Ahead of Savant eCommerce London this September, we had the opportunity of sitting together with Scott Cohen, Chief Innovation Officer of Warner Music Group and founder of The Orchard to talk about blockchain and how companies can prepare for future innovation by embracing change.
Here’s what we talked about!
How can blockchain impact the music industry? And what about the retail/ecommerce sector?
Rather than explaining how the blockchain works, it’s important to consider the potential impact of it to fully understand what the future holds for us.
To do so, we need to take a step back and take a look at how the internet works. Let’s say we have three layers. The first layer is the internet, created to connect military, universities and governments. Then, Tim Berners Lee launched the Word Wide Web, which is the second layer that sits on top of the internet. The WWW created a series of protocols (for example http, hypertext transfer protocol) that allowed every website to talk to every other website and every website to talk to a client or a browser. In order for the web to function and express its full potential, it needed businesses built on top of it. The real power of internet has been unlocked by building platform businesses, like Instagram, Facebook, Spotify, Apple Music and so on. They aggregate content and users on a single platform.
Now, on top of the world wide web, we can develop a 3rd layer composed of a new set of protocols that can replace those platform businesses.
The new layer could eliminate the entire structure of businesses built on the web and replace them with technology.
Bitcoin is not a company, is a protocol just like http. What this protocol does, is allow people to transfer money without an institutional platform between them. The idea behind it is: why do we need all of these institutions?
How this impacts music, eCommerce and retail?
Potentially, tech could replace all the platforms that sit between individuals, including social media. If I want to take a picture of my lunch and share it with my friends, why do i need a platform for everyone to see it? Can’t there just be a technology that makes it happen?
The way all social media platforms work today relies on 3 pillars: the platform itself, the users and the advertisers. FB and Instagram collect all the information and data they can so when brands use the platform to advertise, they know precisely who to target and they spend billions to show me ads in my news feed.
What if the platform didn’t exist? What if I could connect with everyone without having advertisers in between? Why can’t I decide what to see in my feed, but an algorithm does it?
So, why don’t we get rid of the whole layer?
In regards to the music industry: do we really need all the music in the world on a single platform?
Let’s consider Google as an example: when I google something, Google will crawl the web and it will show me thousands and thousands of websites, from different sources, servers and locations around the globe that are relevant to my search. Couldn’t be the same for music? Why does everything have to sit on a single server or on a single platform named Spotify/Apple Music/Tidal etc?
Each user of the web becomes a block in the blockchain: inside this blocks, there will be smart contracts with all the demographic, psychographic, medical record information etc, and everything will stay with me, it won’t be shared with any external entity and the same goes for my preferences and the AI that gives me recommendations.
Why does Spotify need AI to know what I may like or not? Our goal as people online is to get what we want and what we like, not generate business for platforms. Blockchain can completely revolutionise music, eCommerce and retail.
The companies that are thriving today wiped out thousands of businesses and giants of the previous generation, and that’s exactly what will happen with blockchain. When was the last time you bought a map or called a travel agent?
Everything has been replaced, and the same will happen again in the future.
Talking about AI, how is it changing content discovery and personal recommendations? What’s the impact on popular taste?
At the moment there are about 40.000 new tracks uploaded online every single day. This doesn’t help the consumers nor the artists, it’s just more noise.
How can a platform recommend music no one can really listen to? There’s not enough time to listen to all the new music, so we rely on machine learning and algorithms.
How do you know the listening tastes of 200 million people? Only a machine can do that, and this is the crucial factor that’s changing recommendations.
When I started listening to music, you would look up for an artist in alphabetical order. Then iTunes launched and it changed the paradigm: here’s rock! So we started searching for genre and subgenre. In recent years we moved to the Spotify era. We don’t search alphabetically, we don’t search by genre and subgenre. Now it’s about a whole host of other factors, like emotions, moods, themes etc, and it’s all based on data: it’s a combination of what you’re listening to and how songs are performing with other people, so it became a purely data driven approach. The results of this approach are Despacito and BTS (a korean pop band), respectively the most streamed song and group of 2018. They would have never succeeded with alphabetical order discovery, neither in the genre search.
The only reason we have this big hits nowadays is the fact that we live in an AI recommendation and discovery world. In a blockchain world, we will start abandoning the current model.
The music industry model so far has been essentially taking Western music and selling it to the rest of the world. We’re 7.6 billion people on the planet. In Europe, USA and Canada there is 1.1 billion people, so we’re basically ignoring 6.5 billion people in the world. This will definitely change as the dominance of western music as we know it will change. Music is part of a shared culture, it doesn’t work if you don’t know the same songs as your friends, we like it because we can share it and dance to it together! This will be more relevant in the upcoming years, when we will see a shift in focus from the western world to more globally widespread and diverse types of music and culture.
In a previous interview you said “It’s no longer enough for entertainment companies to merely embrace change, they need to create the future themselves”. What’s your suggestion for brands and companies?
Well, it’s not about predicting the future anymore, it’s about pre-determining the future.
Look at what happened to the music industry due to the shift from CDs to downloads. The industry experienced a decade of pain and revenues plummeted. Then, it moved from download to streaming, a shift that brought further 2-3 years of instability.
Now streaming is driving huge growth in the business, until the point the industry has never been so healthy before and streaming became the first revenue stream.
My goal for the whole industry is that as we make the next change, we don’t even notice it.
As you move into the next world, it should feel like a gradual evolution: do you remember the year when you stopped using a paper map or logging into MySpace? No, it just happened without us even noticing it! If we take the steps now to position ourselves in the right way, the future can bring only positive changes: it will be an evolution, rather than a disruption.
We know what’s coming with blockchain, what’s coming with VR, AR and so on. My suggestion and goal is to start doing things in this direction even if it doesn’t have any impact on our businesses today. If we do so with the right mindset and the right approach, we will always be ready to embrace changes and revolutions when they come.
Scott will join us at Savant eCommerce London on 17-18 September for an Inspirational Keynote “Block[chain]buster Technology & the Disrupted Future of the Platform Economy”.
Make sure to secure your ticket here!
