By George Howard. ‘Bitcoin For Rock Stars’ A Year Later: An Update From D.A. Wallach On Blockchain And the Arts. D.A. Wallach, the recording artist and songwriter who Kanye West and Pharrell Williams discovered while he was an undergraduate at Harvard College, wrote the article, Bitcoin for Rockstars: How Cryptocurrency Can Revolutionize The Music Industry, in December of 2014.
Mr. Wallach’s piece – eloquent, insightful, and provocative – served as the first meaningful opinion from the artist community regarding the cryptocurrency and blockchain technology. A lot has been written since then. I personally have explored this topic with artists like Zoe Keating, Imogen Heap, Ryan Leslie; and with Venture Capitalists and entrepreneurs, such as, Andy Weissman from Union Square Ventures, Bill Tai, Jesse Von Doom from CASH Music, and the founders of Colu.
Roughly a year from the publication of Mr. Wallach’s seminal piece on this topic, I strongly believe that blockchain technology (or some alternative distributed ledger) is the very best path forward in order to develop a music industry that enables those who create music to control their works and be compensated for their usage, and for those who desire to consume/utilize/build businesses around music to do so in a transparent and efficient manner, without self-interested intermediaries distorting and leveraging the process.
Pie in the sky? Perhaps, but progress is being made, and certainly no better “solutions” are presenting themselves. I recently had the opportunity to check in with Mr. Wallach about this topic, and, over the course of a lengthy conversation, we discussed not only his views on the progress made with respect to blockchain technology and musicians, but also his work with Spotify.
And his strong conviction that there is a more moral way to approach the music industry than that which currently exists. Our conversation was direct, and at times heated, but it is abundantly clear to me that the music industry is incredibly fortunate to have someone like Mr. Wallach to help define its future. In this first part of our conversation, presented below lightly edited for grammar and clarity, we discuss:
– How the problems of today’s music industry has less to do with nefarious executives, and more to do with “poorly architected systems.”
– The need for a distributed registry.
– The unlikelihood of some sort of consortium or governmental agency coming together to create a registry.
– How institutions, such as ASCAP, BMI, will be reluctant to embrace these technologies, because doing so would threaten their very existence. (This is a point – I made in an early article on Blockchain, entitled, “Bitcoin Can’t Save The Music – – Industry Because The Music Industry Will Resist Transparency.”)
– How consent decrees and other forms of collective bargaining are hindering artist’s ability to determine the usages of their works.
– Mr. Wallach’s “thought experiment” on what might happen if an artist became popular – via social media, etc. – and the artist’s works were played on the radio without the artist affiliating with a PRO.
George Howard: So, I have the pleasure today to talk to D.A. Wallach. D.A., thanks for joining me. How are you doing?
D.A. Wallach: I am doing great. Thank you.
GH: Good. So, before we dive in on the topic at hand, I want to give a little bit of an overview. You wrote an article called: “Bitcoin For Rock Stars: How Cryptocurrency Can Revolutionize the Music Industry,” back in December of 2014. And, that article to me was really the first one that raised a lot of awareness, in the artistic community, about the blockchain, generally.
Through my own work in that area, it is an article that keeps getting referenced, which is a testament, not only to how great the article is, and how well written it is, but, also to you generally, and everything that you have done in the industry. So, I was wondering, before we jump in, if you could set the stage about your career and what led you to this point.
DW: Yeah. For sure. So, as my life stands today, I sort of split my time 50/50 between continuing to make music and putting out albums as a solo artist. And, with the rest of my time, I invest in early stage technology businesses. And, going back even further, prior to Spotify, I was spending pretty much all of my time just being a career artist. So, touring and making records.
And, that started pretty much from the day I graduated college, which was in 2007, that I had started as an undergraduate when my band got a record deal.
And so, I’ve gone through a number of different worlds that all sort of overlap and brought me to the interests that I developed in both cryptocurrency and also in fixing some of the core infrastructure in the music business. And, I had started thinking about some of these issues ten years ago, when I was literally busking on the street in Boston.
GH: Yeah. I probably saw you.
