It is only a year ago I stepped into the world op crypto currencies, starting an account here at Steemit. Since then I've researched a lot about what crypto currencies are and how they work.

I also read a whole lot of hallelujah stories about how blockchains and crypto currencies will change the world for artists like musicians and producers. How big corporates in the music industry can be bypassed and the earnings on the music created by the artists will flow into the pockets of the artists itself and not to others.

I do agree blockchains will support artists to have more control over their music and it provides more transparency on the monetisation of their work, I disagree with the statement artists will get a (much) larger cut of the revenues generated with 'selling' their music, or on and off stage performances.

Although today it seems when eg posting a track at Musicoin or even here at Steemit, revenues of 100s of US Dollars can be made - which is even for most of the professional electronic producers a LOT of money - we have to realise we are with cryptos in a very early stage.

In the remainder of the post I'll talk about:

• Currencies Inflation Model and what this Results to in the Long(er) Term
• Limits to Earnings with the Example of Steem
• Music Industry and What is Required to be Relevant in a Free and Open Marketplace
• Realities of Today are not that much different to the Realities of Tomorrow

image: Fusion Festival 2015 (Germany)

Currencies Inflation Model

Most crypto currencies are based on an inflation model, ie every day new units of the cryptocurrencies are created a distributed in some way. We all know when we create more units of the same, the value of each unit will decrease, since the value of the total will stay the same. For Euro, US Dollar or any other fiat currency that is the case. And this will also be the case for crypto currencies, at some point in time.

Since crypto currencies are still in the early stage, the value of these currencies does increase over time quite a lot due to speculation, but this will at some point in time stabilise. While during the time between now and the full growth and establishment of crypto currencies, quite a lot of money can be made, by anybody, therefore also artists, at some point in time we will have to deal with the dynamics applicable to established currencies.

Any established currency will have a more or less stable value as a whole (call this market cap), and any crypto currency will trend to some stable value at some point in time in the further.

Lets assume Steem will survive and will be one of the dominant currencies in the world, and therefore in our lives. We may even pay our groceries in the small local bakery around the corner with Steem. A bread 'today' may cost us 0,01 Steem, and tomorrow the price will be the same, and a week later as well, a month later also. Well, a year later that bread may cost us 0,011 Steem, 10% more expensive. Why? Because the fact Steem currency has inflation build into the currency. Every single day we create Steem that we distribute. We create more Steem while the value of Steem in total (we already called this market cap before) did stabilise (again, I'm talking about some time in the future when crypto currencies become dominant currencies, like the Euro and US Dollar are dominant currencies today). At that point in time, the economic 'laws' applicable to fiat currencies, will be the same for the dominant crypto currencies. When we live in those times, most of us who earn Steem cannot benefit from the value increase of Steem itself anymore, we actually will suffer from inflation, ie Steem today is valued less in a year from now, and in ten years from now and so on.

Limit to Earnings

Now we've established the realities around crypto currencies, that they at some point in time become more or less stable and actually will decrease in value per unit over time due to the inbuilt inflation model, lets take a look at the possible money distribution power of crypto currencies and towards music genre/segment; using Steem as an example. Lets assume:

• Steem Value is stabilised at 10.000 (10k) US Dollar
• New Steem distributed every day = 40.000 (40k) (this is an assumption, but I dont think I'm far from the truth here)
• 5% of all Steem distributed daily is going to music related posts
• 10% of all music related posts are original tracks posts by the creators/owners
• A good amount of music created in the world is posted to the Steem blockchain, lets assume this is 50.000 tracks per day (incl professional, none-professional, short tail, long tail, everything)

The facts are then:

• 400M US Dollar is distributed on a daily bases to the entire Steem eco system
• 5% to music posts = 20M US Dollar to music posts
• 10% of that to original music = 2M US Dollar to original music
• 50.000 new original music posts daily = 40 US Dollar in average to each track

We all know that most of the earnings will go to the top x posts and therefore artists and/or tracks, and when we would apply the 80/20 rule, this means that 80% of the tracks will receive 20% of the 40 US Dollar, which is 8$ in average.

Is this enough income for a sustainable life of an artist? Maybe when you live in Nigeria, or Bangladesh, yes, but when living in the western world it does not even cover your daily food. Let alone you will be able to create 1 track each single day?!

Of course, I took al sort of assumptions, and all those can be debated. But realise I took huge numbers, also for the value of Steem. The reality today at the Steem blockchain is that most of the tracks posted get cents on the post. Some posts get solid reward, of 10s sometimes 100s of US Dollars. BUT, also be realistic where these 100+ US Dollars come from, they are mostly by a single voter being @dtube or @dsound accounts. These have a limit in the amount they can distribute, and when the number of posts increases, the number of posts not getting their votes will also increase, meaning more and more posts will be left with cents.

image: Tanzwiesse - Fusion Festival 2015 (Germany)

How does the MUSIC Industry Work

I like to start with asking you a couple of questions to think about, and then I'll give some realities we have to deal with and we cannot just shuffle under the table and ignore. Before going to the questions, it is important to understand that we have more than 10.000.000 electronic music producers and DJs in the world, we have more than 100.000 clubs and event location in the world, we have 8.000.000.000 people (potential consumers of the artists work) in the world.

