The music metaverse is not free from red tape

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First shared by @cheriehu on #stage-chat; sustained by several members in #legal-and-policy.

Earlier this month, we held a members-only deep-dive call on commercial opportunities in the metaverse, during which we discussed an intriguing proposal raised by the DAO arm of Decentraland.

In case you’re not familiar with Decentraland, it’s a browser-based game that revolves around users buying plots of virtual land as NFTs. Despite experiencing a virtual land boom at the start of 2021, Decentraland has drawn criticism for being buggy, sparsely populated, and poorly moderated.

Even still, like many fledgling “proto-metaverses,” Decentraland has a fast-developing music culture — it’s hosted shows by artists like Grimes and deadmau5 and even has an indie music venue, The Band Room (more on that here). Users will often stream music into Decentraland as an ambient background to the game’s mechanisms — which can present thorny legal issues.

In a recent DAO proposal, Decentraland suggested partnering with SOCAN to issue a blanket licensing agreement to pay licensing fees for all users retroactively. The community ultimately rejected the proposal in favor of individual landowners continuing to be held responsible for any activity on their land. Although, as @WEB3TJ pointed out, the vote was heavily influenced by three major whales, feeding into other concerns around the platform’s low user base.

As several of us pointed out in the server, despite the DAO wanting to maintain the sovereignty of each landowner’s plot, it’s unlikely that PROs will see it that way. As @danibalcells put it, “if there is music being communicated or transacted somewhere in exchange for a large enough some of money, [music licensing] bodies are going to make the case that they should be paid some of it.”

“I think the differences we see between Decentraland and Roblox are going to be meaningless to PROs. They are going to see something that looks like a video game that’s playing music and not paying for it. Saying, “Well the servers are decentralized but we operate some of them but some are in other countries so you’ll have to collect individual licenses” just won’t happen. Whoever has the most money/operates the DAO/owns the most servers is going to get sued.” – @Jonathan Larr

These arguments beg the question — if Decentraland’s landowners don’t actually have sovereignty over their land, what makes Decentraland different from any other gaming platforms? As @danfowler observes, conversely, decentralization could ultimately amount to Decentraland having significantly reduced protection for consumers:

“Indeed, and to that point, if there’s no legal entity to sue, then there’s no limited liability and every token holder is on the hook.” – @danfowler

These points haven’t been stress-tested legally yet, but could become existential issues for decentralized worlds and platforms moving forward.

The music industry has been roundly criticized — by industry voices who are perhaps still smarting from the industry’s failure to adapt to streaming technologies — for failing to develop suitable licensing solutions for startups and platforms like Twitch. @dhuey observed that other industries have managed to deal with media licensing for large, dispersed global user bases in a much more nuanced fashion, noting that Live365 has an aggregate licensing model for their members, which members can pay extra to opt into. Is this something the music industry could adopt with metaverse platforms?

Either way, technological disruption always presents an opportunity for industries to reexamine their status quo and can sometimes create momentum around new ways of doing things. The thorny legal and regulatory issues raised by decentralized metaverses could be the push the music industry needs to get creative with their licensing models:

“There’s a real opportunity here to improve on the historical “black box” model of blanket licensing with proxy (estimated by market share or other metrics) distribution – there shouldn’t be any reason that model couldn’t be improved on in the virtual world to include a specific reckoning of specific performances to specific artists.” – @dhuey

Although, the fast-declining daily active user numbers of Decentraland suggests that ultimately, there may not be enough people left in the metaverse to sue.