Record Labels Face Competition from Blockchain Technology

A lack of exposure has always been a major problem for talented artists. While a musician’s skill lies in the creation of a song and how it can move its listeners, the world of promotions and advertisement is unchartered territory for them.

This is where record labels come in. In exchange for a portion of the profits made by an artist through their work, record labels will help with the promotion, branding and project funding so that a musician can focus on their craft. They act as an intermediary to push an artist into the world of entertainment.

The problem is that while record labels are great at what they do, there are those that take advantage of musicians. This is doubly true if a musician isn’t well-versed when it comes to the ins and outs of the music industry. Predatory labels can make an artist sign questionable contracts that sometimes make them relinquish full creative control of their work. And this is where a musician’s dreams can die.

Enter blockchain technology. This innovation allows artists to convert their intellectual property – a song in this case – into a digital currency, a process known as tokenization. If a fan likes the song, they can own rights to that intellectual property by purchasing it using the tokens they have. Think of it as owning a stock grant to a certain company, but instead of shares, you get the rights to a particular song.

Now, if the song does really well with a lot of people streaming and buying it, revenues will now start pouring in. And here’s where it gets really interesting. Because fans initially bought a portion of the rights to the song, they too are compensated when it does well in the market. The fans essentially become the record labels themselves, acting as intermediaries and gaining profits as intermediaries, according to Forbes.

The transactions between buying the intellectual property and profiting from it – if it does well – is governed by a smart contract based on blockchain tech, which keeps an immutable record of all the negotiation done on the platform. And the pay is immediate compared to traditional intermediary payments that can take up to more than a year before profits trickle back to the artist.

“Tokenization allows fans to be active participants in an artist’s creative work and share in the success of a project,” said A-Rayz, one of the first tokenized hip-hop producers. “With this new model of vested fan interest in the success of a song, smaller independent artists can unlock new opportunities for fan relationships, brand evangelism, and marketing — with their fans essentially leading the charge as street teams.”

This technology harnesses the bond between artists and fans, solidifying their relationship while getting rid of intermediaries that may force artists to sign bad contracts. While this platform is new, there are already several of them already in operation like Choon, ARAYZ Token, GRMTK Token, and The Pearl Token.