When Napster launched in 1999, the music industry experienced an existential crisis. The advent of peer-to-peer digital file-sharing devalued music and caused industry-wide questions about control and money – copyrights, intellectual property, and how the existing middlemen (or “gatekeepers”) would keep riding the money train.
The battle between the gatekeepers and Napster ultimately resulted in the rise of streaming services and digital music platforms like Spotify and Apple Music, which made it simple for everyone to get and enjoy music, while they retained control.
There was a time when record labels fiercely opposed streaming services, but when compared to Napster, streaming was the lesser of two evils. Music companies were concerned that streaming would eat into their revenue, but after negotiating better royalty fees and developing a sustainable business model, streaming became the norm.
Now they are worried again. Why?
They are worried because we've got two new players in town: Web3 and AI. Just like Napster and other filesharing systems like LimeWire and KaZaA disrupted the distribution of music, Web3 and AI are about to disrupt the distribution and the creation of music. They are already starting to ruffle some serious feathers as they make their way into the music industry.
Earlier this year, a song created by artificial intelligence made its way onto streaming services and TikTok, gaining millions of listens and causing a stir. Drake and The Weeknd were seemingly “collaborating” on this A.I.-generated track. Universal Music, representing the artists, responded with frustration, launching a legal campaign to address the issue as the song spread to other platforms. Some industry veterans argued that it was essentially a remix while others viewed it as a concerning development. The unexpected uproar generated by a video posted by an anonymous user is quite remarkable.
The fact that someone used generative AI to create a song is not the real problem for music companies. The real problem is how easy it was to scale. For record companies, this problem was way more difficult to control than Napster, because it involved locating and shutting down distribution channels.
The music landscape
The music business is a gated industry, controlled by gatekeepers – labels and distributors. Today, the global music industry is worth 43 billion dollars. That is serious money.
The main problem is the structure of the music industry. The market is monopolistic, and artists do not have the bargaining power to negotiate better deals. Record labels typically pay out only 10-15% to the artists, while services like Spotify pay an average royalty fee of $0.004 per stream.
The vast majority of the money goes back to the gatekeepers. They are toll collectors between artists and listeners that funnel profits away from artists into their own pockets. Artists are the backbone of the industry and should be making a lot more, but most struggle to make a living.
Web3: The Promise of Direct Connections
Now, web3 is the new kid on the block. It's all about decentralization, which means artists can connect directly with fans. Decentralized platforms let artists upload their music without record labels and distributors. Unlike centralized platforms like Spotify, web3 bestows artists with the autonomy to release and distribute their works, liberating them from reliance on traditional streaming platforms or record labels and granting them increased income potential and enhanced control.
Additionally, web3 introduces non-fungible tokens (NFTs), offering artists the ability to sell unique, verifiable digital assets, such as rare tracks and album artwork, stored on a blockchain. This not only generates new revenue streams for artists but also provides fans with exclusive content.
In February, Rihanna sold 300 NFTs (for $210 each) of her smash hit song “Bitch better have my money” through the web3 music startup anotherblock, offering holders a fraction of the song’s streaming royalties, estimated at 6.5% for the first year.
But, it's not all sunshine and rainbows.
Web3 is still pretty complicated, especially the tech behind it. And there's no easy way to make money yet. It's a labyrinth of technical intricacies, financial uncertainties, and an evolving landscape that struggles to define sustainable monetization strategies.
Smart contracts, while promising efficiency and transparency, pose a steep learning curve and legal challenges that the industry must grapple with as they attempt to streamline operations.
Yet, tokenization will reshape how artists earn money, offering up a new world of financial opportunities. NFTs provide an opportunity for artists to take full ownership of their work, and reap all the financial benefits that come with it. Tokenization makes it possible to transfer the rights of a song or album into a digital token, which can be bought, sold, or exchanged.
Moreover, DAOs can play a crucial role in the music industry, spanning various stages such as creation, distribution, investment, and community engagement. These DAOs leverage blockchain technology and smart contracts to create decentralized platforms that facilitate collaboration among music creators, artists, and producers, protect music copyrights, and offer investment opportunities in the music industry. Web3 Music DAOs can help protect the rights of music creators and ensure fairer compensation for their work.
AI and Music: Friend or Foe?
Now, let's talk about AI. It's starting to have a say in how music gets made. It can help create music, which is great for producers. AI can also write lyrics. If a singer's stuck or wants to try new stuff, AI can help out. It's like having a helper that suggests cool sounds words and patterns, saving time.
The emergence of AI has significantly reduced the cost of producing high-quality music, prompting a race to establish a new distribution model.
