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RMIT: The case for an Australian Creative Blockchain as a public utility

Posted: 2 December 2019 7:19 pm
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When the benefits of blockchain are clear, the process of elimination leads to the case for a government industry utility blockchain.

One big obstacle to blockchain adoption is the fact that when someone asks "does this need a blockchain?" the answer is often "no".

In many cases, there's no clear technical reason to use an inefficient decentralised ledger instead of a more efficient centralised system, so businesses will decline to jump on the blockchain hype train.

But when you factor in fuzzier social equations, such as the resistance of industry incumbents, many of those "noes" turn into "yeses".

For example, according to a new "provocation paper", prepared by the Royal Melbourne Institute of Technology (RMIT) on behalf of the Australia Council for the Arts, Screen Australia and the Australian Film, Television and Radio School, many problems in the creative industries, "including metadata issues that affect royalties in the music industry and access to transparent data from streaming platforms in the screen industry" could be solved at any time.

They "could be resolved immediately if incumbent industry players and technology platforms were willing", the paper says.

"These do not require blockchains; open standards and APIs would suffice. However, platforms and other industry players have been unable or unwilling to coordinate for the benefit of creative practitioners."

It just goes to show, when you ask the "does this need a blockchain?" question, you need to be crystal clear on what "this" is.

When you ask whether creative industries need blockchain to streamline royalty payments and share data more efficiently, the answer is no. But when you ask whether artists need blockchain to get paid a higher proportion of the total revenue generated by their work, the answer is yes.

This is one of the obstacles to blockchain adoption that RMIT has identified in its report. Even if the technology can deliver objectively desirable outcomes, such as an all-around more efficient creative industry with less wasted money and higher pay for artists, the state of the current industry is such that it will not necessarily be adopted.

"It is not clear that the blockchain economy will progress beyond the margins through natural market forces," the authors say. "Some level of industry coordination may still be required."

This is not unique to creative industries. There are many examples of these sorts of "dead zones" where market forces alone will not result in blockchain adoption, even if the outcome is objectively superior overall.

This is the context in which RMIT floats the idea of an Australian Creative Blockchain – a blockchain as a public utility.

Defining superior results

When attempting to justify a creative blockchain public utility, the first question is why more revenue for artists and creatives is an objectively superior outcome? Why is it desirable? Why should we just assume that artists make more of an economic and cultural contribution to society than copyright lawyers do?

First, there is a wealth of evidence pointing at the importance of culture in "social inclusion, technological diffusion, and even health," RMIT says. Second, there are solid economic arguments in favour of more pay for creatives.

The creative services sector is a massive and growing "employer" and content consumption is growing, but pay in the creative services sector is declining.

As of 2018, "the number of people working in the creative services sector is growing faster than the overall Australian workforce, yet the income of cultural producers – artists, musicians, performers and screen producers – is in decline. Lawful consumption of digital content is growing, yet many creative practitioners are not seeing appropriate returns from these sales," the paper says.

And all of this comes at a time when content is easier and cheaper to distribute en masse than at any other point in history. There are no physical manufacturing or distribution costs, and all the required data can be electronically recorded and transferred, but the intermediary layer that benefits from these developments is also taking a larger cut than ever before.

Essentially, the industry is going rotten, and there are solid economic and cultural benefits to putting a finger on the scales and tipping things back into equilibrium, the RMIT paper argues.

Framing the problem

The reasons the scales are tipping away from artists and towards middlemen are complex, but can in part be attributed to the rise of digital media, which sees artists needing to spend more time promoting themselves on social media, more time learning how to navigate copyright trolls and takedown algorithms, and more time navigating the complexities that today's industry infrastructure foists on them.

In addition to paying more of their revenue to the increasingly convoluted industry infrastructure, this means spending less time practising their art, which undermines the quality and quantity of the end product and hurts the entire industry. There's also the matter of straightforward revenue distribution.

Consider Spotify, for example. It gives artists a new way of reaching an audience, but it also adds an extra layer to the stack that already includes record labels, publishers and collecting societies. By the time the money passes through that fat stack of intermediaries, there's just not much left.

As of 2019, independent artists can no longer upload their own music to the platform. They have to go through approved distributors.

One of the problems is that the only way Spotify can ensure all contributors are appropriately paid is to send money through that nest of middlemen, and the only way artists can reach the Spotify audience is to run their work through those middlemen.

And even that doesn't actually guarantee that artists are paid. There are no real standards for song metadata, so there's no guarantee that an artist will be paid royalties when their song gets played depending on where it gets played. The music industry's "black box" refers to the billions of dollars of unpaid royalties that cannot be allocated to the artist because poor metadata means no one knows who they are.

Similarly, the participants in this complex ecosystem don't disclose where the money goes or how much they take. For example, do you have any idea how much of the ad revenue from a YouTube video with a song in it goes to the artist? Google doesn't give details, but what little it has said publicly doesn't match with what anonymous insiders say.