• How many music channels will consumers of music use in their daily lives?
• How many music channels are and will be available in the world?
• How will consumers discover your work?
• How much time will consumers spend in discovering new music, new artists?
• How will artists be discovered by music promoters to give them their next gig?

Fact of life, freedom and capitalism is that we have the deal with lots of competition on one hand, and lots of potential consumers on the other hand, we have to deal with the facts:

Consumers will use only a very few services on a daily bases and they tend to use those services most - to all - of the products the consumer wants to consume are available at - for electronic music these are now Spotify, Beatport and iTunes; this maybe Steem, Musicoin and Audiocoin powered services in the future, who knows.

Event promoters - those who book artists, buy time of an artist to perform in their venue/event - do only know a small selection of available artists and predominately book those artists that has proven themselves to attract enough music fans to pay for the costs of hosting an event.

This leads to the following questions:

• Who will put in the work and money to create, run and manage the channels the consumers will use to discover and listen to music?
• Who will put in the work and money to publish the artist music at all these channels consumer are using?
• Who will put in the work and money to bring the artist music to the attention of the prospect consumer?
• Who will put in the work and money required to get the next gig?
• Who will put in the work and money to arrange for the next concert, build the site, sell the tickets?

and then this:

• How much time and money will it cost to execute all the activities required to get an artist into the picture of an enough large consumer base so that the artist can actually earn a living from his/her work?

and:

• Do you think an average artist is business minded enough and is able to execute all the activities required to become and stay relevant?
• Do you think the average (or all) artist can spend the amount of time required to execute all tasks as mentioned before and still make sufficient music consumers wil actually pay for by buying/rewarding the music directly, and/or through attending shows (and in the digital world through live streams and all)??

Realities

Like any product on the market in our more or less free societies, selling the product music and artist is more than just creating a (good) product. Betamax never made it, although it was a great product, much better than VHS; Due to marketing and cleaver deals, VHS became the world standard for video tapes. Microsoft Windows became the defacto standard in the office, not because DOS/Windows was the best product (Apple Macintosh was better), but because of marketing and cleaver deals, again.

There is a reason why the music world is an industry in itself, with different kind of companies, executing different kind of tasks. To be able to sell products, in a play-field of many competitors creating similar products, in a play-field of many prospect buyers, and the realities, prospect buyers do:

• Use their channels of choice;
• Have limited knowledge of the whole (ie all products and events available), and
• Have limited attention span;

Many different tasks become time consuming to execute, and therefore this time needs to be paid for somehow.

And please realise this, although the music industry may seem to be dominated by a couple of huge companies, in fact the music industry is very distributed with an enormous amount of small players. To be able to reach the real mass, to get eg 10 million followers and fans, yes, you may have to deal with one or more of the huge companies to get you there.

But most of the artists work with small companies, small booking agencies, small labels, small publishers, small promoters. And also realise, without the blockchain, the artist can already sell their music directly, through services such as iTunes, Beatport, and so one. They can already sell themselves for gigs directly, most promoters simply uses email and phone to communicate and book artists and work with anybody, any agency, any artist directly if the artist wants to do so. No blockchain, or huge companies are required for that.

To be able - as an artist - to create a living out of what you do, you need to become part of the top of the pyramid of earners. How high at the top is determined by what you require to live your life. But the top, whether you want 1M US Dollars per year as an income, or just 10.000 US Dollars as an income, is populated by only a few of your competitors, or maybe you prefer the word colleagues. To become part of those few, much more than just some good product is required.

For some the factor LUCK will play a roll, but that are the exceptions you shall not bank on for your career.

All these reasons will not change because of blockchain technologies, or even new type of currencies like crypto currencies are.

I'm not saying the blockchain cannot be beneficial at all, since I think it will be beneficial in terms of control of the music rights, the control of access to the music, the ease of distribution of music (no need to copy/paste but simply provide a link the original file), the transparency of revenues etc.

But, with regard to artists creating music and selling this using blockchain technologies and crypto currencies, not a lot will change to be able to earn a living from what you/they do. The dynamics will be quite similar in this new world of technologies and currencies (crypto) compared to the old world of technologies and currencies (fiat).

Please WAKE UP and face the Realities!

In the mean time, take as much advantage from the Crypto World while it lasts; The transition from fiat to crypto will come to an end at some point in time and the crypto currency values will stabilise and most of your competitors will be using the same channels you are using. Don't bank on the fact it'll be easy to earn a living in ten or even five year from now, by simply publishing your work on some kind of blockchain and get paid by some form of crypto currency! You will need to pay a whole lot of other people to become and stay relevant!

NJOY

follow me @edje

check out my music channel @qsounds