George: Okay so I have the pleasure to talk today Bruno Guez who’s an old friend and someone who I’ve worked with many, many years ago. We both worked with Chris Blackwell running…,running labels and have come back together around this sort of new and emergent industry and technology and blockchain etc. So Bruno thanks so much for taking the time to talk to us here at Music2020 today.
Bruno: It’s a pleasure, George.
George: Great. So a bunch of things and you’re such a great person to talk to about all of our mission statements that we’re trying to get at, in terms of getting musicians compensated fairly and redefining how the streaming services and other distributors can be better partners. And then, trying to get to a more level or egalitarian playing field about how artists can succeed on their merits. All things that you can talk about but what is so exciting to me about talking to you today is just your work over the past years on blockchain tech and technology generally. So, give me a little bit of background on you and how you came to be where you are right now, if you don’t mind.
Bruno: Sure. So I started in the musician industry when I was twenty-three and I began as a record label and quickly was signed as a label to Island Records. After Chris and I met, over the last twenty plus years I learned everything about the domain and become an expert in distribution, licensing and publishing and recording businesses. I also had a radio show for seven years on a national level public radio and station in Los Angeles called KCRW in the nineties. And so, I learned about broadcasting as well and artist development and artist promotion and ultimately their record label was incubated from my music show. So I’ve seen the whole transformation of the different business models over the years, from a model based on ownership to a model based on access.
Bruno: Add all the compression of the unit royalties and the economics really. But at the same time we’re in a different era now, where, with the explosion of devices and channels, there’s really a much bigger pie.
Bruno: Compared to what we used to have ten, twenty years ago. So in that I think the consumer space has really adapted to it much faster than the B2B space. And as a result the explosion of data has really been a challenge and an obstacle for many, many music companies or media companies. So partly because they just have not invested in updating their infrastructure to really adapt to……
George: And they haven’t had to or they haven’t benefited from it right? I mean there has been no pressure. You threw out some terms and there’s so much to unpack there and I want to let you keep going and I am sorry to interrupt. But you said the consumer side has embraced a certain set of needs, whereas the B2B (business to business) side is not yet catching up. Is that right? Are you suggesting that the consumer is leading?
Bruno: That’s correct.
George: Okay. So, continue. You’ve positioned us in this place where you’ve seen this arc of transformation from the sale of recorded technology to more of a streaming world. You’ve got systems that aren’t working well. Where does this leave the artist and where does your company Revelator come in? I’m assuming you’re getting to that.
Bruno: Sure. Ultimately what I have figured out is that without an integrated services and the infrastructure to really support the growth of rights owners…I don’t even call them just artists, but it’s really all the rights owners that are involved in the chain of rights that need to participate in that royalty split. So, ultimately if there isn’t a more automated or efficient marketplace where all the endpoints are connected and the data is moving and flowing more freely, we are always going to be in a very broken industry.
Bruno: I think part of my vision and my desire with Revelator is to really create a connected world for digital media, assets rights and databases. In the same way that we’ve connected as consumers, now we need to connect as businesses.
George: Yes, that’s so in sync with our [Music2020] very first tenant, help artists be compensated more fairly. Fair is one of those subjective terms. One of our theses is that it’s very hard to know what fair is because you have things like the Payola Laws; which, if those were decriminalized you could have a free market. You have, as you alluded to, governmental intervention with respect to streaming royalty rates or PRO [Performance Rights Organizations] rates, as well as of course mechanical rates. So, we don’t really know what fair is. When you say that it’s broken, is the brokenness a result of the systems not being integrated better, or is the brokenness a result of governmental intervention and putting their two cents in? Which in their defense…look there was probably a time in which blanket licenses and mechanical statutory mechanical rates and those types of things were necessary because we didn’t have the machines that would allow us to do it more efficiently. Can you comment on any of that?
Bruno: Sure, and I think if you think that the gatekeeper is back in the day are really recorded music or the radio stations.
Bruno: And I think Payola came from that because that was the source of promotion. How do I get my music played on that radio station? And then in the seventies and the eighties and partly some of the nineties the gatekeepers became the major record labels because the financiers they were the bank and they were taking the rights from the artist and then being able to provide them with mass distribution along with the marketing and promotion in an integrated way. It was a one stop shop for the artist. But in exchange they have to give up a quite a lot of their revenue and royalty. And ……..
George: And their underlying rights. I mean to their sound recordings for the life of the copyright.
Bruno: And now the gatekeepers are really the digital service providers. They control the distribution channels and the access to the audience and the monetization opportunity. And what I see in the next five, ten years there won’t be any more gatekeepers because we’re really moving to a decentralized and distributed environment. Where the artist will be able to connect with their fanbase and audience one on one. And really this is a game changer and technology can really leverage and enable this transformation of direct marketing and direct targeting of your audience. And you won’t really need the radio stations and the record labels as much as you did before when we did have the same level of infrastructure and services. Today it’s becoming a managed service.
