Posted on Feb 08, 2022Read on

New Modes of Ownership: From Torrents to Music NFTs

TechCrunch was kind enough to host the original version of this article but it felt right to bring these thoughts to share with the community at mirror: 

When you were pirating OutKast in 2003, could you have imagined a world where you earn royalties for owning a copy of that mp3?

At a time when NFT and Web3 criticism is reaching fever pitch, hip hop legend and innovator Nas is selling two of his singles as NFTs, which fans can purchase to claim streaming royalty rights. The rising popularity of music NFTs brings a particularly interesting argument into focus: is blockchain antithetical to the free and open virtues of torrenting? Or is it fighting the same gatekeepers that content pirates aimed to unseat?

Artists vs. fans

The most divisive period in digital entertainment history was the Napster-era and the mass adoption of bittorrenting in the 2000s. This era forever changed the music and movie industries and pitted artists against fans. The end of this period saw a sharp increase in Intellectual Property enforcement that coincided with the introduction of massively improved consumer options for digital goods (think Spotify, Netflix, Apple Music and more).

The rise of Web3 has once again brought attention to concepts of digital ownership, IP management and the rights of creators. Web3 critics often draw negative comparisons to the ethos that surrounded torrenting. The argument is that torrenting embodied “radical opposition to intellectual property” and created an internet where content was more open, free, and accessible, while blockchain does the opposite. 

This misses a couple of points. First, while some were torrenting just to save some cash, many did so because the convenience was overwhelming relative to official paid sources. The torrent movement is best understood as a movement of consumer backlash against antiquated business models which was ignited by rapid technological change. In this regard, Web3 is absolutely a spiritual successor of that time.

Another issue with this hot take is that it forgets the actual debates of the period. The philosophically-inclined pirates of the time would point to artists being disadvantaged by intermediaries as just cause for piracy. “Artists aren’t hurt because they make all their money on tours” was a distinct rallying cry of the moment, and the large publishers were usually painted as the villains. In reality, torrenting’s impact on record sales likely hurt the bottom line of both the publishers and the artists. Reframing the torrenting movement exclusively as opposition to the rise of Web2 by Web1 proponents is a “rose-colored glasses” exercise that ignores the human costs of content piracy.

In addition, many musicians who asserted their rights and seemed to side with the publishers were dragged through the rhetorical muck as well, which was not a great look for the movement’s moral high ground.

Meanwhile, Web3 isn’t just about access to content – it’s about what you can do with that content. Content utility and content value, in other words, particularly for the creators who are at the heart of the matter. Web3 builders and torrenters share a lot of the same goals when it comes to dethroning and disintermediating gatekeepers. However, Web3 gives creators and fans much better tools for this fight, such as enforceable scarcity, transparency, radical ownership and clear provenance. It’s becoming easier than ever for artists to directly own their content and maintain access to their communities. So while web3 pays homage to torrenting in a way, it actually provides the infrastructure for a more meaningful and economically empowering model for artists and their fans.

We’re not so different, you and I: dethroning the gatekeepers

Torrenting is similar to blockchain in that they are both peer-to-peer, decentralized technologies. With the rise of NFTs, the blockchain is also becoming a more common way of distributing content – another hallmark of BitTorrent. One of the key differences between these technologies is their users’ approach to intellectual property rights. 

What people have always appreciated during both the torrenting and the Web3 eras is that acts of creation are hard, interesting and worth rewarding and celebrating. IP is one way of ensuring that those acts of creation are able to keep occurring. In earlier regimes of IP, the value of acts of creation seemed overwhelmingly captured by gatekeepers, rent seekers and intermediaries. What this framing misses is that those intermediaries were simply a means of solving for “discovery.” With nothing but love to my fellow shower singers, acts of creation locked in an empty room are not going to help an artist pay the rent. Hence, the rise of publishers, labels, managers, agents and all the rest. Love it or hate it, this group was incredibly successful for a very long time given the specifics of technology and means of distribution. And by no means has discovery gone away as a major problem - allow me to show my collection of NFT Discords that have “shill on twitter” rooms if you need more persuasion. What sparked such intense conflict during the torrenting era, however, was the belief that this discovery apparatus had grown in power and value far out of proportion to the creative talent they were supposed to be supporting, particularly in a time of rapid technological change. 

