Building a Web3 Solution for Music IP Digitisation

Background and frictions in the market

The music industry has modernised distribution and consumption but needs to improve in updating IP management. IP contracts remain paper-based and non-standardised, making information difficult to access. Unlike sectors focused on a user base, the music industry's value lies in content ownership. This inconsistency leaves IP management outdated, hindering the development of an open IP market and reducing the value of the IP itself.

A view of the future: Innovation in IP management

Making music an accessible and liquid asset class, speeding up the investment cycle

The music industry is highly lucrative. Music catalogues yield higher returns compared to traditional investment asset classes, and in the last few years, institutional investors have also started considering music as an investment. However, music is not an easily accessible asset class for most institutional and retail financial players because there is no public, open market for music IP.

Transforming music IP into an accessible, liquid asset class, based on the concept of Real-World-Asset tokenisation, would enable labels to benefit from early exits, attracting a more comprehensive range of investors. This shift in the business model allows labels to retain their role as promoters while generating liquidity to reinvest in emerging artists. Ultimately, this transformation will enhance the industry's efficiency and market size.

By "music IP tokenisation," we mean the application of decentralised digital technologies—such as blockchain, smart contracts, fungible tokens, and non-fungible tokens—to intellectual property management in the music industry for several purposes, including record keeping, access traceability, licensing, and royalty payment. On top of this, eliminating IP rigidity will enable new business models to emerge.

Structural barriers that hinder the maturation of new forms of consumption, distribution, and content commercialisation must be removed to foster innovation in the music industry. In addition, the financial market overall shows a strong appetite for alternative investments, and the lack of digital market infrastructures has been seen as an obstacle to the growth of such markets. These markets could attract vast amounts of liquidity, estimated to be eight to twelve trillion dollars.

Music IP tokenisation could be considered a new tool to improve the music industry for artists and fans. It could also make music an attractive alternative asset for international investors. The resulting greater simplicity of music content consumption and management, as well as the liquidity of music IP catalogues, would significantly impact the business cycle of many players in the music industry, amplifying their potential for value creation.

The beneficiaries of IP solutions

Applying blockchain technology to intellectual property management in the music industry shows enormous potential for various market actors. However, three key groups stand to gain significantly from this digital revolution: content creators, labels focusing on emerging artists, and music funds.

For content creators, the tokenisation of music IP presents a unique opportunity to monetise their assets in ways that were not previously possible. Artists can better manage IP licensing on the market, providing immediate financial benefits. They could also distribute a part to their fans, fostering a more profound sense of connection and engagement. These possibilities could pave the way for new monetisation models and transform the relationship between fans and artists, promoting a more participatory and inclusive music industry.

Labels that focus on discovering and nurturing emerging talents also stand to benefit from the digitisation of music IP. Traditionally, these labels invest in new talent and wait for it to succeed before they can collect royalties—a process that can take years. However, with the ability to license IP on an open market, these labels can streamline their investment cycle and reinvest the proceeds into their core activities. This liquidity can invigorate the market with new assets ripe for enhancement, promoting a more vibrant and dynamic music industry.

Music funds provide the only avenue for financial exposure to the music IP world and can leverage the market's liquidity to guide investment more effectively. With an open and liquid market for music assets, these funds can create more accessible financial instruments, enabling retail investors to participate in the music industry's growth. This democratisation of investment opportunities can attract more capital into the sector, spurring its growth and evolution.

All licensing procedures would be significantly accelerated, substantially boosting the music industry. The development of digital platforms for music consumption has been exponential, especially within domains that combine reality and digital spaces, such as gaming, the metaverse, and environments enhanced by Generative AI. These platforms offer new opportunities for the music industry to engage with audiences creatively, yet they also demand agility and flexibility in IP management that is unattainable with analogue methods.

The tokenisation of music IP through blockchain technology can transform the music industry's landscape, benefiting all stakeholders. This digital revolution can enhance business models, streamline processes, and build a more connected industry, from content creators and labels to music funds.