George: I’m sorry I talked over you. Today we’re becoming a what?
Bruno: It’s all becoming integrated and managed services.
George: Integrated and managed services yes. So the big, the big hairy word that we use is this idea of disintermediation. And for a long time I’ve said that there has been three dominant waves of disintermediation and you hit on them. One was the time where the gatekeepers were the labels and they exchanged access to the finances to make a recording in exchange for the artist handing over the copyright to their sound recording. That was disintermediated through Pro Tools, “Hey, I can make my own recording, I don’t need your money.” And then label said, “Yeah but you still need us for distribution.” And then companies like TuneCore and iTunes etc. said, “No we don’t.” So that’s disintermediation step two. Disintermediation step three, and this is a little bit softer, is around promotion. Where, “Hey, labels, let’s say you still need us to get you out to the market, right?” And arguably social media facilitates that. I believe that the fourth era of disintermediation that is upon us now is around transactions. Where now people should be able to transact people and industries, all sort of flowering. And you and I have both put our respective money, literally and figuratively, on a technology called blockchain technology. And that’s, that’s what I think you’re alluding to in terms of distributed sort of systems. Could you talk a little bit about that?
Bruno: Sure and ultimately within that framework the right’s owners are able to have not only more transparency, structural transparency and revenue transparency but also a rate transparency. Where they can decide how much they want to sell or how they want to structure their different business models for on demand and streaming and subscription and so on. So ultimately the business models are going to also be disintermediated. So the power moves into the hands of the right’s owner where they get to decide how they want to transact. So you know software is eating the world. We hear that all the time and really software becomes a front end experience, user experience around how do I make sure that I can track and monetize and do my reporting and royalty and attribution and payments.
Bruno: So lead this into integrated and managed service such as Revelator or other companies that are trying to go after the space are offering not only the ability to manage everything in one place in an integrated way but then be able to keep track of all the transactions on blockchain. Now the way companies have operated in the past is in a very centralized way. So there could always be one point of failure. And a centralized environment is not going to be as efficient as a decentralized or distributed environment where the transactions are happening much, much faster and much more directly between the entities and the parties that are doing the transaction. So ultimately disintermediating the big technology players and moving to a more peer to peer environment around transaction is part of our future and it’s already here. So we’ve already started putting in place an infrastructure whereby we could actually scale transactions to be unlimited. We can do about five thousand transactions per second today.
Bruno: Yeah, the bitcoin blockchain does about seven. And PayPal does about hundred fourteen and visa does about between two to four thousand.
Bruno: Even though they do have a high capacity of fifty six thousand at peak. So already on a private blockchain environment which is what you want to create and you want to be able to manage the governments and the cosmic capacity when you’re a business. So we offer a private launch in infrastructure where the rights owners and the rights managers are able to publish and push through a lot of transactions in a very secure and safe and efficient manner.
George: So, great and so important. And kind of dense but you’re explaining these dense things really clearly and I appreciate that. But, so a bunch of things you said in the middle there, this idea of disintermediating in the transaction, the business you alluded to, this idea and I think this goes to what we were talking about earlier about let’s get whatever middle man the government out of it whoever. Let the artist set a price that they are willing to have their works utilize for. Let’s have buyers, users, consumers, whatever, and I use that word very broadly, it could be an individual listener, it could be a radio station, it could be whomever; let’s have them find a match in the way any free market would work and there that is how I do believe we get to our first tenet here, of how are musicians compensated fairly. That would allow us to know. And then that would allow us to say, “Hey look I set a price point for my music, no-one’s buying.” Well, then you’ve priced it too high. Or, I set a price point here and everybody wants it. Well simple economics says demand goes up so the price is right. So it allows us to finally get there. And what was keeping us from doing that was, well, that’s hard to scale. And, what you’re suggesting now is that through technologies like blockchain tech, we can. That then changes the role of these streaming services etc, where they can actually be more like partners. It could be more of a partner relationship because the value proposition is less about the transaction and more about the exposure. Is that a fair statement?
Bruno: And within that part of the technology can provide the supply side.
Bruno: We can understand how to make that work well. But then the question becomes okay now I’ve set my pricing and they know how much I want to sell at.
George: Right, right.
Bruno: But how do I generate demand?
George: Yes, love it.
Bruno: Ultimately the audience today is the big distribution centers or channels are the digital service providers.
Bruno: That’s where the audience goes to experience different types of business models. So ultimately the artists want to be on these services because that’s where the audience is.
Bruno: Plain and pure. But ultimately, until we have better mobile applications or web and mobile solutions that can actually help me better manage my audience and engage them and market to them or the tools to help me really create the demand, until we have that, we still need the current gatekeepers (you know, the digital services.)
Bruno: And once you’ll be able to actually be able to manage and create the demand for your product and mange your audience more directly at that point I do see it becoming a fully autonomous solution for artist.
