Integrating blockchain technology with user-centric payment system to form an alternative royalty distribution model for reducing royalty inequity

Abstract

Over the past few decades, digitalization plays a key role in shaping the music industry. By forcing radical changes, digitalization fundamentally disrupts the recorded music industry by changing how music is made, distributed, and consumed. Within years it becomes impossible to overlook the emergence and the impact of streaming services. The growing demand for accessing music through subscription- based streaming services transforms how the recorded music industry generates revenues. Even though streaming music is much more preferred and more accessible than buying physical copies, it becomes harder for musicians to collect their revenue share from streaming. Therefore, streaming services faces growing pressure and challenges to be more transparent with royalty management and faster with their payouts. This research discusses the current state of the recorded music industry by leading factors that led to the streaming services' lack of transparency and inequality in royalty payouts. This research summarizes copyright and royalties involved in music, and the complex structure of the recorded music industry by discussing the absence of standards for handling metadata and the lack of remuneration from music streaming. How royalties are allocated according to the current payment system, Pro Rata - Market Centric Payment System, is explained in this research. In return, an alternative royalty distribution model, User-Centric Payment System, has been described as reducing inequality in royalty payouts and compared with the current distribution model Pro Rata. Due to rapidly emerging technological developments, there are new opportunities for reevaluating the current royalty distribution model. Blockchain technology is being recognized as having the potential to change the music industry's ecosystem from its foundations. Further integration of blockchain technology with a User-Centric Payment System has been proposed to form an alternative royalty distribution model by providing insight into how blockchain may address these challenges by offering more transparent and almost instant royalty payouts. Finally, this research outlines further research and development on blockchain-based solutions for royalty distribution.