J1 AG 06 Jack Spalone Ujo Music s Vision for a Music Ecosystem of Tomorrow

so we're gonna kick it off let me just get a time check I actually perfect 308 so not too late I didn't time this presentation so if we finish early maybe we could do some QA I could also do a demo I was actually gonna get up here and do a demo but we staged our application live last week on rink B test net so you guys can all go play with it yourself yeah so music and aetherium I'm Jack Spallone I'm with you Joe music which is a consensus application or yeah consensus application we'll call ourselves a little closer gonna be talking about a constant tale of building towards decentralization versus going to market it's been plaguing a lot of applications in this space for the past four years so I'm gonna talk a little bit about the music business as it's pretty important as it relates to aetherium and a lot of that context is necessary to understand where the intersection is so we're gonna talk about three pillars of decentralization as they relate to music the value of a theorem and what I can bring to music and then at that point I'll give a little bit of background on music royalties and the copyright structure and licensing and then from there I'll give a brief history of you Joe what we've done where we've been where Joe fits into music what we're doing now and we hope to do in the future yes a quick Ludo has been around for almost four years it was it was in it was its spendin offer almost four years and still in a space that's in its pre infancy we have yet to scratch the surface of what can be done but we've built a lot to get there so hopefully I'll get a little bit into that today my background as an undergrad I created a blog in college that aggregated all the local events instead of going around and finding where events or what events were where I decided why doesn't someone just make a blog that has all the events and all the different venues chronological I learned really quickly about paid placements and media bias and it was like oh this is crap so I sold the blog got rid of it I left the music industry I wanted nothing to do with it it lacked professionalism what have you then one of the promoters came to me it was like hey I really liked what you did and we want to beef up our digital promotions would you want to get into talent buying and I was like that sounds really enticing I would love to be working with Asians that sounds like a little bit more establish than what I was doing prior so I got into that and then a few months after that I had ended up losing a lot of money on a show and I broke even on all my profits to date so I decided I'm out of the music industry and that was the second time I did that about six months after that someone reached out to me it was like hey I want to manage artists would you want to like come and like help me out with a lot of their digital representation at the time we brought an artist over from Australia to Orlando Florida where I was living and we paid for this this kid to have an artist visa and we were able to get him on height machine every single time by just getting him on all the blogs that hype machine tracked hype machine back in like blog house days was the largest syndicate of like up-and-coming music and we just had a formula for getting on hype machine and getting she number ones every single time six months later we signed the second artist we started managing to Sony Music and to me it was like a loss of the creative direction that we wanted to maintain and I was pretty bitter about it so I started thinking like one I really really really hate the music industry I've now left it three times but it was a good lens to look at through Bitcoin because through like curation and financing and potentially programming licenses in fanship and patronage for that matter Bitcoin provided a really really cool global solution to a lot of the problems in both curation discovery and other problems I saw in music so enough about me let's talk about decentralization in music a little clicker here so there's three main pillars and this is how I want to put it we often think or say that the internet broke the music industry that's just absolutely not true peer-to-peer technology broke to music industry specifically with Napster is the music business release of music it was peer-to-peer technology that first uprooted the supply chain and its businesses as we know it this happened with the creation of Napster distribution in music in 1999 was a 15 billion dollar market globally dominated by CDs and depended on an enormous amount of physical infrastructure this was like retail stores trucks actual like manufacturing plants for printing CDs right it was a huge business and it largely was just wiped out overnight by a Napster but that was incomplete as peer-to-peer networks abolish the entire business of music via disruption or via distribution they didn't enable sufficient infrastructure for payments to thrive in a decentralized peer-to-peer way so here we are almost 20 years later music industry has largely as we knew it then been destroyed but we think we have something now right so from 1999 to 2009 recorded music sales and licensing revenue fell from what 15 billion dollars to right around 6 billion dollar that's a massive wipeout right ad-supported streaming such as Pandora YouTube and Spotify helped bring that back up but there was still a lot of issues with that and I'll get into that now these companies were not built to built on peer-to-peer networks either that's important to note these were just it was conventional centralized architecture so I'll make a point about how you know as a fan you might go on myspace music back in 2004 follow a couple artists create a couple playlists MySpace goes down you lose all of that connection then you go over to YouTube you do the same thing you follow a couple artists on like VEVO then that doesn't really become popular and SoundCloud becomes popular you lose all those connections so did the artists you got SoundCloud you lose all those connections now because Spotify and this is going to keep happening unless we actually have something underpinning all of this in that relationship so meanwhile the music business played a reactionary game not an innovative one never has and it hasn't yet to date there's been like exploration but music industry itself has had to play a reactionary game because you know punks out there that will just disrupt it very easy BitTorrent pushed the envelope of distribution put the two remaining but the two remaining