DW: You may have, unfortunately. But, particularly with my experience through Spotify, and from being on the other side of the table, a little bit, I gained an even more acute awareness of really how significant some of the problems were in the way that the industry functions that aren’t necessarily attributable to evil minded executives or anything nefarious; it is really just that this industry and lots of other media industries are built upon really poorly architected infrastructure. In fact, no one architected it; it just sort of evolved over the past hundred years. But, it is not up to the task of today.
GH: Yeah. It’s sort of an architecture of accretion.
Thank you for that introduction and context. And, it does sort of uniquely qualify you, as say you’ve been on both sides of the table; being an artist who has had the trajectory of busking all the way up to putting records out and playing in front of a lot of people, and selling a lot of records – this all gives you context. And, then investing, and working with Spotify.
And, frankly I wish there were more like you. I think that one of the main reasons the record industry sort of devolved was that there was a separation between the people who were making the music and the people who were marketing the music. And, never the twain shall meet. So, we are lucky in the artist community to have somebody like you out there. So, thank you for what you are doing.
DW: That’s nice. Thanks.
GH: To your point about the lack of architecture; unquestionably, the music industry did evolve through accretion. We still talk in terms that are anachronistic, in the sense that they were invented back when the music industry was invented. I mean “mechanical royalties” was a term used when they had to come up with some way to describe taking music and mechanically reproducing it on a piano or a music box, and yet it is still a key component.
What intrigues me about the blockchain or a decentralized registry, generally, is that maybe now we can move to one place that has a more accurate registry as well as one that is less easily corrupted by people for their own desires or for economic imperatives or what have you. Is that a fair statement?
Was that sort of your initial gesture on this or was it not?
DW: No. I don’t think it was. You know, I would sort of distinguish between two separate problems that my article is attempting to address and that, to me, is clearly more two separate problems the longer I think about this. The first one is that we really need this thing. And, by “this thing,” I mean that we need a central registry where we easily keep track of who creates our art and who gets paid when that art gets used.
GH: Can I interrupt you? The idea that we need a central registry…. I would say that we need a distributed registry. Right? I think it might be helpful for people to understand the distinction.
DW: Yeah. Absolutely. I think that is the second problem.
GW: Okay. I don’t mean to change your flow. I just think there is a key distinction, because there are tons of registries out there. ASCAP has a registry, Harry Fox has a registry, Sound Exchange has a registry. What I am arguing for, and I think you are too, is a registry that is decentralized. In essence, it is distributed.
DW: Sure. What I would say is that when I first started thinking about this – before I started thinking about decentralization – I was thinking about the music industry becoming global and that is sort of a universal trend. We have one world, one culture. It doesn’t make sense really to release records in different territories on different days, and things like this because the internet has brought everyone so much closer together.
And, if you can imagine a world in which the United Nations created this database and it was a free public asset and everyone used it. That would be great. And I sort of wouldn’t mind a single party controlling it, as long as they were trustworthy, and were sort of easy to work with, and did a basically good job on the technology side.
But, the world in which we actually seem to live in, is one in which basically no one in the media industries basically trust each other.
DW: So, I actually view the need for decentralization here, or the opportunity for decentralization as sort of a slightly sad testament to how corrupted the media businesses are.
I mean I sort of wish that everyone could work together and form a consortium globally that did this. But, that hasn’t happened. It doesn’t seem like it’s going to happen. It is hard to imagine what would actually make it happen.
And, that led me to the possibility that maybe the only way to do this is to actually produce a solution that will enable everyone to work together. And, that’s what decentralized stuff is good at.
GH: Yeah. I’m there. So, decentralization sort of addresses both of those things. One, it obviates the bug in the ointment of if people have control they are going to utilize that control to their own ends. And, that’s life.
It also allows for it to be global, as you say, and finally allows for us to be able to distribute it across anyone who wants to use it. So, it’s not just in the hands of a few people.
DW: I agree. I think that you are absolutely right that people are keeping… you know, ASCAP maintains their own database; Harry Fox maintains their own database. All of thee people are keeping their sort of proprietary dataset around.
GH: I am sorry to interrupt you, but, that’s where their value comes from, right? That’s part of the inherent problem of saying, “Hey, ASCAP open up your database.” Well, if they do that they are giving away their secret sauce. They are giving away their value.
