Buffalo Law Review

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The copyright market for creative works such as music and movies traditionally involves a complex web of licensing transactions and exorbitant transaction costs. Out of every dollar that consumers pay, an artist who writes, performs, and produces her own work may receive less than fifteen cents while the rest are diverted to cover the costs of financing new production, marketing new works, and distributing royalties. Although artists are typically scheduled to receive royalties on a quarterly basis, a payment may lag as far as two years after users paid. Furthermore, if a collecting society is unable to identify the rightful owner for a royalty payment, it routinely allocates the royalty among its existing members.

This Article proposes a blockchain copyright exchange (“BCE”) that dramatically improves efficiency and accuracy in copyright transactions by hardcoding thousands of copyright rules and license terms in blockchain-based smart contracts. First, BCE allows artists to earn a royalty per stream potentially sixteen times larger than Spotify offers and eighty times larger than YouTube offers. Artists receive payments at a speed millions of times faster, in a matter of seconds instead of months, with zero administrative charges and zero dollars falling through the cracks. Second, BCE allows artists to launch crowdfunding campaigns inviting fans to securely finance creative works in return for a share of copyright ownership in the form of a non-fungible token (“NFT”) or a fungible token (“FT”). It significantly diversifies the investment risks for artists and labels alike. Third, BCE cultivates a healthy ecosystem among artists and users by mobilizing users to mine BCE tokens through distribution and promotion of licensed works. These powerful incentives, together with BCE’s innovative enforcement mechanisms, may effectively eliminate the breeding ground for copyright piracy.