pillars in a technical solution for a new music ecosystem remained absent that's where aetherium comes in so this whole like theory of blockchain for music largely enters as streaming takes off so for the one time for the first time we have this huge disparity of what artists know their music is being like how much the music is being played but how much they're actually getting paid so like with iTunes you have digital downloads with CDs you have actual sales tangible sales your your record can go platinum and you know that but for the first time you can say holy my music has been played a million times this week yet I'm getting paid less than ever so artists call call file particularly songwriters call foul and meanwhile blockchain sitting there like this huge theoretical solution Adel best album of the year twenty five never let it on Spotify Taylor Swift revokes her catalog off Spotify streaming was the villain right smart contracts meanwhile are like this huge solution for royalties a theoretical one but just like a glaring example of what's possible this was just the start so aetherium put forth the greatest tool for reimagining the relationship between musicians and fans that technology has ever provided this isn't a solution of just royalty payments this is fan and artist interactions and that's really where this started to become powerful and it really became interesting so since 2014 the music business has attention on blockchain is a solution has come way ahead of schedule the development though has not but let's step away from like decentralization of music what's important is to understand like the legal frameworks and licensing for this because that that really kind of justifies how complicating this all is so as long as two pieces of copyright you have the recording in a composition so recordings like the tangible medium think analog era like vinyl CDs that's much easier to think about all of this stuff through recordings like the actual recorded work done in the studio the composition is the actual written song like the sheet music this is become increasingly blurred but these are typically managed by two different parties and have different licensing frameworks so in America I will use America as an example I'm from the US and America is rarely ever less complicating than anywhere else with few exceptions so it's a good example basically you have one side collecting one one royalty and another collect and the other the recording is licensable there's real T's based under the consent decree at story rates for the composition so this is this is pretty straightforward right as it relates to streaming though there are two royalties we have a blanket license and mechanical license depending on what kind of application you are you have to pay both so for a blanket license that's like a broadcast think like radio uh venue retail stores restaurants that all comes from the analog era you would pay like a blanket license to a Performing Rights Society this via like an annual subscription and then they based on a market share would distribute royalties that was like just out of sake of convenience at the time in an analog era there's too much paperwork to actually go down hunt down set lists of what actually is being played there's a lot of problems there but it worked effectively people were satisfied on the other hand you have mechanical license is this is the right to reproduce not a right to reproduce but our royalty you owe every single time you reproduce something there was a lawsuit with Pandora on whether or not actually streaming a song is reproducing it and it turns out that a stream is a reproduction which now just makes this increasingly complicating so as it relates to different licenses there are different rates there's interactive and non interactive interactive is easy it's like a deliberate selection of music on Spotify like I want to play this song non-interactive it's passively listening to it via like you know the genome project on Pandora right still pretty straightforward make sense so the rates are predicated on how you access that music are you subsidized or are you not subsidized there's actually different royalty rates on whether or not you are a paying user say ten dollars a month or whether or not you have a 14-day free trial or have ads supporting that actual consumption so this is this is easy you can kind of follow it back up and see what the different royalty rates are so did I skip ahead yeah so this leaves out like other countries so I'm an American let's say that someone picks up my recording they get the the rights to it and they play it in South Africa or let's say France so it's s I'm gonna pay me the the Performing Rights Society here no that's called neighboring rights I would actually have to have a publisher or a management team that is registered in France so that I can make that money back and more complexity of this the different exchange rates for this this is like we're dealing with over 100 currencies as it relates to collecting societies across the globe when you want to trace all this back it usually takes long periods of time I actually had insight that a major label likes neighboring rights because they leave money in certain countries and gain interest on it they're running a credit business they're not really in the music business right so it's sort of problematic it's like we had this assumption that hey we could solve solve all of this for you and then we find out like no we actually make a lot of money on gaining interest on holding that money where we do okay so two forms of copyright to royalties that relate to streaming to modes of consumption all of which has to be paid through different parties at different rates this still sound like a fun problem to solve yeah so what this results in is more than confusion slow to move supply chain legal red tapes and opaque licensing deals have become the norm artists not getting paid is an overused Blake in statement so let's forget that how much more can artists get paid if we start to break down these obstacles and better yet how many new artists start to get paid if we just eliminate all these obstacles altogether like if I'm just someone who now uses digital instruments in my bedroom and want to put something up on soundcloud I'm sure as hell not gonna use a manager a publisher to go around to every single country and sign me up with the collecting society in that respective place it just doesn't make sense yeah we're in a digital world and we don't have this infrastructure so that all is you know pretty