Philosophical Notes: The Future of Audiophile-Quality Music?

Predicting the future of anything is hard. So, in the spirit of appropriate humility, this blog is probably wrong. But, maybe not, so I invite you to read on.

With the advent of blockchain technology, most notably the creation of Bitcoin about 15 years ago, we have substantial development work going into decentralized methods of handling various types of information. This could have a big impact on how music works.

Background

Because blockchain systems can be built with high security and high fault tolerance, blockchain technology is viewed as an ideal way to store assets of certain types. And because blockchain systems can be built in a way that is quasi-self managing, blockchain systems are being examined as a way to sidestep centralized network managers and their tendency to extract value from the systems they create (something never happens without energy, so the question raised by blockchain devotees is whether the value delivered is appropriate to the value skimmed, and this is often unknown until a market alternative appears). Blockchain is complex and what you can do with it is complex, so take the preceding paragraph as very approximate.

One asset type that Blockchain is fomenting is something called the Non-Fungible Token (NFT). NFTs are basically contracts that provide the owner(s) with certain rights. That sounds boring, but in a world of digital media, you can pretty quickly see how this might be a big deal. You could, for example, own the rights to a photograph. You could own the rights to a video clip of Steph Curry draining a particular buzzer-beater. Or you could own The Beatles song “Come Together”. Once you start thinking about this, especially when you add the ideas of buy/sell capability, low transaction fees, artist management of content and marketing, you start to come up with all sorts of ideas about how this could work.

The Future of Music?

One blockchain idea of special interest is the idea of sponsoring artists who want to develop new music. If you want the Dallas Symphony to record works by Messiaen, maybe they invite you and others to support this. The middleman is cut out, particularly the middleman who decided if the project is worth backing. It is like Kickstarter, sort of. But such a project might attract more backers because you and your fellow backers could own the recording and the proceeds from distributing it more widely than just to the backers.

This is being put into practice in several places. A recent example is royal. royal is the creation of several artists and producers from the hip-hop world, but you can get a good idea of how this can work by visiting their site and reading the explanations.

A second blockchain idea is for artists or music companies to create NFT projects that are built around high-resolution recordings. If we want master tapes transferred to some kind of 24/192k format (or whatever format), NFTs could provide a way to fund the effort. Again, the idea is that funding might be attractive because funders would own some downstream rights and thus might fund a portfolio of projects in the hopes that a few go big. This is a possible market mechanism for more high-res.

More on royal and music NFTs in the January 22 podcast of Modern Finance starting at 58:38.