The Sound of Music - DEPIN’s Next Frontier
DEPINs (decentralized physical infrastructure networks) have unshackled everyday people to participate in the disruption of large, entrenched industries dominated by monopolistic centralized entities. We are seeing DEPIN entrants such as Helium attack telecom and Hivemapper go after Google and Apple Maps. Each of these decentralized networks allows for the bootstrapping of infrastructure that would cost billions of dollars to create were it not for the labor and capital of the contributors of these networks, who are being rewarded in cypto tokens for their contributions. These networks are aggregating data about the real world or providing a service that will only grow in value as more people and devices contribute to those networks.
One lesser-known dataset that is capital-intensive to aggregate is real-world sound events and audio. You may be thinking, what sort of sounds are worth tracking in the real world, and how hard can it be to track them?
The answer to this is very valuable and extremely hard!
Let’s expand on one example of sound that occurs in the real world, which is extremely valuable in tracking and capturing its existence and how a few century-old oligopolies dominate this world.
The sound we are referring to is music, and the location of this sound is in public spaces where commerce occurs i.e. bars, restaurants, concert venues, nail salons, malls, gyms, and cafes, etc.
A little background on copyrights first! In most nations, a legal right known as a copyright exists. A copyright is a legal protection for original works of authorship that gives creators exclusive rights over their creative works. It protects the expression of ideas in various forms, such as:
Literary works (novels, poems, articles)
Musical compositions
Films and audiovisual works
Artistic works (paintings, photographs, sculptures)
Computer programs
Architectural designs
Owners of these copyrights can earn royalties from others for the right to use or profit from their copyrights. For music, two copyrights are inherent in a recorded composition or song. One copyright is the recording, the actual sound recording, while the other is the compositional copyright, also known as publishing (the underlying music and lyrics). You would think musicians, publishers, labels, and artists could only collect two royalty types from these two copyrights, but in fact, up to six types of royalties can be generated from these copyrights.
Mechanical royalties: Earned when music is reproduced physically or digitally, including streaming and physical copies like CDs or vinyl.
Performance royalties: Generated when copyrighted music is performed or played publicly, such as in bars, venues, concerts, radio, TV, or streaming platforms in public settings.
Sync royalties: Paid when music is synchronized with visual media, like in films, TV shows, commercials, or video games.
Print music royalties: Earned when copyrighted sheet music is transcribed, printed, and sold.
Digital performance royalties: Paid to recording artists when their songs are played on non-interactive digital streaming platforms, such as Pandora.
Recording royalties: Generated from the actual sound recording, often collected by record labels.
Below is a visual of how the royalties break down:
The royalty we will focus on that has the most potential to be transformed due to DEPIN is the performance royalty. Performance royalties are earned when a piece of music (composition) is played or performed in a public setting, whether it’s being performed live at a music venue, at a bar or coffee shop, or over the radio. (Note that streams from on-demand streaming services, like Spotify or Apple Music, in public venues earn both a performance and a mechanical royalty - this is unique among types of music usage.) The owners of the music - songwriters or their publishers - collect performance royalties.
All performance royalties are collected and distributed by collection societies known as performing rights organizations (PROs), sometimes called collective management organizations (CMO). PROs are entitled to performance royalties whenever songs in their repertoire are performed publicly. Most countries only have one PRO that acts as a toll bridge for collecting and distributing these royalties. Oftentimes, these national PROs are non-profit institutions and have a monopoly on the collection of performance royalties in their countries. The US is unique in that it has three primary PROs that collect the vast majority of performance royalties. Up until very recently, these three were non-profit organizations. Now, SESAC is owned by Blackstone, BMI was recently acquired by New Mountain Capital in 2022, and only ASCAP retains its non-profit status.
Collectively, these three organizations collect over $6B in royalties, taking a 6-10% cut for their services. Globally, PROs collect nearly $13B in performance royalties in their respective nations. Each of these PROs has reciprocity with other PROs to collect on behalf of the repertoires each PRO represents. Yet, 42 nations worldwide still do not have a PRO.
Venues must pay a performance royalty if they have live performances at their location. Live performances can be actual bands, music over the speakers, DJs, or even music emanating from the TVs within the venue. Most venues pay a blanket licensing fee/royalty to each respective PRO to gain the use of their repertoire. These blanket license fees are calculated based on the venue occupancy, frequency of live performances, and a host of other attributes, such as whether dancing is permitted in the venue. PROs have no way of verifying this information and primarily rely upon venues following the honor system (Spoiler: Most do not).