boring and cumbersome right let's let's let's use a metaphor because I think it's important to bring it back we're not necessarily talking about a commodity music is a lot like food I actually love this metaphor unlike you know the music business and it has its put out think of music like food sure it's a commodity in some places but it's also something you can create in your own home for your family right in front of them live and serve them it's a cultural piece of artifact every different region has their own different taste their own different styles and one has their own interpretation of it everyone has their own intentions with it certainly it's like you know big business but at the same time is the big business obstruct obstructing the actual consumption of it on a cultural level think like GMOs in America agribusiness in America think about that like the music business and like you know an organic local farm-to-table farmer as someone who's just jamming out let's not forget that this is something that's ubiquitous across humanity it's important so you're probably wondering where you Joe if it's end all of this so I'll give you a brief history in 2014 boo Joe was like a music platform idea with the conception of consensus so founded by Joe Lubin along with consensus there was this idea that even the obvious nature of smart contracts applying to royalties theory UM's a great or music is a great use case for aetherium so at the time it was like alright let's let's build towards this idea of an entirely shared world computer that everything fluidly operates on we were not actually making any compromises on architecture we weren't looking to like stage a front end using a you know normal database none of that it was like let's use the theorem for everything and let's actually just build along the trajectory in which the development of etherium happens so this is that struggle of going to market versus building towards decentralization so we were sourcing ideas talking to people getting other ideas people were coming in and coming out giving like you know different use cases and the ideas were just endless everything from like financing events the ticketing events everything around music people wanted to use blockchain for it who knew it would blow up even more so fast forward 2015 continued to I da ting planning more a lot of that brought some people in at Def Con one in November in China the koala IP working group formed with simon de lu Riviere who's a new Joe and census member basically it was like how can we take copyright and legal frameworks and migrate them into emos that work in a content addressable network a lot of what we were talking about was solving a lot of the music industry's problems like you know actually settling the differences of who owns what on the composition recording side wasn't necessarily a problem that need a blockchain but maybe something that just needed to move into like an object-oriented storage network just like okay well this is great layer than it was a theory I mean you can really do a lot of cool stuff so towards the end of that year at the same time the Udo team released a collaborating team global collaborating team released the Imogen Heap prototype this was the first use of smart contracts for dividing royalty payments you can see here we had different licenses download licensed em streaming sync policy and a sign Heiser contract at the time this was really cool it was also really cumbersome it had its own wallet is like clunky and it was really really graphic so fast forward to 2016 and the music business very susceptible to being disrupted hence Napster was like okay what is this blockchain stuff how can we actually get ahead of this so the open music initiative was created this was a cross industry global effort to explore inefficiencies a music supply chain through founded by Berklee School of Music in Boston the United States and in collaboration with MIT and Intel there was a lot of members there's over 200 members spanning both the tech side in the music business everyone from Jack Chain resonate Oh Joe - like Spotify Pandora major three labels and even like redbull media was a part of this everyone was in this thing because block it was going to be the next big thing effectively we explored applications at the same time on our own or huge I did on their own for composition and recording database it was a non-market fit at the time and fell short of what the full potential we saw was I was like great we could build this for you you can maintain the IP but it misses the full point of what we want to do with the theorem and that's more of like yeah we can migrate you into these new structures build api's and make this all content addressable for you but we didn't really want to do that so we had a chicken in the egg problem if we if we're not going to build something for music and it's extremely expensive to license it what are we going to do because we can't demonstrate what we want to do with music without it and we certainly can't enable any cool fan features without it either so with the complexities of licensing music bottlenecks eliminated end-to-end like you know if we're working for a PR oh and they have to go through Fiat and some paper trails to get to you know like the Harry Fox agency or a label it just didn't make sense so 2017 would you align the sand well that's uh 2018 2017 line in the sand product segment and focus let's go after unencumbered musicians there are so many musicians across the globe that don't have a label deal don't have a publishing deal and aren't even registered with the Performing Rights Society so those collecting societies so what we did was we said hey look this solves the chicken the egg problem it's not great it's hard to maybe grow traction off of this segment but it'll get us out in the market to experiment with some of our assumptions so by building this we were focused on people with you know the idea that there's a prole earth a proliferation of digital instruments so many people have digital instruments on their Mac books right now like any computers across the globe so many people can upload music to SoundCloud you could make music that and there's music that's been made that's made top 40 charts a billboard with a literal laptop keyboard this to us was like a no-brainer okay let's go after that segment just to experiment some of our assumptions against you know combine that with like the writing and recording process that difference of recording and Composition that's sort of been blurred and become intrinsic if