DW: You know, I think that’s their perception, and, you know, they may be partly right. But my view of it – and I am not like extremist “information should be free” type of person – it’s just that in this case, I don’t see anyone deriving much value from having this stuff be proprietary. Sure. It is part of ASCAP’s value. Yes. They have a pretty comprehensive database of their songwriters and the stuff those songwriters created. But, I really don’t think that’s where their value comes from in the world.
I think the reason songwriters affiliate with them is to go and effectively collective bargain on their behalf with broadcasters and other people who use music. By the way, I think that is always going to be a potentially valuable service that they can provide in the world.
GH: So, let me stop you again. I do disagree here. And, that’s okay. I think that ASCAP and BMI and any of the PROs are the most likely low-hanging-fruit to be disrupted by the blockchain.
Let me just throw a straw man out at you and you can tell me where I am wrong. And, I am probably going to work this into an article. So, I am testing it out on you today.
So, if you decide that this music thing is for the birds, and, you don’t want to do it anymore; you are going to open up a restaurant instead, right? You want to play music in your restaurant. And, you are not you; you are someone that doesn’t know the ins and outs of the music business. And, you get a letter or a knock on the door from ASCAP or BMI saying, “Hey, you want music in your restaurant? Great. You need to pay us a blanket license fee and then you can play anything that’s in our catalog because we’ve negotiated” — as you said re collective bargaining — “we negotiated for our writers. And you say, “Alright. I understand. Great!”
And the PROs say, “By the way, if you don’t purchase this blanket license, we are going to sue you.”
So, what if we were in a — and I am sort of jumping ahead a little bit — but, what if you and I got together and said, We are going to find two to three hundred artists out there who have the rights to their compositions, and we are going to put it up on the blockchain. We are going to stipulate that this music can be used by restaurants and then we are going to find three hundred of our friends that have restaurants, and say, “Hey, you want music in your restaurant? You can use this music according to the database that we used the blockchain tocreate.”
And the people supplying the music will set whatever reasonable price, and the people that want to use the music willdecide: “yeah I am either going to pay or I am not going to pay that.”
What do we need ASCAP or BMI for? Scale?
DW: Sure. The system you are proposing I find really appealing, right. And, I think at a certain level, artists shouldn’t need to affiliate with one of these PRO’s in order to have their music usable in the world.
GH: And, you think you have to? You can tell I have a bias against this. So, you can shoot me down at any point. But, you are right. They shouldn’t. Then, there is a burden on the services — that artists have to align themselves with — to report accurately and effectively, and we both know now that none of the PROs come anywhere near that.
DW: Sure. Look, I would distinguish between two functions that the PROs provide. One, is that they keep track of who owns this stuff, and then they move them all around, right? They go and get a check from Clear Channel. They figure out how to go and split it up. You can debate whether or not they can do a fair or a good job of that, but let’s assume that they do an OK job of it. So, that’s one of their functions. And, the other function is this sort of collective bargaining thing.
DW: And, the collective bargaining thing, in general is good for artists who don’t have a lot of power. And, it’s potentially worse for artists that do have a lot of power. So, this sort of alternative PRO that you are describing is actually sort of being done right now with a lot of powerful artists in the form of this GMR; Global Music Rights.
DW: Which isn’t bound by the consent decrees of U.S. Congress, and so can’t demand higher rates on behalf of its songwriters who are the sort of folks who you can’t live without if you have a radio station.
GH: If you are the Eagles, you can say, “We are going to pull our music from ASCAP, BMI or whoever and limit our usage.” And the Eagles will not let, for instance, tv shows broadcast their music without a direct license. But, all that does, and tell me if I am wrong, but doing this without the blockchain or some other decentralized registry, is just building a new system that is essentially the same as the other one, but perhaps more elitist.
And, what I am looking for is one that allows for some sort of smart contracts to exist. Where I open a restaurant, but, I can just say, “OK, I like salsa music. I want that in my restaurant, and I am willing to pay $100.00 a month.” And, I plug that in and my machine goes out and looks for artists that do that type of work and are willing to allow their music to be used and the machine sort of match each other up. Is that too pie in the sky?
