Spotify buys blockchain startup Mediachain Labs to track, manage music royalties

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Spotify on Wednesday announced the purchase of Brooklyn-based startup Mediachain Labs, a company which developed technology that can help the streaming music giant better track online content and reward owners with royalty payments.


Spotify co-founder and CEO Daniel Ek. | Source: Spotify


In a press release posted to Spotify's webpage -- and oddly removed -- the firm plans to leverage Mediachain's technology to help further its "journey toward a more fair, transparent and rewarding music industry for creators and rights owners," VentureBeat reported earlier today. Terms of the deal were not immediately available, though the startup had raised some $1.5 million from a variety of investors including Andreessen Horowitz and Union Square Ventures, according to CrunchBase.

Mediachain developed a clutch of technologies for registering, identifying, tracking and managing creative works across the internet, valuable assets for streaming companies looking to properly mete out royalties to rightful content owners. Specifically, the firm specialized in applying blockchain technology to embed timestamps and ownership metadata in media files.

Before being purchased by Spotify, Mediachain created a decentralized, peer-to-peer protocol and database for connecting applications with media, an attribution engine and a cryptocurrency for royalties, reports TechCrunch.

Spotify is expected to use Mediachain assets to avoid potential licensing disputes, an ongoing problem for many streaming music services. Spotify itself is no stranger to lawsuits stemming from improper media attribution or a failure to pay songwriters and publishers for their work. For example, Spotify in 2015 was slapped with a $150 million suit for allegedly failing to pay license holders.

In a more recent case, Spotify reached a $30 million settlement with the National Music Publishers' Association over unpaid royalties. For its part, Spotify contends a lack of sufficient ownership data made it difficult to pay out licensing fees to the proper parties. Today's Mediachain purchase is expected to help solve some of those problems.

Music royalties are a major consideration for any streaming platform, especially as streaming entities take on increasingly important roles in the distribution process. A recent report from the Recording Industry Association of America said streaming services like Spotify and Apple Music acted as primary industry drivers in 2016, helping U.S. retail revenue grow 11.4 percent to hit $7.7 billion. The gains were the industry's largest since 1998.

According to the RIAA, Apple Music paid out the highest royalties to music creators at about $12 per 1,000 streams, followed by Spotify's roughly $8. Free and ad-supported platforms like YouTube trailed far behind.

Comments

  • Reply 1 of 9
    calicali Posts: 3,495member
    Why does every keynote/presentation have to look like a mock Apple stage with the word "innovation" thrown around for no reason?
  • Reply 2 of 9
    chasmchasm Posts: 1,643member
    I'm glad they've bought mediachain, because (so I'm told by musician friends) they've done a shockingly terrible job of actually paying out royalties until fairly recently -- when the moved up to merely "bad" at paying them. Also, you'll note the 50 percent discrepancy between Apple Music and Spotify (and everyone else pays less than Spotify). I think this is all the information artists and record companies need, frankly.
  • Reply 3 of 9
    john.bjohn.b Posts: 2,720member
    Spotify on Wednesday announced the purchase of Brooklyn-based startup Mediachain Labs, a company which developed technology that can help the streaming music giant better track online content and reward owners with royalty payments.
    Royalty payments are a cost of doing business in the music broadcast/streaming industries.

    A debt owed, not a "reward".
    mobius
  • Reply 4 of 9

    I don't understand why it is so complicated to pay out royalties.

    When you get a database from the record company, each song should be accompanied by whom the royalties should go to. How difficult is it to tag this information and then calculate based on the number of streams?

    If your primary business is streaming licenced music and you can't figure out whom you have to pay, then you probably are in the wrong business.

    Maybe Spotify's main business is their business plan that is being studied.

    mobiuscali
  • Reply 5 of 9
    Using a blockchain as solution for database problems... :o wow... This is going to break their neck in a few years
  • Reply 6 of 9
    macxpressmacxpress Posts: 4,934member

    I don't understand why it is so complicated to pay out royalties.

    When you get a database from the record company, each song should be accompanied by whom the royalties should go to. How difficult is it to tag this information and then calculate based on the number of streams?

    If your primary business is streaming licenced music and you can't figure out whom you have to pay, then you probably are in the wrong business.

    Maybe Spotify's main business is their business plan that is being studied.

    Maybe they don't have the money upfront to pay out these royalties? Or, they don't have a very good system for calculating what royalties to pay? Maybe both? Spotify can't be making a lot of money off this. Last I knew, they relied heavily on investors. 
  • Reply 7 of 9
    gatorguygatorguy Posts: 20,913member

    According to the RIAA, Apple Music paid out the highest royalties to music creators at about $12 per 1,000 streams, followed by Spotify's roughly $8. 
    This could benefit from some added explanation from the author. It's common-sense that Apple would not be paying out more than they take in from Apple Music subscriptions, and in fact stated early on that they'd be keeping roughly 30% of every dollar for themselves so even a family subscription only has $10.50 available for royalty payouts. Single subscribers and free trials eat heavily into that max number.

    So how is that $12/per thousand streams computed? On the surface (no pun intended) numbers don't match up. Perhaps the author has some insight?

    EDIT: Maybe Apple subscribers don't stream as much music as users of some other services, and thus have fewer streamed songs to divvy up the monthly 70% of the revenue that goes to content owners (not necessarily performers). Just guessing. Dunno. Maybe it's not even paid out monthly to begin with.
    edited April 2017
  • Reply 8 of 9
    SpamSandwichSpamSandwich Posts: 31,317member
    sog35 said:
    interesting acquisition by Spotify.

    Your move Apple.

    IMO, Apple should make an offer to Shopify for $15 billion. Buying Shopify would put Apple as a solid leader for online commerce for SMB. Shopify is also expanding to larger businesses with Plus. This would be a GREAT move to counter what Amazon is doing in commerce.

    Shopify might not be willing to sell, in that case Apple should make a $3 billion bid to have passive control of the company allowing the current management to have full control.
    I'll give you this: You relentlessly shill for those companies you are personally invested in, to an annoying degree. Shopify has precisely NOTHING to do with tthis hread.
    edited April 2017
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