you're in Ableton you're playing around with different instruments effectively writing a song as you're also recording it rarely do those types of people ever send it to a studio to be mastered unless they actually get a label deal so these places these people need services or infrastructure that serves them the security that they need as an individual creator so in 2017 we started building our product but this is many different pieces that we had been working on to date but the quality we built the JavaScript implementation Alex ATAR did that we also built console 8 which is an IP FS file persistence layer this one with swarm as well we did a lot of interviews and market research basically just to do our own due diligence but we learned a lot through that and we also released our private alpha of the creators portal which was like super buggy and it was just a registration flow for artists at the time whose only supply facing there was nowhere to push your music to but it used a lot of these open source and decentralized components that we were really excited about getting out there so then yeah fast forward to 2018 this is live the creators portal it's on rinkeby test net right now you can goto yujo musicom go and click try alpha and check this out but effectively it's an application level implementation of that ecosystem that we've been building towards it allows creators to register themselves associated with an etherium address that the register with using meta mask they can register after registering themselves their music group and then they can register a release this could be a single this could be a full LP what-have-you but basically this just models current copyright frameworks and licensing frameworks but merging the recording in the composition right now it's on rink B but you can go in as a single user register a single music group and pushes many releases as you want a cool thing about that is and when you actually register your release you can set different license policies for each right now we're only offering a download license which you can control the rate of but in the future this is a supply-side implement implementation of an ecosystem where many demand applications can come in and plug in and then determine what kind of additional licenses we offer so the user is always going to maintain control but you can actually go in and create many different licenses that can be picked up via registry so I'll get into that but right now on the rink B test net we only allow one user to make up a music group with our main net release in May it's gonna be a multi stakeholder Music Group enabled so multiple people can comprise a music group which you know finally realizes that vision of dividing payments immediately so yeah what are we currently using we're using aetherium we're using it for payment right now we may or may not stick with that for the long term we don't have a lot of traction or we like prioritizing getting market traction again this is just a validate a lot of like technical and UX assumptions we have so we're using aetherium for licensing as well which is pretty cool and something that like is really powerful so with every purchase we actually give a badge out which is not effectively the license but it's a signification of ownership of that digital download and I will caveat the digital download it's something we want to move away from right because if file goes offline you don't know how many times it's being played you lose a lot of the power that you have in the theorem but if like a Spotify plugs in and we have a stream license then this is actually starting to become powerful we're using IP FS we're storing the metadata that we create in quality an IP FS we're printing it up via aetherium we have constant late for that we're using IP LD we're not referencing anything via IP LD at this time but we're basically putting C IDs on all of those different registrations because we're moving towards that like Merc alized forest that wonbin a is known for terming using madam asked for wallet and then obviously you know this is not all holy decentralizing AWS for storing and serving the site so Simon made a good point you know this architecture requires you Joe to exist at various places indexing payment validation and file disbursement Gujral provides a centralized components that are necessary for it to work at this point in time but this is not something we want to do long term again it gets us to market but this is something that we really want to decentralize and in the future as this space goes up so yeah what's that a system look like we're gonna be announcing a lot of this stuff soon and open sourcing a lot of it it's open source as it is but we're not really publicizing it but our Creator and license registry we're gonna have those collectible tokens and places where you can actually have value for them so applications that plug in and say hey you have that token you purchased the fifth album of that artists release great like I'll trade you at the at this rate or just a place to exchange them for not necessarily monetary value but like social clout value indexing searching API gateways this will be important and critical we're doing some pretty cool stuff with porting over discogs and musicbrainz information which we'll be talking about in the future open law integration open law is another consensus project but basically dynamic legal agreements so in the actual interface we're gonna be using all the information you put and that will actually create a legal agreement that will put on ipfs and then of course that will be content addressable and we'll be issuing those to the purchasers when they purchase something as well and then there's gonna be applications across platform think we're moving away from the supply chain that's linear with many many intermediaries to a circular one with many many on ramps and off ramps and all this stuff just sits in the middle and it's maintained by aetherium and decentralized architecture so thank you yeah i just want to give a shout out to the whole you Joe team Joe Luba and everyone at consensus and the asset team for organizing this and just to wrap up this technology from its inception has been incredibly inspiring what started with unique financing events for artists with Bitcoin was blown open with aetherium the ways of funding recording distributing and discovering music can now all be reimagined with the balance of working with the existing players and experimenting with new ideas we're heading towards a really exciting few thanks guys