“Only thing that you regret
You need more time to forget
And you don’t come close
You don’t come close
You don’t come close”
“Don’t Come Close” from Road to Ruin, 1978
Rare is the Ramones song simpler than “Don’t Come Close.” It’s one of many peppy songs on Road to Ruin, the third of the band’s celebrated first four albums.
Startups at the intersection of music an blockchain don’t come close—to be successful businesses, to providing value for their token holders, to changing the music business. Not just yet, and for some of them, not ever.
After spending a few months looking at startups in music/blockchain, the song “Time Bomb” (Subterranean Jungle, 1983) comes to mind, (not “Time Bomb” by Rancid), as does “Every Time I Eat Vegetables I Think of You” (Subterranean Jungle). Many of these companies lack the preparation and focus of the average music startup. It’s as if writing a white paper—the crypto world’s hybrid business plan-prospectus—automatically adds legitimacy to an endeavor. It doesn’t.
The tokens of the 13 music-blockchain startups listed at MyMusicToken have a combined value of $27.3 million at the current, depressed Ethereum price. One of these startups was ridiculously valued at over $115 million when Ethereum prices peaked in January 2018. I wouldn’t buy a token from any company in the group until it shows discernible progress.
But I’ll add some positive, generous caveats:
- To be fair, music blockchain companies are operating well ahead of the curve—an inverted curve?—and a low survival rate is to be expected.
- Blockchain technology has value from the artist point of view: transparency of the sale/stream and payment; immediate payment; minute transaction costs.
- Prominent companies are using or considering the use of blockchain technology, such as JP Morgan, Amazon, Microsoft, Comcast, Walmart, Seagate, HTC, MetLife, State Farm, Bumble Bee Foods, …the list goes on.
- Forrester sees much progress in blockchain technology. The analysts notes an “abundance of platforms, with improved tooling and services” and an expects to soon see a “steady stream of enterprise-relevant launches.”
But blockchain has a long way to go for widespread adoption in music. One of the most glaring problems is the token, a platform’s unit of value. An artist paid in tokens needs a functioning exchange to cash out in fiat currency such as the U.S. dollar. Some startups want to create a marketplace in which tokens can be exchanged for goods such as stems and loops. It’s a good idea in theory: a new currency accepted throughout a marketplace, somewhat like the BerkShare in the Berkshire Mountains of Massachusetts.
One big blockchain problem is how companies lure token — sometimes implicitly, too often explicitly — with the chance a token will appreciate in value. In other words, token buyers are often speculators, not people who actually want to use the tokens for their intended purposes, not people who want to participate in the business.
But setting aside the profit motive, tokens that cannot travel off platform could become worthless. When you obtain a token, you hope somebody is making a market. In other words, somebody needs to buy your token for you to obtain the fiat money (dollars, euros, etc.) that pays your utility bills, puts gas in your tank, and allows you to eat. Maybe someday all grocery stores will accept Ethereum. Until that happens, you want fiat.
Imagine being a Wall Street bank caught with “toxic assets,” the name given to subprime mortgages stuck on a bank’s balance sheet. Just as you don’t wouldn’t want to be left holding a mortgage when an owner defaults, an artist wouldn’t want to hold tokens that could plummet in value before being cashed out for fiat currency (unless landlords start accepting crypto). In effect, being paid royalties on a blockchain platform turns every artist into a cryptocurrency speculator, if only for a moment.
It’s a digital world. Physical product and warehouse-to-retailer distribution are sick, not dying, but they won’t recover.