The networked record industry: How blockchain technology could transform the record industry

• Published date: 01 September 2017
• DOI: http://doi.org/10.1002/jsc.2147
• Date: 01 September 2017

RESEARCH ARTICLE

Strategic Change. 2017;26(5):471–480. wileyonlinelibrary.com/journal/jsc © 2017 John Wiley & Sons, Ltd. 471

DOI: 10.1002/jsc.2147

Abstract

Blockchain technology may have transformaonal potenal for those music industries asso‐

ciated with recorded music, and for the sustainability of music careers. While predicons of

widespread disintermediaon may have been premature, blockchain technology does appear

to have the potenal to transform the role of third pares and to make musicians’ careers

more sustainable. Blockchains could improve the accuracy and availability of copyright data,

facilitate near‐instant micropayments for royales, and signicantly improve the transparency

of the value chain.

1 

|

 INTRODUCTION

Following the emergence of le‐sharing networks such as Napster

and BitTorrent, the record industry has tended to regard peer‐to‐peer

networks in a negave light. This is hardly surprising: in the terms of

Yochai Benkler, such networks provided “technological shock” but not

“economic sustainability,” at least from the perspecve of industry

intermediaries and, arguably, arsts. The shi from music “piracy” to

subsequent stages of digital music consumpon—legal downloads and

streaming—has not prevented what appeared, unl recently, an inexo‐

rable decline in income from recorded music. Although the recent IFPI

report (IFPI, 2016) showed an increase in overall recorded music rev‐

enue of 3.2%, following two decades of almost uninterrupted decline,

the report also highlights a “value gap”: payments to arsts are “minis‐

cule” compared with the massive consumpon of music on plaorms

such as YouTube (p. 8).

This arcle criques recent claims that blockchain technology

has the potenal to help overcome this challenge. While some claims

made on behalf of this technology may be inated, we idenfy three

areas in which it could be transformave: accuracy and accessibility

of copyright data; speed of royalty payments; and transparency of the

value chain. The arcle also addresses barriers to, and even poten‐

al disadvantages of, adopon, and outlines implicaons for pracce,

including the sustainability of the recording industry and creave con‐

trol of musicians’ careers. The conclusion is that blockchain technology

does have at least the potenal to usher in a more sustainable model

for recorded music—one that, with a nod to Benkler’s “networked

informaon economy,” might be called the networked record industry.

2 

|

 CHALLENGES FACING THE

RECORD INDUSTRY

Globally, the music industries are worth an esmated $45 billion, of

which approximately $15 billion relates to recorded music (Rethink

Music, 2015); of that $15 billion, digital income (45%) surpassed income

from physical sales (39%) for the rst me in 2015 (IFPI, 2016). This ar‐

cle focuses specically on recorded music, since this is the area that has

been most obviously adversely aected by recent technological devel‐

opments. It is also the area of the music industries that, some suggest,

could be most aected by the emergence of blockchain technology.

As well as being important, both economically and culturally, in

their own right, the music industries can be seen as the “canary in the

coalmine” in terms of broader economic developments. Aali (1985)

pointed out that musicians have been on the cung edge of economic

developments since the eighteenth century, when a new entrepre‐

neurialism among composers signaled the end of patronage. If block‐

chain technology has the potenal to transform industries relang to

recorded music, it could produce equally bold changes—of the sort

Christensen and Raynor (2003) call “disrupve innovaon”—in other

creave industries as well.

In the specic context of the record industry, some (Dubosson‐

Torbay, Pigneur, & Usunier, 2004; Hughes & Lang, 2003; Knopper,

The networked record industry: How blockchain technology

could transform the record industry*

Marcus O’Dair | Zuleika Beaven

Middlesex University, United Kingdom

Correspondence

Marcus O’Dair, School of Media &

Performing Arts, Room TG53, Town

Hall Annexe, Middlesex University, The

Burroughs, Hendon, London NW4 4BT,

United Kingdom

Email: m.odair@mdx.ac.uk

* JEL classicaon code: O3.