The Emanate Intro Series explores the fundamental issues that face the music industry today, these articles provide an overview of some topics that may not be familiar to those who are new to music, blockchain and cryptocurrency.

Are blockchain-based micropayments the way forward?

We are well and truly in an era of ‘access over ownership’, where people prefer accessing services over owning assets. This means listening to music on Spotify, Apple Music or Amazon Music instead of buying an album or track online or even offline. Even holding MP3s on a hard drive is perceived as a hassle to gen z. These streaming platforms are like your own personal jukebox, listen to as many songs as you want, whenever you want, just by paying a small monthly fee. It doesn’t take up too much of your system memory, is available on almost all devices with internet access, and provides a great way to discover new music with personalised suggestions.

The Recording Industry Association of America (RIAA) report for the first half of 2017 confirms this trend of music streaming in the USA. The fact that YouTube plays too many advertisements and doesn’t pay the video creators well only adds up to the popularity of other music streaming applications.

Emanate micropayment exchange

The rise of micropayments

Micropayments are online financial transactions that involve small amounts of money. Although it usually consists of any purchase below US$1, each company has a different limit to classifying something as a micropayment. For example, any transaction below US$10 is considered micropayment by PayPal.

The first generation of micropayment-based systems emerged in the late 1990s, but none of these took off. With the popularity of the internet and internet-based commerce, the 2010s saw another series of services that enabled these small transactions.

Micropayment in music

Online streaming is one of the areas that played a significant role in bringing micropayments to the masses. This form of payment can be advantageous to the listeners, creators, and producers of music.

Consumers: Micropayments make tracks easily available to music lovers, at affordable rates. They need to pay only for the content they need, rather than paying for an entire album. The customers have the power to choose what they want and what they don’t. Moreover, the tracks they’ve paid to listen would be available in all of their devices connected to the internet.

Musicians: The creators of music can benefit a lot from this model if executed correctly. The fans are not forced to buy an entire album just to listen to one track, thereby reducing the number of illegal downloads. Every time a user streams or buys a record, the musician gets a part of this revenue. This would also push the musicians to deliver quality content to their fans.

Producers: Micropayment methods make it easier for producers and record labels as well. It lets them get the payment each time their music is streamed, however small that revenue be.

Issues with the current system

The micropayment system is a viable business model, especially in the music industry. But, just like many other good business models, the lack of proper execution and the refusal to update the model has created problems for its users.

Registration: Micropayments are made possible by third-party applications such as PayPal, Amazon Pay, and Stripe. The user is required to create an account in these platforms to be able to make a micropayment transaction.

Transaction fee: Services such as PayPal and Amazon Pay charge 5% of the transaction amount and 5 cents per transaction, Although the charges of these micropayment providers are lesser compared to a credit card transaction or wire transfer, it adds up after adding the authorization fee, cross-border processing fee etc.

Payment delay: With third party involvement, the time for successfully completing each transaction also increases. It typically take 2–3 days to get the money credited to one’s account.

Complexity of system: The user interface (UI) and policies of micropayment systems can be a bit complex for someone who doesn’t have much experience or knowledge in the same. This would make things difficult for both the user and the music provider. Hence, it is important to invest time and energy in understanding the UI and policies of the system.

Varying rates: The revenue paid to the record labels and artists are different across and within different streaming services. The streaming platform and record label usually strike a deal, which is not made available to the artists. The amount paid to the artist every time a track is played is usually at the discretion of the label. In other words, the micropayment systems are not transparent.

It’s time to update the business model

So how can we integrate micropayment into music streaming industry and create a stable business model out of it?

There are three immediate issues to be resolved: lower the transaction fee, bring down the transaction time, and create a transparent and fair payment distribution system.

So could Blockchain be the answer? Here’s how the technology can be used to solve the issues associated with micro-payments in music streaming, and the things which need to be improved before mass adoption can happen:

Low transaction fee: With some blockchains, you can altogether avoid expensive third-party payment services. Pay and get paid in tokens. These tokens get accumulated in your crypto wallet. You can either sell these tokens for other cryptocurrencies or fiat money or use it to pay for other products and services on the platform. The fee for crypto transactions is low or non-existent, and will further reduce in the future.

Immediate payment: Crypto transactions are processed 24x7. Instead of waiting for a couple of days to get your money credited, you get paid in tokens or cryptocurrencies within a few minutes, can we get that down to a few milliseconds?

Fair distribution: Since every agreement between the streaming media, label, and artists is bound by smart contracts, the payment distribution would be automated. That is, if a user listens to a particular track, the payment received through this streaming is immediately debited from the user and divided between all the people involved in the contract.

Easy-to-understand UI: We are making the Emanate platform as user-friendly as possible so that you don’t have to waste time understanding unnecessarily complex policies, processes, and technology. It’s one of the things preventing mass adoption of crypto right now, and musicians need to concentrate on creating amazing music.

We strongly believe that blockchain-based music services will improve the music industry in the long term. We are building a technology platform for the blockchain era with artists, creativity and collaboration at the very centre; connecting all participants in the music ecosystem to drive transformational change for the industry. While the technology is still maturing, we know we must start now.

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