The average person with no musical training or music production skills will be able to create songs by crafting prompts and using AI tools. Musicians who possess knowledge of music theory and music production will be able to do it faster and at scale.
Popular artists can do what Grimes is doing, and outsource their brand, allowing fans and artists to be a part of the co-creation process. Grimes isn’t the first artist to embrace voice cloning and artificial intelligence tools. Holly Herndon, an experimental musician, introduced her artificial voice called Holly Plus in 2021. Herndon allows users to upload audio files and receive a new version sung in her voice.
Currently, platforms must acquire permission from publishers and labels to feature a song. In most cases, the label owns the sound recording, while the publisher controls the underlying music and lyrics. YouTube is in negotiations with record labels to launch a new AI tool that will allow creators to make videos using vocals from popular musicians. In the case of artists like Grimes, they could potentially be both the performer and the owner of the sound recording.
Many others, however, are concerned that AI may bring in a new era of online music piracy, similar to what Napster did. Because of the usage of AI in music production, copyright ownership is becoming more complicated. The ownership of these works, as well as the best ways to license and sell them, are big concerns, because AI is capable of creating whole songs without direct human input, using models based on human creations.
The big question is, how does AI affect how we feel about music? Some say it can help artists be more creative, making new and exciting music. Others worry that music will start feeling fake and less emotional.
But here's the twist: some artists are teaming up with AI instead of fighting it. They see AI as a partner that can help them be even more creative. For example, a famous musician named Jean-Michel Jarre used AI to create new sounds for an album. It's like a mix of human and machine creativity.
So, the future of music is still up for debate. Does AI make music better, or does it make it less real? It's a question we're still figuring out.
Big questions that need answers
As the music world changes, here's the deal: the music world is in the middle of a big change. Web3 and AI promise cool new things, but they also bring challenges. It's like finding a shiny new toy but realizing it's not as simple as it looks.
We need to consider some important things.
Who gets credit when AI helps create music? Is it the person who made the AI, the AI itself, or the person listening to the music?
In the proper hands, AI could result in incredible new artistic expression, an extension of our minds, allowing us to reach a world beyond our own musical experiences, experimenting with different styles inspired by various composers and lyricists, and possibly even employing parts of the created melody and lyrics. This process could result in a decent or even great song.
How do you assign a percentage to the various contributions? Even if it was technically possible to trace the origins, the amount of metadata needed to administer payments would be staggering. When it comes to that, the music industry is already in disarray as it is.
And there's another thing: How does AI change how we experience music? Does it make music feel less special, or does it open up new ways to enjoy it?
I think it will be some time before AI-generated music will replace musicians for a number of reasons – the connection people have with musicians, the human experience of the song, the energy of live music, and the artist's humanity.
The Future of Music: A Balancing Act
In an environment of uncertainty and ambiguity around rights, the transparent, decentralized, and immutable nature of Web3 can counterbalance AI-generated music and ensure that it’s owned, operated, and governed by the artists and users, rather than gatekeepers of the music industry whose DNA is rooted in centralized monetization.
Tokenization provides a path to defining digital ownership and transparent rights distribution for musicians. Integrating NFTs into AI-generated music and workflows will ensure ownership of music is made clear and traceable on a blockchain network – and that creators are paid fairly. By verifying the original song or track, in theory, that particular artist can receive royalties anytime an AI model creates an output that incorporates their sound. Using smart contracts for royalty payments doesn’t require interference from third parties like banks or music labels. In this way, a marriage of AI and web3 would benefit established artists, fans, and aspiring musicians.
Ultimately, the future of music lies in the hands of those who adopt and drive these game-changing innovations. By fostering a culture of innovation and embracing new technologies, the music industry can create an environment that benefits everyone involved. Blockchain is already solving the music industry’s biggest problems and there is potential for AI to help improve processes as well.
The future is still a bit of a puzzle, but Web3 and AI hold the keys to a more inclusive, democratized, and progressive future. As we move forward, we need to be careful. We want these technologies to make music better, not worse.
We're all in for a wild ride and that's what makes it exciting!
Tweet of the week
a16z wants everyone to stop talking about AI's copyright issues, please!
Fast fashion’s reliance on cheap manufacturing is raising red flags. Bangladesh is the world's biggest garments exporter after China. This week, after deadly protests between police and factory workers, the government mandated an almost 60% raise to the minimum monthly wage to 12,500 taka ($113) from December, the first increase in five years. From 2011 to 2019, clothing exports from Bangladesh more than doubled to $33B. The garment industry makes up 16% of Bangladesh’s GDP, and 85% of its exports. [link]
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