LI G H T P A P E R

Redefining Music Distribution Through Blockchain

04.09.2018 | 1.9

The music industry is being taken over by the back door and if we don’t try and make it fair for new music producers and artists then the art will suffer.

- Thom Yorke

““

(Radiohead)

Streaming now dominates downloads and physical sales. Habits of music consumption are drifting ever further towards fully digital, all-you-can-eat experiences.

T

H

E

P

R

O

B

L

E

M

Fig.1 — US Music Market Share

Source RIAA

2012 Streaming 15%

Physical 39%

Downloads 43%

Synch 3%

2017

Streaming 62%

Physical 16%

Downloads 19%

Synch 3%

However, there’s a problem... Working artists are finding it increasingly difficult to make ends meet in a streaming economy that pays so little.

Minimum Wage$1472/mo

Google Play 210,000 plays

Apple Music 230,000 plays

Spotify 380,000 plays

Pandora 1,200,000 plays

YouTube 2,400,000 plays

=

Fig.4 — Playing for Minimum Wage

Source RIAA

Music revenue is seeing the largest year over year growth since the dawn of digital music. And, consumers are listening to more music than ever before

U S

REV E N U E I N

MI L L I O N S

1H 2013 1H 2014 1H 2015 1H 2016 1H 2017

$2,213$2,122

$2,263

$2,666

$3,235Fig.2 — An Industry on the Rebound

32.1 hrs2017

201626.6 hrs

201523.5 hrs

Fig.3 — Listening Is Up

US

A V G

H O U R S P E R

W E E K

Source RIAA Source Nielsen Music 360 2017

Fig.5 — Ripped From the Headlines

Fig.6 — Who Gets What

So where is the money going?Giving consumers virtually every piece of music ever recorded at their fingertips comes at a price for artists and retailers. In the wake of losses sustained during the explosion of free and ad-supported digital music, major labels and their publishing partners have fought to maintain heavy financial control over the industry and the squeeze is felt on both ends of the supply chain.

60% 30% 10%

P U B L I S H E R S & L A B E L S

A R T I S T S & R I G H T

H O L D E R S

R E T A I L & S T R E A M I N G S E R V I C E S

Source RIAA

iHeartRadio Has Filed For Bankruptcy forbes.com - 3/15/2018

Will Pandora Media Ever Turn a Profit?

thefool.com - 2/28/2017

Spotify’s Loss More Than Doubles Even as User Growth Surges

bloomberg.com - 6/15/2017

verge.com - 11/17/2017

Why Rdio Died?

And, even though revenues and listening are growing, streaming services continue to operate at huge losses, pushing us further towards a future controlled by Apple, Google and Amazon– who have many other sources of revenue.

S T R E A M I N G

THE

eMusic is at a crossroads. Do we stay the course and focus on a shrinking digital downloads market? Do we enter into losing streaming agreements that conflict with the company’s ethos of championing the indie artist?

Or, do we double down on our beliefs and make a move towards fixing what we see as a flawed system?

eMusic is embracing Blockchain and its ability to correct an imbalanced industry.

O

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O

L

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T

I

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N

D I G I T A L D O W N L O A D S

Fig.7 — Destination Ahead.. .

50%

50%

SMART CONTRACTS

A R T I S T S &

L A B E L S

R E T A I L E R S

Fig.9 — The New Split

How Royalties Flow in the Industry Today

We Want to Create a True Two-Sided Industry

Leading the Transition to BlockchainCurrent streaming models mean musicians and songwriters are only compensated after labels, distributors, publishers and other intermediaries take a disproportionate cut. As a result, competition is increasingly limited to a few retailers and support is reserved for the largest commercial artists, which limits consumer choice.

Efficiencies driven by a decentralized Blockchain-based music platform enables fair distribution of revenue

Fig.8 — A Race to the Bottom

Artists

30%58%12%

P U B L I S H E R S

R E T A I L E R S

L A B E L S

1. A fully transparent system of distribution

that can be used by any producer/ creator of music, from the unencumbered artist to a major label with 1,000s of artists on its roster.

2. A frictionless method for existing retailers

and streaming services to enter profitable content agreements, while offering the same music to their users.

3. A set of tools for managing royalties

and rights holders that provides instant access to funds and the flexibility to redistribute rights.

4. A seamlessly integrated system for

music fans who don’t have to change their listening habits or their players/apps of choice.

Fig.10 — The New Industry

eMusic’s Blockchain Platform will provide:

We Are Re-Shaping the Music Industry

MUSIC FANS

3RD PARTY RETAILER/ STREAMING

eMUSIC RETAIL STORE ARTISTS

LABELS

RIGHTS HOLDERS

MUSIC CATALOG

eMUSIC BLOCKCHAIN CROWDFUNDING

eMUSIC BLOCKCHAIN ROYALTY MANAGEMENT

eMUSIC BLOCKCHAIN PUBLISHING PLATFORM

Blockchain simplifies transactions.

The technology itself is nothing

new, however it is rapidly advancing

beyond applications limited to

digital currency and opening up a

whole new world of possibilities

wherever financial value of any

kind is involved.

Supply chains and other economic

structures complicated by

intermediary processes can be

simplified and their efficiency

increased by digitizing the

transactions involved, distributing

them on a public ledger and

allowing the parties involved to

interact with each other directly

rather than having to go through a

central node.

What is Blockchain?

Fig.11 — Simplif ied visualization of Blockchain

Blockchain BenefitsFor Music Fans• Support artists - more of the money you

spend goes straight to the artist

• Pay less - operational efficiencies are passed along to consumers in the form of lower prices and better incentives

• More music - discover a wider variety of artists as promotion is less and less reserved for only the biggest sellers.

