The music industry is at the beginning of a profound transformation, as the rise of streaming services is changing the way music is consumed.

According to data from Forbes earlier this year, music streaming accounts for 84% of total music industry revenue - surpassing $17 billion annually (IFPI).

However, streaming isn’t the only digital tool changing how the music industry operates. Web3 tools like blockchain and tokenization are slowly shifting possibilities for artists, fans and distributors alike.

At the forefront of this shift is Sergio Mottola, the CEO of Music Protocol and the Web3 Music Association, who envisions a future where music catalogs are tokenized, creating a new paradigm for the industry.

In an interview with Cointelegraph at the Proof of Talk 2024 conference in Paris, Mottola outlined to Cointelegraph how blockchain technology can revolutionize music distribution, intellectual property management (IP), and revenue generation.

Streaming FTW

“In an industry that is growing in streaming, that is the big dilemma — how can you convince people to buy music?” Mottola asks.

"Music revenues in terms of buying tracks can’t compare to the billions made off streaming."

The current model, heavily reliant on streaming, presents challenges for artists and industry stakeholders in effectively monetizing their work.

He highlighted this in reference to Web3 tools like non-fungible tokens (NFTs), which have been previously used by artists to drop new tracks or offer community exclusives to fans.

Professionals in the music industry, such as DJs, still purchase tracks, but for the average user, this practice is less common.

“Either you have the fan base, so you go toward collectible fandom, but that’s got nothing to do with the music IP,” Mottola explains. While traditional models like Patreon create additional revenue streams, they don't directly address the core issue of music distribution and IP monetization.

According to Mottola, the solution therein lies in bringing music onchain. 

"We said the only thing that we can do is sit with music industry leaders and help them understand how we can actually bring them onchain. Onchain means massive catalog distribution in Web3 and then letting people build other offerings from them.”

Related: Polygon Labs and Warner Music Group push music industry Web3 evolution

By tokenizing music intellectual property, the industry at large —Universal Music, Warner Music, Sony — can digitize and distribute catalogs on a blockchain, creating an infrastructure where users can purchase licenses and leverage IP for various creative projects.

Virtual reality needs music

One example of this would be the potential impact on virtual environments like the metaverse.

“If you have metaverses today, there’s no music. It’s impossible to bring in music as it stands, so if you have a massive catalog suddenly available in Web3, where people can organize concerts, they can go and listen to music, you don’t need to have 1-to-1 negotiation with the music industry every time you have an idea." Mottola notes.

Tokenizing music IP would enable seamless integration into virtual worlds, enhancing user experiences and opening new revenue streams.

He gave examples of potential collaborations with metaverse developers in the Web3 space, such as Animoca Brands and Mythical Games.

"We talk with everyone doing metaverse projects and say listen from today you have this catalog which is made up of thousands and thousands of songs, which can be made available in your environment for people to interact upon."

“That's very much how we want to build the case study,” he said, “and then hopefully case study by case study that's where you reach the total adoption.”

This approach, supported by real-world asset tokenization and licensing, is set to materialize in 2024, along with the Music Protocol launching an open innovation campaign starting this forthcoming July.

Tokenizing IP

The process of this music catalog tokenization involves identifying the IP onchain, issuing licenses that anyone can buy, and allowing users to create unique experiences with the music.

"We need to tokenize music intellectual property, so we need to fully digitize the industry.”

According to Mottola, this approach not only makes music more accessible but also provides a framework for data availability and revenue generation.

The future of music also greatly intersects with artificial intelligence (AI), which has already proven a challenge in terms of copyright violations for the industry’s largest labels and artists.

"You're going to have a lot more people bringing a lot more IP to market because of AI. With blockchain, with Music Protocol, you would register the IP, issue a license and distribute it easily across the value chain." 

Mottola explained that this system could offer better capital efficiency and liquidity in the music industry through the use of blockchain and digital assets, while also keeping track of rights with more transparency.

Mottola acknowledges that other music applications have different visions for the future of the industry.

However, he asserts:

"What we argue is that we're not arguing on how the music industry is going to do business in between the counterparties. But we are helping them using a new tool called blockchain to improve friction and problems and be protected for the future."

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