The problem, in simple terms, is that the space between artists and consumers is a black hole where data and money go in and never come out.

Why blockchain?

The solution is to bring transparency and accountability to that space between creatives and consumers. One way of doing this is to rely on the middlemen inhabiting it coming together to agree on a new set of unifying standards and open APIs, under an overarching commitment to perfect accountability and doing what's best for the artists.

Or you could use blockchain.

In much the same way that blockchain can guarantee the legitimacy of each Bitcoin, it can also trace the original copy and original owner of a digital product as it enters the ecosystem. Instead of depending on an unknown number of unknown intermediaries to perfectly record the metadata of anything as it changes hands, you can permanently attach that metadata to the digital asset itself.

In many ways, it's the perfect solution to the problem. But this only makes its limited uptake all the more striking. It's seen sporadic use by individual companies in the value chain, who can individually benefit from it, but these savings don't necessarily translate into higher revenue for artists, in much the same way that the efficiency of digital media relative to CDs didn't mean higher revenue for artists.

To achieve that end goal, the solution will have to face the artists themselves in a way that lets them cut out unnecessary intermediaries. In the words of the RMIT, it's "an attempt to rebuild a creative economy from the bottom up. These applications empower creative practitioners through marketplaces that are less reliant on intermediaries, where they can be guaranteed payment for works and where contracts are handled by software.

"Old industry incumbents and new technology platforms alike have failed to demonstrate a willingness to embrace an open and accessible 'internet of value' (as blockchain is known). Without concerted efforts to coordinate practitioners and stakeholders (arts organisations, creative firms, funding bodies, collecting societies and others), including shared digital infrastructures and open standards, these benefits may never be realised."

The case for an Australian Creative Blockchain as a public utility

The industry has shown that it won't fix itself. Rather, some kind of external force is needed. And if you want to try to push an external solution onto the industry, blockchain is the best option because it goes right to the heart of the problem, ensures transparency and enforces compliance through automation.

From here, there are several different types of blockchain solutions that may emerge. But by the process of elimination, a government-driven Australian Creative Blockchain ends up being the most sensible, the RMIT paper says.

Public vs private blockchain

First, consider a public vs permissioned blockchain. A public blockchain is a system where anyone can participate, such as Bitcoin or Ethereum, while a private blockchain is a network under the control of an individual entity, small group or consortium of sorts.

While other industries, such as the travel industry, are exploring public blockchain projects as a method for busting incumbent intermediaries, the nature of the problem in the creative industries may lend itself more to a permissioned blockchain.

In part, this is because public blockchain solutions encounter problems with scalability, security, compliance, issues with stolen content being immutably uploaded and sold direct to end users by pirates and a myriad of other issues that come from being primitive, unpredictable and ever-evolving networks. But more pertinently, it's because the goal here is to minimise effort for the end user (the artists) and reduce the time and energy they need to put into participating in this ecosystem.

In the nearer term, with public blockchain solutions, you run the risk of simply replicating the current problem by fragmenting the ecosystem among many different solutions and standards. And if the ecosystem doesn't fragment, you're left in a situation where the artists either need to spend time and energy actively participating in the ecosystem or handing monopoly control to whatever group controls the blockchain solution.

That leaves permissioned blockchains.

Government vs private sector permissioned blockchain

Once again there are two options that may emerge. One is a government industry utility blockchain and the other is a blockchain built by a private consortium.

And at this point, the argument heavily favours a government industry utility blockchain, the RMIT paper suggests.

"The argument for government rather than private consortium provision of an Australian Creative Blockchain rests on the consumer benefits of competitive open access to the infrastructure," the RMIT paper explains. "A private consortium could potentially block access to competitors and thereby attain monopoly rents and other beneficial forms of market control.

"However, those same rents are also the incentive for private research and development, financing and construction costs to build an Australian Creative Blockchain by a private consortium."

What this means is that, even if you do just leave it all to the private sector, and even if a private consortium eventually does pull together and build a suitable blockchain infrastructure, the resulting blockchain would have natural monopoly characteristics, at which point you'd realise with the benefit of hindsight that you should have just built a government public utility blockchain anyway.

"Such an infrastructure may not make a profit, but will likely enhance the overall productivity of the creative industries. Automating many routine aspects of creative industries business administration using blockchain-enabled technologies can potentially lower operational business costs and enable substitution of creative labour away from administrative tasks, toward creative content production. In both dimensions, this pushes creative businesses toward improved profitability and growth, and therefore sustainability," the paper says.

"Moreover, the country or region that is able to develop a protocol and infrastructure for the business administration of the creative industries may set the standard that other countries choose to adopt. Such an outcome would prove an effective tool of soft power that gives the country in question a strategic advantage in global trade via the export of creative content and administration expertise."

After that, all that's left to do is make some creative content worth exporting.



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