A major goal of Web3 is to radically disintermediate the gatekeepers that torrenters were going after. If anything, one of the issues of Web3 is that they see gatekeepers absolutely everywhere. Using these transparent and decentralized tools, you can increasingly know that your hard earned dollar is going directly to the creators or projects you want to support. Open ledgers, smart contracts and white papers stand in sharp contrast to the impenetrable and confidential contracts that creators were forced to sign in the old world. People want to see new mechanisms protect creators, like IP has done in the past, and we can now feel confident that it is the creators themselves who benefit. In the words of one artist, the technology allows for “more creators, more music, and a more human experience.” Framing this as "IP bad then, IP good now" totally misses the point of both movements. 

Fighting for your rights

NFTs aren’t going to replace albums or physical art altogether. You (probably!) won’t need a crypto wallet to listen to music or collect something beautiful. They will create new experiences for fans, and will have a major impact on both licensing and the ability for creators to make a living. 

I spent more than four years building Twitch’s music offerings and spent quite a bit of that time toiling away in the DMCA mines, so I’m intimately familiar with the headaches that come with US digital IP enforcement. 

NFTs are a far more clear, transparent, interoperable, and efficient way to do business. All ownership details are written in terms that a simple computer can understand, rather than buried in legalese. Moreover, the simplicity of these contracts will encourage much greater utilization of licenses - much like how the shift towards easy-to-consume MP3s was the start of the music streaming industry. It turns out people want to and will do the right thing if you build products that make it easy for them to do so.

This means that NFTs can lower the barrier to entry for collaboration and create opportunities to inspire fans to become creators themselves. I love the idea that owning an album could also give a fan rights to remix/sample from it, play it while they stream, play it at their bar, or include it in a movie or podcast soundtrack.

Naturally, any rights that are associated with using NFTs must be owned by the artist or conveyed by the rightsholder. This is why independent artists will drive innovation and early adoption in the space - they have preserved a clean rights profile for themselves which gives them much more room to operate. Even signed and represented artists will have an opportunity to participate, perhaps, issuing art and collectable NFTs based on their likeness or art they’ve created. I’m enjoying seeing the creators who are using NFTs as merit badges or access passes to concerts or other live events. Many musicians are finding success using these new tools to transform their fanclubs with radical ownership and an opportunity to build a community together. 

Collaboration, not litigation

Blockchain technology provides artists a direct way to build a community with their fans by allowing them to identify fans, gift or sell things to fans without intermediaries, and form communities with shared artifacts and signals. These tools together offer so much more community building power than was available to artists twenty years ago - particularly when they were suing their fans. And all of these things are possible without the intermediaries that controlled access to consumers in the past. 

So let’s take a breath and give creators room to explore this new space. And if IP law helps protect the new things that are being built, let’s celebrate that. We can celebrate it secure in the knowledge that the most important tenets of the technological movements of the recent past are still in force: creating things is hard and creators and their creations are worth protecting. 

The discussion continues

Since this was initially posted it has sparked a vibrant discussion on the mechanics of NFTs and the reality of copyright law, particularly in regards to the NFTs offered by Royal. Here are my thoughts on some of the questions I’ve received:

Are artists able to "master" a record as an NFT? 

There's the "trivial yes" and the "it's hard, but yes" answer to this. The "trivial yes" is that NFTs can contain any kind of data, so it's quite simple to add audio content to an NFT, call it an album and declare it a whole new distribution model. But I suspect that's not what people really mean by this - they mean instead "Can an NFT grant you an ownership position in this album? Can you have rights to this album that you wouldn't have from buying a physical copy?" 

That's the "it's hard, but yes." Ultimately, for an NFT to convey properly understood rights it needs to have an interest in revenue streams attached. That means someone or (preferably) some program needs to do a lot of work: counting streams, collecting money, converting that money into crypto, sending it out. At present, all of this is easier for humans to do under existing commercial relationships than it is for smart contracts to manage. It remains the case that most companies prefer to secure the legal and commercial leverage that comes from bespoke, confidential agreements. And most companies are more used to dealing with humans than APIs. In a reductive sense, Spotify is the source of Streaming Royalties and Spotify remains A Company and not a Smart Contract. Therefore, getting money for your track involves a human doing work, which describes most of the “hard work” of making an NFT convey rights. ** **

Are publishers and labels cut out from revenue when an artist mints their track as an NFT? 

This process becomes exponentially more difficult if your rights are encumbered or owned by publishers, labels, or other components of the traditional music industry. This is why indie artists and massively large icons are the best target. If a publisher thinks they are due a payment for this song, nothing about crypto prevents them from finding you or a vital human involved in the chain (be they the artist or the facilitator I pointed out above). In fact, the open nature of ledgers and transactions on the blockchain makes this easier than it would be in a Web2 framework. This ultimately means that NFTs distributing royalties must continue to work within the existing legal system for IP ownership and rights management.

If that is disappointing to hear, well - it’s still early. #wagmi

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