Keatly Haldeman heads up blockchain-based music licensing marketplace Dequency. Here, the company's CEO explores the music strategy across the metaverse and what it means for artists and labels…
Just as in the real world, music has become a must-have fixture for the myriad virtual worlds known as metaverses. From background music to media soundtracks to virtual concerts, music’s inherent, inarguable value has translated to these new digital frontiers.
However, music licensing in virtual worlds brings with it all the complexities and difficulties that we’re used to in real life as well… in addition to some novel considerations. Add to that the decentralised nature of some of these metaverse platforms, and music licensing becomes incredibly challenging (not that it wasn’t already!).
Why is it so hard to know how to license music in the metaverse? Much of the nuance lies within the ownership structure of these new digital worlds. In order to understand, here’s a quick lesson in the differences between centralised and decentralised metaverses.
A centralised metaverse is a virtual world that is controlled by a single entity. It owns the servers that host the metaverse and has full control over the rules and regulations. Perhaps the most well-known examples of centralised metaverses are Roblox and Fortnite.
By contrast then, a decentralised metaverse is a virtual world that is owned and governed by a community (at least in theory), usually via the blockchain. This means that no one person or organisation has complete control over the metaverse, and that the rules and regulations are set by the community that inhabit it – with populations often reaching into the tens of thousands. Decentraland and The Sandbox are two such examples, both of which are built on the Ethereum blockchain.
Regardless of how they’re structured, every metaverse needs an effective music strategy that determines how music is valued, licensed and consumed – a thorough and thoughtful music licensing strategy ensures that metaverses and their users can benefit from and make use of music creatively and legally, while ensuring proper remuneration for rights-holders.
Every metaverse needs an effective music strategy that determines how music is valued, licensed and consumed
Centralised metaverses like Fortnite and Roblox are way ahead in terms of music strategy.
Roblox has licensing agreements with several catalogue owners, providing its users with access to a vast resource of music. Fortnite’s parent company Epic acquired Bandcamp in a headline-grabbing move, one likely reason of which is to facilitate easy access to music for its user builders. Both platforms have proven that they can be valuable partners to the music business, with the ability to move the needle for an artist when used creatively.
On the other hand, decentralised, Web3 metaverses such as Decentraland and The Sandbox are lagging when it comes to music licensing, presenting more challenges for the music industry in terms of enforcing compliance. In these cases, platform-level licensing is harder to establish as a result of the distributed ownership that characterises them.
Take the case of Decentraland, which faced pressure to agree to a blanket licensing agreement from SOCAN after its inhabitants used copyrighted works that SOCAN represented for public performance rights. Decentraland responded by highlighting its decentralised nature, arguing that the responsibility for obtaining licences lay with the platform’s ‘landowners’ who are ultimately accountable for infringements within their digital properties. Additionally, a licence with SOCAN would only grant public performance rights. Landowners would still need synchronisation licences from each label and publisher that owns the rights they wish to use.
Reports suggest there are up to 10,000 daily active users in Decentraland alone – all of which would have to individually get clearance from multiple rights-holders every time they wanted to use a track in their online world.
With the right technical licensing infrastructure, these metaverses can ensure their users are legally compliant while staying true to their decentralised ethos. Dequency’s Web3-powered, peer-to-peer marketplace for on-chain music licensing addresses this directly. It tackles, among other things, the challenges of licensing music for decentralised, blockchain-based applications, offering solutions for discovery, legal compliance, and on-chain licensing and payment.
As we’ve seen with previous tech platforms, including the OG decentralised platform, Napster, the day of reckoning will eventually come. It’s only a matter of time before a Web3 metaverse reaches a population size where the absence of a music licence cannot be ignored… and we won’t be able to sit around the table with a parent company rep to thrash out a deal. It will be down to the decentralised autonomous organisation (DAO) that governs the metaverse, otherwise it will fall to individual users to find licensing solutions for their digital properties.
While decentralisation is empowering, it also shifts much of the responsibility from centralised entities to individual content creators. Therefore, it’s in the interest of both sides – the music industry and metaverse creators – to develop a licensing approach that aligns with the customs of Web3 and benefits all parties. This will enable legally defensible user-generated content for the next wave of the internet and allow music rights-holders to reap the rewards of this flourishing new channel of business.