Contributed by Chaz Luciano
“Ladies and Gentlemen… the Revolution…” The first words from the film, Purple Rain. Relevant not because of Prince’s recent, tragic passing, but because he was one of the first major pop artists to stand up against the machine and the unnecessary, often lecherous “middle man”.
What incentivizes the middleman? Profit. What incentivizes producers to use a middleman? Utility. Why do consumers purchase the end product from a specific middleman? Cost and availability.
This pattern is evident in any large-scale consumer industry. Producers deal with labels deal with distributors deal with promoters deal with retailers. Each layer takes their profit. If someone is getting hosed, it’s probably the producers and consumers — the ones at the ends of the chain. They are largely replaceable, while the network of labels, distributors and retailers is much smaller. Most content producers can’t afford to be choosy. Most middlemen can.
For the average content producer, this lack of leverage is a fact of life. Artists are all too familiar with having to compromise their vision for the sake of making something commercially viable. More insidiously, this dynamic manifests itself as self-censorship. Most obviously, the ones with all the leverage make most of the money.
This is not an indictment of middlemen in general, just an observation of a zero-sum game. Everyone takes their share from the pool of ((gross sales) — (expenses)). If the major labels, the major studios, or the major galleries are the only way for an artist to access the market, it stands to reason that those majors will be able to bargain a much larger share than if the artists had other viable options.
What are these middlemen providing that allows them to demand such a premium for their services? If we are going to theorize a better way, it is important to know just which services content creators need in order to bring their product to market. We’ll use the music industry as an example, but the concepts apply equally to all media.
Funding — When a band gets signed, they get a cash advance with which to record the album. This money gets repaid in full before the band gets their share of the royalties. This could be arranged on the blockchain through a series of smart contracts, for a fraction of the cost of a major label’s accounting department.
Production — Expertise is expensive. Labels can afford the very best, but they’re not the one’s paying for it. That usually comes out of the artist’s advance, which the label will recoup before the artist begins getting paid. It is not unusual for an artist to be over $1 million in debt on the eve of their first major label release, even these days where there is little demand for physical albums and production costs are way, way down.
While the expertise will always be costly, a community of content producers could share the cost much more equitably than a major label. Membership in this community could provide access to certain aspects of production, mastering and encoding in particular, with discounts comparable to the one a major label gets.
Promotion — The promotion costs are often taken out of the artist’s advance as well. Mostly this takes the form of in-store displays of folded cardboard. Artists pay handsomely for this privilege, but nobody buys albums in stores anymore. Digital advertising is available to individuals, but a community of content creators could negotiate advertising deals with the leverage of a major label, undercutting the current “pay to play” system.
Distribution — The ultimate goal of any productive enterprise is to get your product in the hands of the consumer, and the consumer’s money in your pocket. Major labels have sweetheart deals with retail stores and streaming services to facilitate this, but on the way they take something like 2/3rds of the profit for themselves. The internet allows artists to reach their audience directly, but this lacks the reach of traditional label distribution. A community of independent artists could achieve similar negotiating power with retailers and streamers without sacrificing the freedom of the artists.
The efficiency of the blockchain is a complete revolution in the entertainment business. The innovation it enables will serve content producers and disintermediate middlemen throughout the industry. With secure blockchain smart contracts, the obfuscated accounting and contracting practices that underlie the system of major labels who take advantage of content creators is no more. Revenue splits can be made open and instantaneous. This changes the game dramatically.
SingularDTV, Ujo, and other creative communities that are growing up around this new framework will be ones that inherently respect artistic freedom and don’t practice censorship, while having similarly wide ranging support to a major label. The mission of decentralization is to ensure technology empowers not just the lucky few with privileged access, but humanity as a whole.
The revolution might not be televised, but now that we have these amazing tools in blockchains and smart contracts, the rise of a better way is near inevitable.
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