28 Days of Libra, is a series of blog posts set to analyze the founding members of the Libra Association and how each will benefit from the creation of the price-stable, Libra cryptocurrency. We will look at what it means for consumers as well as what it means for small business owners in each respective industry. All views and ideas expressed on here are hypothetical and meant to start a healthy discussion on the matter.
**Disclaimer** The libra cryptocurrency is still in the development phase and has NOT launched yet. Anyone trying to sell you any ‘libra’ is trying to defraud you. Only invest in cryptocurrrencies at your own risk.
Spotify is the worlds largest subscription music streaming service. With over 96 million paying subscribers and over 200 million MAU’s (monthly active users) overall, Spotify is one of the most dominant players in the music industry. They are also one of the 28 founding members of the Libra Association. Today we’ll look at what the creation of libra (currently in development) and blockchain technology solutions could mean for Spotify, consumers of their products and services, and the wider music industry in general.
Current Business Model
Spotify is a business that implements the freemium business model. The majority of their revenues are derived from offering customers two different services to choose from; an ad-supported free service and a premium paid service. The majority of their revenues (roughly 90%) come from the paid subscriber group and the ad-supported service acts as a sort of customer funnel to their premium services.
Spotify is in the business of connecting music-producers with music-consumers. Stablecoins, such that Libra would be, and other digital assets would revolutionize the music industry and be a boon to not just Spotify but to musicians, artists and consumers alike.
Blockchain Business Model
It is a fundamental belief of ours that the peer-to-peer, technological invention known as blockchain will allow for increased efficiencies in online marketplaces. Price-stable cryptocurrencies, like libra as well as other cryptocurrencies like Bitcoin, will allow for individuals and small business owners to transact directly between one another, cutting out costly innefficiencies in the existing system. It takes the prior system:
To a blockchain-based system where it’s more of a dynamic system and musicians can choose to do business with consumers on Spotify’s platform, or they could choose to do business with customers directly.
Bitcoin as a technology showed us that it was possible to create digitally-scarce assets and not have to rely on any third-parties to verify them. Because blockchains serve as a sort of globally-shared database, not owned by any one person or entity directly, it allows for individuals to have direct control over their assets. It allows people to ‘Be-their-own-bank’ and conduct transactions peer-to-peer on a global scale. The only necessary requirement being a cheap smartphone and an Internet connection. Money was just the first application, but the more we experiment with the technology we begin to realize that the concept of digital scarcity can be applied to most industries.
Digital Scarcity in the Music Industry
Currently, there exist many inefficiencies in the music industry. A report by the Rolling Stone stated that, on average, musicians receive only 12 percent of the money the music industry makes. This may amount to millions of dollars for the musicians with household names, but 12% as a small business owner (which is what musicians are) is unacceptable. Blockchain technology, such that Libra is being built on, would put more money in in the pockets of the small business owners (aka musicians) and take less out of customers wallets. Here’s how:
- The Tokenization of Musical Assets
- Every song published on a blockchain would be scarce in its digital environment. This means if a musician created an awesome new song, but only wanted to distribute 10,000 copies of it, they could sell those copies directly to fans and be confident that there would ONLY be those 10,000 songs created. The distributed nature of the blockchain database would make illegal streaming very difficult.
- Smart-Contract Programability
- We understand that there are many different parties involved in the creation of a hit song. Between the musicians, producers, recording studios, music streaming platforms, etc. every party would add some value to the creation of the song and hence, would deserve some cut of the song revenues. Blockchain technology allows for your digital assets (your new song) to be pre-programmed with self-executing smart contracts. So let’s say that every time somebody listened to your song you made $1. A prior agreement with your recording studio could state that you, the musician would earn 50% of song revenues, the recording studio would earn 40% and the streaming platform (ie Spotify) would earn the remaining 10%. So, in real-time, every time your song was listened to you would make 50 cents, your recording studio: 40 cents and Spotify: 10 cents. And all of this would happen without any need for human involvement
- Music Portability
- Tokenization of music would allow for absolute ownership of every song produced. If a musician created a song and tokenized it, he or she could carry that song over to any platform of their choosing. If the musician typically operated on the Spotify platform, but thought that the song would be more successful with consumers on Pandora, they could transfer the rights of the song over to Pandora. Or maybe they wouldn’t even want to deal with selling the song. Maybe they could sell the full rights to their new song to somebody on Ebay, and they could be responsible for selling it. Those 10,000 copies of your song could be sold individually or in bulk and at different price points. Not only does this give musicians much more ownership and choice over how to sell their music but it also has the potential to create 2nd, 3rd and 4th tier marketplaces for the trading and exchanging of music.
- Streaming Payments
- Cryptocurrencies allow for microtransactions on a global scale. In the old financial system, micropayments were never possible because of too many inefficiencies in the existing system. Libra would allow for ‘pay-as-you-listen’ type business models. So if you wanted to listen to Spotify but didn’t want to listen to ads or pay the monthly subscription fee for the premium-membership, you could opt for the ‘pay-as-you-listen’ model. Paying something like $.05 for every 10 minutes of listening time would make much more sense for consumers who only streamed occasionally.
Blockchain Companies already in the Space
These are but a few of the many ways that Libra and blockchain technology would drastically change the music industry. One could argue that Libra would be the biggest benefit not to just Spotify, but the small business owners and consumers that use their platform. Currently, there are many different companies working on these exact problems, notably, Ujo, Open Music Initiative and Mycelia.
Libra: In Summary
At the end of the day, libra gives us an opportunity to create a currency that works for everyone. A currency that could potentially ‘bank’ the 1.7 billion people in the world still shut out of the existing financial system. A way of exchanging value that worked as seamlessly and easily as sending a text does but on an instantaneous, global scale. A currency that offers small business owners a way to stay lean and agile in a digital marketplace.
If we have all the tools at our disposal to create a better way of transferring value, then why shouldn’t we do it? This isn’t a new business venture being launched by Facebook but an idea. An idea that’ll take the collaboration and cooperation of the word’s largest companies, organizations, governments and central banks from around the world. And after that the support from small communities in developed and developing countries all around the world. An idea that actually began 10 years prior on Jan. 3rd, 2009 with the creation of Bitcoin. To make access to financial resources a right for everyone instead of a privilege for the fortunate. For the first time in our lives, we have the chance to remake our global financial system for the Internet era. This idea is a whole lot bigger than just Facebook.