In the ten years between 1999 and 2009, annual recorded music revenues in the U.S. (the world’s biggest market) collapsed from $14.6 billion to $6.3 billion. Piracy in the form of digital file sharing was to blame. By 2019, revenues had recovered to $11.1 billion. Streaming was cheered as the industry’s savior.
This is a story that’s been told and retold in the years since streaming platforms first arrived. Most recently, it’s come up repeatedly during the U.K. government’s inquiry into the economics of music streaming. Streaming technology, it’s said, has helped to combat music piracy and re-energize a once-flagging industry. Good news.
But by the time the inquiry is over and the DCMS committee publishes its recommendations, streaming’s positive impact on subduing piracy may be all but irrelevant — a footnote alongside the anti-home taping campaigns of the 1980s.
Why? Because the next technological development on the horizon will make the power structures and copyright legislation the industry relies on today totally redundant.
Before I find myself accused of hyperbole, I’ll point out that there’s plenty of historical precedent for what happens next. Technology has always defined how we record, distribute and ultimately listen to music. Wax cylinders were once at the cutting edge. Vinyl improved on shellac. CDs rung the death knell (almost) for cassettes, and now streaming means you can walk around with the history of recorded music in your pocket for ten pounds a month.
But no matter how advanced the technology, or how secure the protections against piracy, there will always be a route around it for those driven to discover it.
When Napster arrived at the turn of the millennium, the music business was caught off guard and a simple piece of file-sharing software would be enough to bring it to its knees. Today, peer-to-peer torrent sites still thrive despite attempts to shut them down. Usage of stream-ripping sites, which let users pull and download content directly from streaming services for free, has increased by 1390% in the past three years. The kid in their bedroom with nothing but an internet connection and a desire to experience music on their own terms will always find a way.
The prospect of another Napster moment still looms. And it’ll arrive sooner than most music execs think. The next iteration of technology disrupting distribution, ownership, and copyrights is already on the way.
The internet as we currently know it (referred to in the vernacular as Web 2.0) revolves around a handful of big companies that control the vast majority of online interactions, and the data those interactions produce. Far from the open utopia that its creators once imagined, the World Wide Web has developed into a loosely connected and closely protected series of walled gardens.
Web 3.0, enabled by ultra-high speed 5G connectivity, promises a return to the decentralized ideals of the early internet. It’s a return that’s already well underway.
Ethereum is the foremost example of a functioning decentralized network. It offers its own currency and trading markets. You can play games, collect art. There’s an Ethereum streaming service too, called Audius. Users – or, in the idealistic language of Web 3.0 enthusiasts, ‘community members’ – are free to act, share, and create without the oversight of any one centralized power. Ethereum was invented by a 19-year-old programmer.
Decentralized networks are currently the realm of enthusiasts interested in blockchain technology. Surges in Bitcoin valuations or escalating auctions for NFTs (non-fungible tokens) grab the headlines, and surface-level analyses paint these interactions as nerdy gimmicks. In the year 2000, the Virtual Society? project was far from an outlier when it wrote off the internet as a passing fad.
Ethereum is built on blockchain technology, but just as most web users couldn’t begin to tell you how the internet actually works, the same will be true of blockchain. As usability and accessibility improve (Ethereum-based browsers are already being developed) the consequences will reach far beyond these enthusiast circles.
Again, there are plenty of examples from recent history that offer precedent for this direction of travel. Twitter CEO Jack Dorsey has already begun exploring a decentralized future for his micro-blogging social media site. It should be expected that others will follow.
So what does all this mean for copyright holders?
Decentralized networks pose a huge challenge to existing copyright law.
The closest comparison we have currently is peer-to-peer (P2P) networks. Peer-to-peer networks allow users to connect their computers directly with other specific computers, and to share files between each machine. When these networks scale up they can be incredibly difficult to police.
In the past, legal attempts to hold either P2P software developers, internet service providers (ISPs), or individuals liable for copyright infringements have met with some limited success. Copyright holders have been able to identify individuals who’ve downloaded pirated material by their IP address and pursue prosecution. But this does little to stymie the actual illegal distribution of copyrighted materials.
Decentralized networks, which are self-sustaining and protect their users’ identities and transactions with cryptography, do away with even this slim possibility of identification and prosecution. Current copyright enforcement is rendered toothless. The desire to distribute remains.
The music industry, despite its current rude health, can’t afford to be caught unawares again. The difference this time is that the warning signs are clear to see.
However, I see no value to be gained from trying to stop the growth of decentralized networks, or applying old rules to new technology. Instead, the industry needs to consider how to use this technology to offer new value to listeners and music fans. Smart contracts embedded in blockchain artifacts already hold huge potential for those on the business side of things (from managing ticketing, to distributing royalties), but there are just as many benefits for fans to be discovered too.
Streaming was a digital solution to a digital problem. The success of streaming, and the value the product offers, has meant that hundreds of millions of people now pay to listen to music every month.
The proliferation of decentralized networks and the speeds offered by 5G will provide their own opportunities to improve experiences for music fans. The real challenge will be building those first.
Mark Gillespie is the founder and CEO of Three Six Zero, whose management roster includes Calvin Harris. He has partnered with Sony Music Entertainment, Jay-Z and Roc Nation, and most recently Westbrook Entertainment, home to Will Smith, Jada Pinkett Smith, and the entire Smith Family. Gillespie also joined forces with fellow Brit Pete Tong MBE to run Three Six Zero Recordings, his own in-house record label, while continuing to expand an already successful presence in film and television.