DW: I don’t think it’s pie in the sky. It should work, you know, if an alien came down and created this from scratch. So, in general, I favor that approach. I think. My wish though is that artists could do whatever they want. If they want the sort of collective bargaining power of ASCAP and they want to go in with a bunch of other artists and have someone negotiate a rate for all of them that might be better than what they could negotiate on their own — more power to them. If someone doesn’t want to affiliate and wants to use a sort of system that you are describing at their own rates, then they should be able to do that too. And, I think the problem right now is that artists can’t do that.
GW: Right. That is the point.
DW: I have had sort of a “thought experiment” for a while that I think would be a fun stunt. Which is: imagine that you had an artist that was really hot on the internet and you had a big bidding war over them and they signed a record deal with whomever, and they didn’t affiliate with a PRO. And then as soon as they get played on the radio, all over the place, they sued every station for each play.
GH: They weren’t affiliated with a PRO. For the people who don’t understand: If you write a song only you have the write to publicly perform it, which means, have your song broadcast on radio, etc. And, if you have a hit, however that might happen – via social media or whatever – and radio stations just start playing it, and you haven’t affiliated with ASCAP or BMI, those radio stations are infringing upon the songwriter’s right to publicly perform the song and the songwriter can sue them for infringement.
DW: Exactly. And, I don’t know if this has ever happened. I don’t think it has happened with a notable artist. It’s an interesting way to sort of put pressure on this system. You could imagine major artists un-affiliating from ASCAP or BMI and just reclaiming their own rights.
GH: You can imagine that. But, the problem with that is, if you are Paul McCartney, and you are making lord only knows what Paul McCartney is making from public performance royalties because “Yesterday” is being played a billion times a day, he is lacking the necessary incentive to say, “I’m going to stop doing that,” and pull that song from his PRO, and, then negotiate directly with every radio station and therefore make more money, because it is more of a pain in the ass to do the administrative side of it.
DW: Yep. Yep.
GH: And, that’s why I go back to blockchain. With blockchain it can be done through smart contracts and machines. Radio stations could say, “OK I’ve got to only play songs that the writer has checked off the box that says, ‘I’m willing for my music to be played and I am willing to be paid this amount.’” And, it could be played with bitcoin or whatever currency. It could be in micropayments and you wouldn’t have the transaction costs.
I want to direct this back to blockchain, though I love your thought experiment.
It’s been almost a year since you posted your article. What has changed in your thinking or thoughts? It most be somewhat gratifying at least to be sort of the “genesis block” almost of this discussion. Are you more or less optimistic about blockchain now than you were when you wrote this? And, what have you learned?
DW: Well, I think both. What I have seen in media related to the blockchain, and in other verticals, notably financial services, is just an incredible flurry of creativity and energy. And entrepreneurial enthusiasm for decentralization and blockchain and similar technology. And so I think this is a technology, generally speaking, that has more of a sort of moral component in people’s minds.
So, it’s not only an interesting technical solution to a pretty complex problem, but it’s also brain candy, because when people learn about it and go a little deeper, they feel really smart, and it sort of tickles your brain because it’s hard to understand. Once you figure out the puzzle. Then, you want to explain it to people, and do something cool with it, and it’s gratifying in that way.
But it also is sort of accompanied by this moral weight, and this notion that this is a fundamentally different way to organize society or to use computation and to get people to do things together. And, I think it is a genuinely sort of novel idea in human history.
So, I think right now we are trying to figure what to do with it. You’ve got a lot of people building things that are stupid, and you have people building things that are smart. And, you have people building things that are too smart and ten years away, and don’t have the sort of enabling technologies in place to make them thrive.
But, my hope is that we will start seeing some usable stuff coming out of this. But, you have to zoom out and look at technology from a ten-year or twenty-year time scale. And, we are just at the very beginning of this, hopefully.
GH: Yeah. I agree. My friend, Andy Weissman, who is a venture capitalist, I interviewed him on this topic, and he said, “Look, my job really is to envision a world that I want to live in that is three to five years away from now.” So, I am with you. I am encouraged by certain people, and as I have said, I have talked a lot with Imogen Heap and others.
I am starting to see little tiny flickers of going from sort of pie in the sky things to: “You know, I think we might actually make something of that.”
In part two of our conversation, we get specific about Mr. Wallach’s work with Spotify, and how blockchain technology could play a role in its growth.