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Closing the Value Gap of Music — Our Report from Music Tectonics Conference

Last month, more than 400 music tech professionals attended the inaugural Music Tectonics conference in Los Angeles to talk about the future of music and technology.

Bitfury Surround CEO Stefan Schulz joined a panel with representatives from Warner, Universal, and AVL/CDBaby. The panel, “Partnerships with Major Labels and Distributors,” discussed the current transformation of the music industry and how companies are meeting shifting demands in the digital age. Throughout the conversation, Schulz focused on the value gap between the emergence of giant data sets and old industry practices unable to deal with them.

Panelists talked about the effects file-sharing and streaming services have had on major labels as well as independent artists. Schulz noted that more opportunity exists today (compared to ten years ago) to develop partnerships with a wide range of industry players. Previously smaller companies and startups were priced out of major label deals due to huge upfront payments for licenses. With automated licensing, the industry can cut out on an entire layer of administrative costs by enabling direct communication that facilities real-time contracting.

Intermediaries have long been challenged by the bureaucratic process of licensing music. By automating the process — a major feature of the Bitfury Surround platform — Schulz said we’ll identify new ways to define pricing in different jurisdictions. The price of doing business in Israel or Singapore is wildly different than in the U.S., Europe or Africa. Automated contracting will enable individuals and companies to observe different pricing mechanisms in real-time. Licensing that used to require months of negotiations, reams of paperwork, and numerous employees can be accomplished instantaneously.

Schulz said, “There’s a lot of opportunities to run this in an automated way, whereas today you have a lot of individuals that you have to talk to and data points to collect and understand. It’s very difficult to do this manually. Bitfury is working to create an infrastructure that allows anyone to interoperate …in an efficient manner.”
For two decades, Schulz continued, the music industry has experienced a serious value gap — a “value universe,” he called it. The monetization of data is an inherent part of the gaming industry, driving up value for everyone involved. The music industry, however, has so far failed to monetize much beyond the original recordings because there is little understanding of how to use the data being collected.
Labels and other industry professionals, he continued, have to “see the connection points between this new oil, i.e. the data, that’s creating all this new revenue. It does not necessarily have to come from the original reporting or publishing rights; it can come from other streams. This is a huge opportunity right now to tap into value areas that are indirectly related to the original recordings.”

For example, Schulz says Billie Eilish and her brother, Finneas, might create a billion data points every 10 days. A giant opportunity to monetize these data points is being overlooked because the industry operates on old principles of business. The new model requires an ability to harvest these data, because, as Schulz said, “Every company in the world would love to have this set of data points.” That’s where Bitfury Surround comes in.

When asked if the goal is to partner with major labels, Schulz said Surround is an open platform. “It’s really about letting the industry interoperate and share common knowledge. The side objective must be to support efficiency because there’s a lot of efficiency gains that are needed.”

Bitfury Surround will be the bridge between industry and data. The value gap, which other industries identified long ago, needs to be closed. A transparent process of licensing and contracting will enable everyone in the process — artists, labels, management, venues — to prosper by the cultivation and implementation of this new realm of data points.

The ability to see where music is being played will also make collecting revenue easier. For example, the automation process could allow for the immediate identification of song usage. If that use is not licensed, a cease-and-desist letter will automatically be triggered — for the legal industry to get involved at the initial stage.

Likewise, automatic payments written into contracts would be immediately collected, instead of waiting months or years for payment. This could be applied more broadly to the persistent black box royalty problem many artists experience. A platform that allows for immediate and transparent payments and licensing is a win for everyone involved.

Such an infrastructure requires the ability to scale. As Schulz said, all the data in the world won’t matter if the platform cannot handle the load. Once that’s in place, the real issue is how to use data to monetize artistic creations. With the proper implementation of this process — the very goal of Bitfury Surround — Schulz believes the value of the music industry “could easily double.”