I just read about a new company again that has what they think a brilliant idea that has you in music in the new blockchain technology. This is actually the fourth this week I read about. I just see a big hype right now that will rip off artists and make the music industry look like a shitty amateur camp.
The fact that is that is nothing new even though they claim they are so innovative and new. Sorry to burst the bubble. This concept actually was going on in 2002, almost twenty years ago. It was like a stock market for songs and built by a friend of mine. It was never launched because it didn’t pass the finance inspection, it was too large of risk from an insider operation. Back then they didn’t have blockchain technology that now is going forward, that some cryptocurrencies are run on. I think the inside problem is a big issue still in the new companies. The blockchain has an easier way to control ownership. Still doesn’t really solve the problem with inside jobs. Even the stock market has a problem with inside things like the GameStop controversy just a month ago. Here it can be even worse. There is no way to stop anyone to build bubbles around an artist that never will happen. You just have the example of Threatin in 2018 as a fresh reminder.
There is even a bigger problem I see right now. The people behind the new systems. When blockchain came around there were a bunch of good music tech investors and really smart people adapting to it; this was around ten years ago. If there was something that made sense about this then these people would have showed up right away. Most of them have left the projects claiming that it won’t really work in their favor. The new systems I have just seen this week are very alarming. One system was done by quite a shady DIY distributor. One was done by a person that couldn't see the difference between a manager and a record label and quite clearly is not part of the music industry. The third is run by people that have lost a lot of money before to artist building similar tech companies like a Ponzi scheme getting investors that then run with the money.
Then you have another problem. They all claim to be new and innovative. To be honest, I got contacted two years ago by a company doing exactly this. trying to get in with some of my artists. I didn’t fall for it because there are some things in the whole strategy that didn’t make sense if you know the real music industry. Last week I was talking to a person that works there but he was afraid of losing his job right now because the company is not doing well. And he said was it hasn’t gone well the whole time. So why would it be better now when a bunch of these companies jumps on the market?
Why won’t this work? This is what record labels have been doing from day one. They evaluate the artist, the songs and make an investment. These new systems just claim that okay now you can go without the record label and just get your investment money from investors.
First the investors. The company I was talking about that isn’t going that well. One of the reasons I was suspicious was that there were no investors on the platform. It was your job as an artist to pull in people that should invest in your music. That is just another word for Pledge Music if someone remembers that crash. Yes, it was a Go Fund Me page where you can get people to invest in a project. Mainly the return is that you are investing in a machine or tool and you get it very cheap after it’s done. Not many artists that were lucky on these. There are a couple of success stories but never any big ones. In all these cases the artist has to spend a lot of time driving people to the project even if it’s a pledge or the new blockchain investment. Time that is taken off from making music and art. Of course, if you already have an enormous fanbase, a system like this would work. Metallica with their fanbase would get a hell of lot of money if they put out that you could be a shareowner or getting the album first etc. Just one problem.
Now Metallic doesn’t need the money, they already have it. But let’s pretend they got a couple of million dollars. They need to use that money wisely to get the music out there. Now it's the guys in the band that have it. They need to oversee the process to get the new album to the right people. With the money, they can hire the right people. I doubt they actually know the right people. All this was done in the past by their record label.
Bingo! Here is what the record labels have been doing for the past 50 years. They have a staff of people hired to do this work and develop personal relationships. If they don’t have it, they know who they should hire. In many cases, they also have partnerships in hand. Take a new artist that hasn’t been around at all, they don’t even know where to start. Instead, when they get this money they will spend it all on a recording and some flashy videos, and a new guitar amp. That won’t get their career going. A record label would stop these accessories and put the money in the right place.
You put the artist hard at work and then they might get money to spend, but they don’t have any clue where to spend it. Every artist has to build up a new network to make these things work. Not even blockchain can save that one. You are competing with companies doing these strategies and collaboration for fifty years and you really think that you can get a new artist to build up the same network in one year?
I don’t say the technology is wrong. It might work but then it has to contain several things. First, inside the platform, it needs to have options with networks that the artist can choose from and use. Second, the systems has to have built-in investors. To explain, when Spotify started they needed the big labels to gain attraction to a big audience. Today we all know that Spotify is one of the biggest platforms, you can be certain there is an audience there. That is the same for an unknown artist if there were people inside the platform that invested in music it would be attractive. Is that an angel investor who would do that?
That is also a problem. This has been the case before. I have been associated to many wealthy people that have set aside big portions of money to invest in artists. As of today, I haven’t seen any of them succeed. If it has succeeded it’s usually spent on their sons or daughters, like Taylor Swift. Most of the time the projects fall apart since the artist is really not up for the job. Isn't talented enough. A think that now would be decided by the artist that sells their songs in the system.
Another problem is that the blockchain only covers the master side, maybe the publishing side (a bit unclear on different systems). The master side is just 25% of what an artist earns. The big chunk is live where it’s 50% of the income or more. We are now going to have more live shows than ever since the audience is hungry for it. To invest in music, you need to have income coming from all areas. That is what the companies tried to do in the crisis with 360 deals. Kind of greedy. Didn't work out since even the biggest companies couldn't provide full service in all areas. When it comes to investors they are in for the money. If they see they can only get money back on 25% of the whole. There is much better business to be done. We all know also that artist mainly makes money out of one area. Like Ramones made most on T-shirts and touring, not recordings or syncs. My guess many investors that wouldn't get any money back seeing the artist making a lot on a different field would make the business sour.
My advice on this is to stay away from it. If it’s going to work, it needs a sanitation process. There are too many players out there. Not a market for each one of them. Maybe one survives and it all become like a record label with the inside tools. My guess is that the record labels that still hold a lot of the gates won’t let it happen too easily.
Editor’s Note: Peter Åstedt has been working in the music industry for over 30 years. He has started record labels, distribution systems, and publishing companies. Peter also runs several major showcase festivals and is an advisor for INES and co-founder of MusicHelp/Discover Sensation. He has worked with the Top Ten most streamed songs and had music on both the Olympics and Super Bowl. Peter has currently taken up the seat of Station Manager of Cashbox Radio, working with MD, PD and station owner, Sandy Graham. His latest venture is a new Showcase Festival in Sweden, Future Echoes scheduled for September 16-18, 2021.