Spotify just acquired Mediachain Labs, a blockchain startup based in Brooklyn. The team of Mediachain Labs is set to join the office of Spotify in New York to work on developing a much better technology for linking artists, as well as other rights holders to tracks that are hosted on the service of Spotify. Prior to the acquisition of Mediachain, the startup already developed numerous technologies that were intended to aid the same efforts.
This included a peer-to-peer, decentralized database to connect an application with information about it and media. They also worked on an attribution engine that is solely for creators. What’s more, Mediachain Labs developed a cryptocurrency that can reward creators for their contribution.
In short, Mediachain worked on leveraging blockchain technology to help find solutions for problems with attribution.
Of course, we all know that this area is where Spotify can surely use some help. As it turns out, Mediachain is perfect for Spotify. Just a year ago, Spotify settled a licensing dispute with the Association of National Music Publishers over unpaid royalties.
According to the association, Spotify failed to obtain a couple of mechanical licenses. Mechanical licenses refer to the control of a copyright holder over the power to reproduce songs. Spotify, as reported, failed to obtain such licenses for a significant number of songs that are in the service. This was in a report made by the New York Times. This issue has the potential to affect other streaming services, as told by the association. It’s been reported that 25% of the activity that is on streaming platforms nowadays is unlicensed.
At the time, Spotify agreed to pay music publishers over $20 million because of the settlement. That did not include the additional $5 million which is for the penalty. The company managed to avoid numerous class action lawsuits because of the settlement. However, it translated to a much bigger problem within the industry.
Spotify claimed that the only reason why it did not pay out royalties is because it did not have data which would help the company figure out the claims that were legitimate. The company also said that it did not know how to look for the parties. As it turns out, the company lacked a database that would cover all the existing music rights. Litigation was then opened, which is not the most ideal way to manage these payments.
With Mediachain, the digital music service now has a solution to the problem. However, the company is building a decentralized database instead of a centralized one with information regarding music rights.
According to Mediachain, its vision is a data layer that’s shared. The company thinks this is the key to the solution for the attribution problem as it empowers the rights’ owners and creators. It also enables a sustainable and efficient model that is for creativity online.
The team of Mediachain has experience in the music industry. The company noted that their CTO was a hire of Hype Machine, a music curation aggregator.