely on illegal downloads for their music demands. However, the prominence of the entertainment industry amongst the youths who are digitally aware as well as the growth rate of the industry presents a great opportunity.

About the Author

Awoyemi Ayomide

Ayomide Awoyemi is a student of Law at the Obafemi Awolowo University and Team Lead of the African Intellectual Property Network.


[1] Edgar Bronfman Jr. (Former Warner Music Group Chairman)

[2] https://guardian.ng/life/music/pman-calls-on-ncc-to-revoke-cosons-operating-license/

[3] https://www.bbc.com/news/business-46646918

[4] https://www.wipo.int/wipo_magazine/en/2018/01/article_0005.html

[5] https://www.goldmansachs.com/insights/pages/blockchain/

[6] Spencer Bogart & Kerry Rice, The Blockchain Report: Welcome to the Internet of Value, NEEDHAM & COMPANY, LLC (Oct. 21,2015)

[7] http://www.cardozoaelj.com/wp-content/uploads/2011/02/WISHNIA_NOTE.pdf

[8] https://builtin.com/blockchain/blockchain-music-innovation-examples

[9] https://techcrunch.com/2017/04/26/spotify-acquires-blockchain-startup-mediachain-to-solve-musics-attribution-problem/

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