George: Yeah I love that. And so my partner Scott Kirby has the notion that this allows for a social network, in the truest sense of that word. Andy Weissman who I think you and I both know from Union Square Ventures says, “Look, we shouldn’t have four, five, six streaming services or service providers, we should have six thousand.” Is that where this heads?
Bruno: Absolutely. Why can’t I subscribe to Blue Notes streaming service or Berg my favorite record labels because I know that if I like the curation of a label I’m most likely going to like a lot of the artists on that label. And I’ve always been puzzled why on the streaming services I could never search by label.
Bruno: Why? I mean I want to follow all the sound. I want to follow more acts, I want to follow these labels. I don’t know the artist necessarily. So if I was able to search by label I would have a lot more access and I would have a desire to be able to follow that label as a channel and be able to subscribe to that. We don’t have that model today and that’s really strange to me. So, Andy is probably right saying there should be six thousand because if there is six thousand record labels they should all be a streaming solution.
George: Or I should have my own or you should have your, I mean you did, part of your background was that. So it does empower it and that’s a key tenant. A couple of key tenants of blockchain we should talk about. The first one you sort of already hit on is well in order for these prices to be set and matched by the participants you need something that in blockchain speak is smart contracts. Things that are able with when a set of requirements are matched they self actualize. And then the data, the payment whatever spit out to the appropriate right’s holders. The other thing, and Imogen talks about this idea that the fans can be empowered to promote through, not necessarily financial means, but just because their promotion can be tracked down the chain and they can be rewarded whether through access or other things is, I think, a very important part of this. Can you talk about that a little bit?
Bruno: Sure and I think the idea of collaboration and crowd collaboration whether crowdsourcing or crowdfunding. Earlier we talked about a social network I really look at it is as a social exchange.
George: Social exchange. I love that.
Bruno: Right, because essentially it’s a market place.
Bruno: And it’s an exchange and the buyers and the sellers are determining the market value of the assets.
George: Right, free market.
Bruno: So, yeah and the music today are digital assets. They’re transacting in a digital way. It’s a digital file. There’s a recording and a composition or an audio visual recording connected to that. So, ultimately however many streams and downloads and plays and views a certain asset has should be able to determine the relative value of that asset. And then the market itself decides the pricing and I think that’s where it’s going to go.
George: I love it.
Bruno: Bruno you’re so articulate, you’re so smart and one of the things I’ve always admired about you is you take it from these very high levels but then you get down into the dirt and roll up your sleeves and build it. I mean you’ve built this technology. This is not conjecture, this is not hypothetical, this is something that you’re working everyday on, that you’re launching, that you’re putting out there into the world. So what does it look like? What’s our trajectory over the next however period of time you wanna say to help us get to these three main points: getting musicians compensated more fairly, redefining the roles of the streaming services, and getting to that more egalitarian playing field?
Bruno: Sure, and I think there is still some certain challenges that we can touch on in a minute but ultimately I think what we’ve done well over the last year is really solve the transparency layer.
Bruno: By providing a better user interface to access the revenue and the rate transparency for rights owners and we have a unique architecture where you literally open a portal to anyone that’s in the chain of rights. So it’s no longer from you to me, or from a distributor to it’s client, but now that client can also open it up to their customers and right’s holders. So this motion of passing through the data and payment information across the chain of rights I think now we have nailed that and we understand that. We solved the transparency issue, but now how do we actually go beyond that and get the services to actually provide more real time data? Because currently they’re still paying on a forty-five to sixty days, and in some cases record labels pay on a hundred eighty to two hundred and seventy days, and then the rights society can pay quarterly and to up to twenty months before you collect the money.
George: That’s crazy.
Bruno: Yeah, the issue really becomes around the payment now. I can see the data why do I have to wait so long to actually get paid?
George: Because they’re making money on the interest by holding it.
Bruno: Or it used to be the record label would reinvest some of those proceeds.
George: Well yeah and they had returns and all those things that no longer apply.
Bruno: So why can’t the payment be more real time? And to me the obstacle and the challenge we still have to face is that the services don’t report in real time. It’s already better because on Revelator dashboards you can actually see daily what’s going on. So now we’re talking about actually taking that next step and saying, “Well, why can’t we pay out based on the daily data?” So, we’re starting to get into factoring and receivables essentially again. We know at the end of the month Apple and Amazon and Google and Spotify will pay us. So we’re actually going to provide advances towards the revenue that’s coming in on a daily feed. Since they don’t know, the artist will not have to wait forty-five to sixty days or longer to actually get paid. Part of my mission is real time data, real time transactions, real time payments and blockchain technology is a great instrument for those things.
George: That’s so great. Bruno thank you for your time. Any last words before we sign off?
Bruno: No I think we covered a lot. It was an exciting talk.
George: It was a great talk for me. Thank you for all you do Bruno. Thank you very much.
Bruno: Alright George, speak soon.