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- 1 The term royalty comes from an Old French word ‘roilte’ which means royal right.
- 2 Blockchain is a distributed ledger that records transactions.
- 3 NFTs can help in facilitating equal and fair distribution of an artist’s work.
If you are an artist, especially someone from the music industry, chances are you might have encountered issues over the royalty generated over the use of work. A songwriter can simply take his cut initially from the entertainment company or whoever has hired him and it is done. But it must not happen this way.
Several artists across the globe are not paid honestly for their work. Even if they do get paid, only a few generate ample revenue from it. However, a system where an artist gets paid as soon as their work has been used and they receive a royalty for it would be a game changer. Blockchain potentially is one technology that may help with this.
What is Royalty?
The term royalty comes from an Old French word ‘roilte’ which means royal right. Owner of something holds the right to be paid if someone uses their work. In the art industry today, this sum, which an artist deserves, is typically shared with third parties.
Different types of royalties include book royalties, patent royalties, performance royalties, and more. Performance royalty is paid to a musician or a songwriter where his work has been played. Streaming platform Spotify is currently the best example for this.
However, the payments are made every month to artists based on the agreement of a music distributor or label. Moreover, it has laid down new policies for royalties which will allow songs with over 1,000 streams to be eligible for the payment.
On platforms like these, well-established artists are an issue to the emerging artists today. However, this depends on the quality of the work and better works get listened more. With blockchain, the problem is solved as the technology helps in creating true ownership of the work and with the help of smart contracts, payments are made for each time it is used.
What is Blockchain?
Blockchain is a distributed ledger that records transactions and is able to track tangible and intangible assets in a business. Information has become the new oil for businesses today and blockchain allows anyone to store and share it with the stakeholders.
Each transaction is recorded on a unit called a ‘block’. It may contain any kind of information one chooses to store and then it is locked. Blockchains are secured in a way that a hacker would require over 50 percent control over a blockchain to start manipulating the data.
Interestingly, this is not it. As the data is stored separately on separate blocks, a malicious actor would need to change the information stored in there manually, which may take a massive amount of time.
As of now, blockchain utility remains primarily in finance. Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Solana (SOL) use blockchain as their underlying technology. Moreover, non-fungible tokens (NFTs), also considered crypto’s cousin sisters, also use it. To this date, Ethereum remains the biggest blockchain to cater to the NFT ecosystem. Data shows over 80 percent NFT transactions happen on Ethereum today.
How Blockchain Can Help With Artist Royalties
NFTs can help in facilitating equal and fair distribution of an artist’s work. It allows content creators to charge whatever fees they have set up for their work. This works best with secondary market sales. What usually happens is that after the initial sale, especially in paintings or digital art, an artist never gets the part of royalty from the secondary market sale.
In case of non-fungible tokens, they guarantee a percentage of fees in the form of royalty that an artist will get through the secondary market. For example, an NFT is sold for $100 in a market multiple times, and every time a transaction is completed, the original owner will get the set amount of royalty in it.
But many choose not to go down the NFT path as smart contracts are not backed by any legal authority. Only the platform enabling them upholds the responsibility. To this, crypto associated markets are usually witnessed by individuals promoting bogus projects that may be financially risky.
The entire crypto market is based on trust and anyone thinking of pouring money should think of safety before potential returns in investment. Because you may get an empty bag as a return if invested in a fraudulent project.
Is There a Need to Generate Resale Revenue?
Think about this, someone created an art, sold it for pennies to someone, and heard someone sold it for Millions – this actually happened. In 1963, Harvey Ball sold his famous yellow smiley face for $45. The iconic image was then sold for $500 Million in 2000. Similarly, a painting created by Robert Rauschenberg was initially sold for $900, and later for $85,000.
According to the United States Copyright Office, visual artists, in contrast to other artists, are at a unique disadvantage in terms of revenue generation. “In many, if not most instances, only the initial sale of a work of visual art inures to the benefit of the artist and it is collectors and other purchasers who reap any increase in that work’s value over time,” the report dubbed ‘resale royalties’ read.
Several artists have tried implementing royalties for their work through legislation, however, they have failed to do so. But a few regions like France have these rights and artists there can earn through secondary market sales.
Blockchain is an emerging industry even though major companies like International Business Machine (IBM), Walmart, PayPal, and more are already using it. Although these companies do not belong to the artistic field, this showcases that the technology is in fact, entering the mainstream. Its implementation in the art sector could revolutionize payment distribution and eliminate the need for a third party that tries to take what artists deserve.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