As these blanket royalties are collected, PROs must distribute them to the respective rights owners based on the frequency of performance at venues. The reality is that PROs have no idea what songs are played at the venues. Thus, PROs distribute these royalties based on which songs are the most popular played songs on the radio since they can track that. This obviously creates a disconnect and leaves some rights holders being over-compensated and others under-compensated.
With this background, one has to wonder how these PROs collect and distribute these royalties and, better yet, find out which venues have live performances.
The answer is that it is very hard to find out which venues have live performances and to track what songs are actually being played live in these venues.
This problem is amplified because many of the venues themselves do not know they have a legal obligation to pay these PROs a royalty for performing songs in the PRO's repertoire. Additionally, most venues have very little incentive to self-report since the PROs have no efficient method of finding out and proving there are performances in the first place.
I can personally attest to this. I used to run seven bars and restaurants and was unaware I needed to pay for these. A team visited two of my bars in 2017 which was the genesis of the idea for Uvo. There have been no visits since, and there have been no visits in the 30 years my family had operated said restaurants before 2017. Checking for copyright infringement once every 30-40 years is not a great way to ensure compliance. They do this because they are either unmotivated to get more aggressive or think they will have negative ROI due to needed to pay field teams of employees.
PROs globally spend hundreds of millions of dollars to field teams within cities to track down live performances in non-licensed venues or enlist off-shore BPOs to call and cajole venue owners into a blanket license based on information gleaned by scaping public websites and social media. These methods are expensive, ineffective, and lack bona fide evidence PROs need to prove in court that infringement is occurring.
It is estimated that PROs only collect 3-5% of the performance royalties that are owed globally because PROs have no efficient way to identify public performances and the data associated with those performances.
Enter The UVO Network.
UVO Network aims to democratize sound data through a decentralized, people-powered network. Leveraging 7 billion existing smartphones in circulation, UVO transforms these into "super sensors" and data-collecting nodes. This data populates a Decentralized Sound Map (DSMap). Smartphone contributors earn tokens for contributing this data.
One of the first applications built on the OVO Network is UVO+, a decentralized application (dapp). UVO+ is a community-driven platform focused on addressing the growing gap between currently tracked public performances and what is being performed in the real world, The project encourages users to contribute hyper-local live performance data by offering rewards in the form of UVO Network tokens.
Utilizing an innovative tokenomics model, UVO+ aims to create a sustainable and engaging ecosystem where users actively identify live performances while benefiting from their contributions in the form of tokens and real-time performance insights in their cities. By gathering accurate, real-time data, UVO+ seeks to identify every venue where public performances occur and eventually track real-time public performances to allocate performance royalties to the rights holders accurately.
With over 7 billion smartphones in circulation, these devices contain some of the most sophisticated sensors known to mankind. These sensors can record not only the music being played in real time but also where and when this performance is occurring. Tokens can further incentivize the contributor to tag, annotate, and enhance live performance data to establish bonafide evidence of infringement and accurate data to establish a true blanket license fee.
PROs would have to spend billions of dollars to hire global teams to track all the live performances and the data needed to calculate accurate license fees. PROs have an incomplete list of venues and zero insights into what is actually being performed inside these venues.
DEPIN makes this happen at a scale and efficiency impossible by centralized PROs. Further, the ubiquitous presence of contributors in any given city provides a powerful incentive for venue owners not to lapse on their licensing fees as the network never sleeps.
This ubiquitous coverage and real-time tracking of every live performance will eventually incentivize these venues to install fixed sensors within their venues to track 24/7 live performances. In this scenario, the venue is now also earning tokens and only paying for what is actually being played. It's a win-win-win for the venue, UVO Network, and the rights owner.
UVO’s datasets will train a live music detection and classification model, making these on-premise sensors 100% accurate. Current music detection and classification models such as Shazam perform poorly in identifying live performances and cover songs since there is no large corpus of annotated live music data to train them.
UVO will have the world’s most comprehensive live music dataset, which can be used to power a super PRO and achieve nearly 100% global coverage of live performances. This PRO would be compensated anytime a song is performed publicly worldwide. Performance rights royalties would soar to become one of the largest categories of royalties.
UVO Network will have an open API where enterprise Web2 and Web3 platforms can purchase live-performance data to enhance their applications. Imagine looking at Yelp and seeing what songs are being played, either on their speakers or by a band, at the restaurants on the viewer's list, or opening Snapchat and seeing where live performances are occurring in your city and what songs are being played in real-time.
UVO’s data will also prove valuable to investors seeking data on mispriced performance royalties that have been under-earning due to PRO’s current method of royalty distribution.
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