$$$'s In The Stream

This is Part Three of my series on Music Economics. The idea of the series is to investigate how musicians can make money in a post-streaming world. My goal is to help explore a better path for independent musicians.

If you are a musician, please liberally share this series with everyone you know, it can only be helpful if it starts a wider discussion.

Part one was my interview with C. Allen Bargfrede one of the men responsible for the most extensive study done on the economics of streaming to date. You can find that interview by clicking HERE.

Part two was my interview with Rain Perry the Director of the movie "The Shopkeeper," the owner of an independent record label, and a recording artist in her own right. You can read that interview by clicking HERE.

Benji Rogers

Benji Rogers is the founder and Chief Strategy Officer for PledgeMusic the direct-to-fan company he founded in 2008. Benji is also the co-founder of the Dot Blockchain Music Project which is an attempt to create a fair trade standard for music releases in order to protect artists and accurately ensure fair payments.

To say I am flattered beyond belief to have gotten the incredible interviews in this series so far is an understatement. Part four will be with independent record labels.

The Interview

Unlike with the other interviews, Mr. Rogers sent audio taped answers to my questions. I will reprint the questions under the audio embed so you can refer back to them as he answers the questions. 

The Questions

I have included the time at which Benji answers each question as well.

First, what is a blockchain (sometimes reading about this makes my eyes roll back in my head and I am a person who actually enjoys reading post-modern philosophy)? I suspect most musicians are intimidated by the term and the tech, is there a simple explanation? 

5:41: I also imagine most artists will wonder if it will be harder to create the Dot.Blockchain wrapper than to record and distribute music in the formats that they are used to now (MP3s WAV etc)?

7:52: And, will it be harder for consumers to use? 

Okay, in terms of music economics, so far we have accepted:

* The traditional album sale model ($10 - $25)

* The Ripping/Piracy model (Free, but with opportunity cost of myriad legal and security risks) 

* The Itunes model (99 cents a song)

* The free streaming model (safe access to a larger library of music but at the cost of listening to and seeing advertisements) 

* The paid streaming model (safe access to the same large library of music without the advertisements but with more cost).

The only exceptions to these models have been the sale of Vinyl (segments of the population are still willing to pay for Vinyl recordings) and "Special" releases (I believe that this to be at least part of your "PledgeMusic" business model, yes?).

Since that time, for the vast majority of artists, albums have mostly been seen and produced as a loss-leader (building demand for concert ticket sales). 

One of the strongest arguments in favor of streaming services like Spotify is that they generate profits for artists during free listening using the traditional ad model that funded television for decades. Spotify has also argued that this process "trains" consumers to get used to paying for music again. 

However, as Rain Perry pointed out last week, the Streaming services have set the competing/comparative price so low, that the payouts seem to represent piracy as well. 

For the vast majority of artists, the payback is so low as to be invisible. Hundreds of thousands of plays generate pennies and the economics don't work for anyone.

8:54: So, how does your Blockchain model potentially deal with this "tragedy of the commons problem" (competing against free or nearly free)? How do you get consumers to pay for music again at a rate that sustains profitable recordings? I think this is what you refer to as the "First- Mile problem?"

Of course, another part of the "First-Mile" problem is caused by what I have called "Industry Consolidation" and Ms. Perry referred to as the "A&R problem." With an industry built around investing in and pushing only about 100 artists, can your model address (or do you have ideas about) what used to be called A&R?

Another problem is the "Black Box" problem, where labels (and/or streaming services) are not transparent about the amount recovered or about the splits with artists. 

12:49: In your writing, you have mentioned another dimension of this problem which could be called "waste." Apparently, you believe that a large amount of waste is happening, enough so that the labels and streaming services might be induced to participate willingly in applying your blockchain model (thereby solving the 'black box' problem as well). 

Could you explain why so much "waste" is present in the system and why the financial incentive created by true transparency would be clear enough for labels and services to give up their advantages in opacity (maintaining the box)?

Also, what would favor the major stakeholders choosing your "fair trade model" over systems like Kobalt (which, as I understand it, improve the tracking of rights within the already existing sales models)? 

15:00: You also talk quite a bit about the promise of VR as a trojan horse delivery system for your .bc concept, but why are you so bullish on VR as a music delivery system in the first place?

17:09: Finally, in those initial commercials for Tidal (with most all of the major-label artists gathered around a table talking about ditching the major labels) their combined recording power was what was supposed to pressure the whole world into changing models. Will it require a Lady Gaga or Beyonce to be the first to record in the new format? 

Post-Interview

After hearing Benji's answers it occurred to me that what he had referred to as "waste" was really opportunity costs of remaining hitched to the current models of delivering content to consumers.

While he is certainly saying that there are uses of music that never pay out to the producers of the songs, he is also saying that because the services are locked into streaming and payment models that are inflexible, millions and billions in sales are never realized.

Example, say I own a local record store and want to feature a song by a band I like, I cannot easily pay for the use of that song for commercial use because of the impenetrable thicket of usages and rights rules so I just never buy the local rights to the use of that song. That is an opportunity cost of the current system (It is money left on the table).

In addition, during the interview, Benji Rogers mentions a study he did. Here is a link to that study, click HERE.

And here are the two articles that Benji wrote about the Dot Blockchain Music Project (that drew my attention in the first place).

First, the original story on Cuepoint is HERE.

Second, the follow-up article on Rethink Music is HERE.

Part Four will involve interviews with several independent record labels.

Did you enjoy the third part of the interview? Let me know your thoughts on the Dot Blockchain project, leave a comment!