• More choice - buy or stream from more independent services rather than being increasingly limited to Apple, Google or Amazon

For Music Creators and Rights Holders• Efficiency saves money - multiple

contracts and 3rd party agreements are reduced to 2 contracts

• Retain more of the royalties - straight forward 50/50 deal between rights holders and retailers / streaming services

• Access royalties faster - rights holders get immediate access to royalty payments

• Unprecedented insight - levels of sales and usage transparency

• Control your music - Release and post-release cycles controlled in one place

For Retailers and Streaming Services• Increased profitability - proceeds from

sales/streams split 50/50 always

• Simplified royalty payouts - no need for complicated equations. One sales contract

• Attract bigger and better artists - whatever your model, you’re able to pay more

• Frictionless - work with existing content providers

CONTENT SMART

CONTRACT

SALES SMART CONTRACT

SALES SMART CONTRACT

SALES SMART CONTRACT

DOWNLOADRETAILER

eMUSIC BLOCKCHAIN

RADIORETAILER

STREAMINGRETAILER

RIGHTS HOLDER #1

RIGHTS HOLDER #2

RIGHTS HOLDER #3

Fig.12 — Smart Contracts Do All the Work

Fig.13 — Davids v. Goliath

The shift to Decentralization in the music industry is inevitable. There are a number of Blockchain music projects being considered, but they are inherently flawed.

Blockchain + Music

Many ignore the economic realities of the music industry and pitch their new platforms in direct competition with the likes of Spotify, Apple, Google and Amazon. Their success will rely on attracting users and content creators away from these providers.

Tying the success of the platform to a new storefront or streaming service limits consumer choice. This is Centralization through Decentralization.

We sold our first digital music download way back in 1998, and have served over 49 million music fans worldwide. Now we will disrupt the music industry yet again with a Blockchain platform that cuts out the bloated intermediaries and rewards the artists and providers that are giving fans the best listening experience.

Fig.14 — We Love Company

eMusic Is Different

It shouldn’t matter how you listen to or buy your music. The

artists you love should always be rewarded

for their work.“ “

But wait, there’s more...eMusic will introduce a brand new Blockchain-based crowdfunding platform that allows fans to support their favorite artists in return for limited rights to music.

Because Blockchain is a publicly distributed technology, artists and rights-holders on the eMusic platform are free to open contracts to their fans.

Source RIAA

CONTENT SMART

CONTRACT

SALES SMART CONTRACT

SALES SMART CONTRACT

SALES SMART CONTRACT

DOWNLOADRETAILER

eMUSIC BLOCKCHAIN

RADIORETAILER

STREAMINGRETAILER

RIGHTS HOLDER #1

RIGHTS HOLDER #2

RIGHTS HOLDER #3

FANS

Fig.15 — Smart Contracts for Fans Too

Fig.16 — A Brand Always Evolving

1 9 9 8

World’s first online mp3 music store.

Introduced credit-based subscription model

Leading the industry transition to Blockchain

2 0 0 4 2 0 1 8

The eMusic store will continue to be the go-to destination for independent-minded music collectors. It will retain its current membership model, but there will be a number of key improvements:

More MusicSavings made by switching to Blockchain technology means more money will be funneled into attracting artists and labels to the platform - established and up-and-coming.

Pass On SavingsLikewise, reduced overhead costs and fees means eMusic is able to offer more member bonuses and incentives.

Added FlexibilityBlockchain allows us to explore new payment options and incentives for members, including credits that don’t expire and variable bonuses

Better User ExperienceThe inherent flexibility and scalability of Blockchain means eMusic is prepared to adapt and offer new features and benefits that will make the best user experience possible.

So what does Blockchain mean for eMusic Members?

The Team

Tamir KochCEO

21 years of entrepreneurship and leadership; Two previous

successful exits.

Nir PeledCTO

More than 16 years leading

software and engineering teams.

#ProgRock#80sAlternative

Michael Juskiewicz CFO

Over 15 years investment banking experience. Specialty in public and

private capital raising and M&A.

Matt DowningCMO

More than 20 years of experience, including launch of SiriusXM Streaming Services.

Lara PetersonDirector of Marketing#IndieEclectic

Ricardo CabretLead Front End Developer#JazzLover

Alex HernandezDirector Label Relations + Merchandising #DJ

Eric ChangUX Designer#TeenyBopper

Daniel KarniFull Stack Developer#Hamilton #OnRepeat

Eliza DunawayFront End Developer#IronicTeenyBopper

Ashi AtlasProduct Manager#Metalhead

Guilherme BirkMobile Developer#ShuffleButton

Shauli BrachaQA Engineer#EvenMoreOfAMetalhead

#90sHipHop #ClassicRock #TechnoLover

Matt RobinsonAVP Product

Multi-platform product specialist. 10 years experience bringing B2C

software to market.

Bryan Farevaag Creative Director

10+ years of UX/UI experience, Oprah Magazine, guesterly and Random House. Faculty at SVA.

Ram Avissar Community Specialist

Over 6 years community- building experience for a number

of succesful projects

Ori Erez Blockchain Expert10 years leading technology

projects in the fintech industry including invest.com.

Stas OskinTechnology strategy & partnerships at WINGS.

Sebastian StupuracCo-Founder WINGS; Adviser to AdEx,

Blackmoon Crypto, INS.world.

Yaron AdlerFounder We Group, Incredimail. Chairman

of Crowd-funding platform Exit Valley.

Bill CampbellFounder Barefoot Media, formerly executive

roles with UMG and Sony Music.

Oded FederbuschCrowd-funding expert. Advisor Exit Valley.

Founder We Group. Owner, f.r.a.l.y holdings ltd.

Our Advisors

eMusic reserves the right, in its sole discretion, to change or modify all of or part of this Lightpaper at any time.