In 2015, notorious pharmaceutical executive and former hedge fund manager Martin Shkreli bought the only existing copy of the latest Wu-Tang Clan album off the online auction site Paddle8. The Wu-Tang Clan, one of the world’s leading Hip Hop groups, had released the album Once Upon a Time in Shaolin as part performance-art/part-political statement. In a world where most people don’t even pay for music, the RZA (defacto leader of the Wu-Tang Clan) wanted to challenge the public’s perception of how music should be valued. So he ensured that only one copy of the album existed and that there would be a private auction to facilitate the purchase.
It’s arguable whether RZA has accomplished his goal. Martin Shkreli paid $2 million for the album, including all accompanying legal rights to the album’s distribution. This was the most expensive record ever sold and made Shkreli the sole owner with complete control over the album’s release. The album has still not been released to the public. At certain points throughout the past few years, Shkreli teased the internet by claiming he would release the album in exchange for sexual favours from Taylor Swift or if Donald Trump became President of the United States. After Donald Trump’s election, Martin Shkreli played a few seconds of the album on a youtube livestream.
Martin Shkreli is the world’s sole gatekeeper of the latest Wu-Tang Clan album. As he is currently serving a prison sentence, the fate of Once Upon a Time in Shaolin hangs in the balance.
As a fan of the Wu-Tang Clan, this really sucks because I want to hear the new album. Hopefully, this situation will not happen in the future.
The music industry should be able to evolve with the latest technology developments to solve these kinds of problems. Technology can provide modern solutions to modern challenges.
This is where blockchain comes in. Adoption of blockchain technology in the music industry has the ability to satisfy both The Wu-Tang Clan and Martin Shkreli. Here are three reasons why: Traceability, Compensation, and Tokenisation.
Traceability
When you release a song or album onto a public blockchain, think about the process as essentially releasing a music data file onto the internet for the whole world to see. Because the blockchain is an immutable public record, that means it is a public display of a master data file of the music and all associated information. If the RZA released Once Upon a Time in Shaolin onto the blockchain, he and his team would be credited as the true owners of the intellectual property and that would be on the global public record. It’s like we have all agreed to share a google doc with the same information.
This means that the ownership of the music is decentralised. At one end of the spectrum, the most centralised form of music ownership is Martin Shkreli, where he can hold an album hostage and no one else in the world can listen to it. While this is an extreme example, the way the music industry works now is between a fan like me and a musician like RZA, there exist several ‘Martin Shkrelis’ between us.
Some of these ‘Shkrelis’ exist for RZA because they serve purposes of distribution and intellectual property. Record labels distribute RZA’s music and organisations like the Recording Industry Association of America (RIAA) guarantee RZA’s claims to music royalties. The internet has already made it easier for RZA to distribute music and the blockchain can help him protect his intellectual property. In a world where you have a public online record of all creative work available for everyone to see, your legal rights are publicly guaranteed. This open record keeping mechanism exists through a blockchain where we can trace the ownership of music to the original artist.
Compensation
As one of the producers of an album like Once Upon a Time in Shaolin, you may be entitled to a certain percentage of royalties. Transactions logged onto a public blockchain are underwritten by smart contracts, which are online legal agreements that can automatically execute contractual terms based on certain variables. So if smart contracts are encoded with your legal rights to intellectual property, you can almost immediately receive royalties for every time the album is sold or played. Artists can automatically receive funds that are legally obligated to be distributed to them.
In comparison to the current world, royalty payments today are generally overseen by a variety of different organisations. Using smart contracts to encode currently existing legal structures on a blockchain would make it easier for these organisations to distribute royalties. Artists could also get paid more efficiently and more frequently. Not only would RZA receive the appropriate royalties for Once Upon a Time for Shaolin, but everyone else who worked on the album could receive royalties dynamically as people around the world enjoy the music.
One of the challenges for musicians today is getting fair credit and compensation for their work. Currently, online streaming services are not very lucrative and illegal downloads are widespread. This is exactly what RZA was protesting against with the unique release of Once Upon a Time in Shaolin.
Tokenisation
I link the idea of tokenisation to a similar idea from history called patronage. In certain eras, wealthy aristocrats or merchants would often pay artists to create works for them on a semi-permanent retainer or a set of subsidy-like financial grants. These wealthier individuals paying the artists would be called ‘patrons.’ One of the most famous examples of patronage is the powerful Medici family in 15th Century Italy paying the architect Brunelleschi to rebuild the Basilica of San Lorenzo and then eventually expanding to support artists like Michelangelo, Raphael, Donatello, and Leonardo Da Vinci.
The online platform Patreon was founded in 2013 and takes its name from the old idea of patronage. On Patreon, you can build relationships with artists and support them directly by paying them a fixed monthly amount. Catering primarily to videographers, artists, and writers, Patreon provides another revenue stream to people working in creative fields.
If you have a public record of music properties tied to the original artist and underpinned by smart contracts, you can streamline the modern process of patronage and maybe even create a new form of creative valuation. Tokenisation on the blockchain is the process of converting a real-world asset into a digital cryptographic token.
To use an example, imagine you as a Wu-Tang fan were able to invest in a Wu-Tang Token. This provides both the artist and the fan with a variety of different benefits. This token could grant you access to certain special Wu-Tang events or concerts, discounts on Wu-Tang merchandise, coupons for retail partnerships, membership in an exclusive Wu-Tang fan club, or a whole other realm of possibilities.
As an artist, you would have a stronger signal of people that are willing to support you financially as the price of the Wu-Tang Token in the open market is a function of supply and demand. It’s not the same as owning a share of a company, but the token would be both tied to the ‘market value’ of that artist and provide useful services as well. The better the success of the Wu-Tang Clan on the whole, the higher the price of the token. If you release Wu-Tang sneakers, announce a world tour, or even release a new album, the owners of the token would be more incentivised to support all of those activities. The Wu-Tang Token owners themselves will receive financial gains from broadly supporting their artists and serving as brand ambassadors.
Having done a bit of research, I noticed that the son of Ol’ Dirty Bastard from The Wu-Tang Clan is himself a Hip-Hop artist called Young Dirty. A March 2018 article in Coindesk indicated that Young Dirty is launching a crypto token in honor of his father called Dirty Coin. This token will raise funds to support Young Dirty’s musical projects, provide people access to certain concerts and enable them to buy merchandise. Another group of people have actually launched a Wu-Tang Coin to raise funds in order to buy back Once Upon a Time in Shaolin from Martin Shkreli, paying him in crypto tokens. If the extended circle of Wu-Tang is already thinking about this, the time seems ripe for RZA to himself launch a Wu-Tang Token…