Why DEPIN? Why Performance Rights? And Why Now?

In 2013, I was sued by BMI and then subsequently by ASCAP and SESAC for copyright infringement because I was hosting cover bands at one of the taverns I ran as well as at a sports bar, for broadcasting sporting events over the TVs in the establishment. I was shocked, surprised, and angry, especially since the lawsuits had very large statutory damage numbers on the initial complaint. Ironically, being a lawyer, I had no idea what performance royalties were or that there was a requirement by the venue to pay them if there were any sort of public performances at your establishment.

I hired an IP attorney, and we eventually settled the lawsuits for a sum less than the initial demand but still material enough to hurt. Part of the settlement was that I must sign blanket license agreements at these establishments with each performance rights organization (PRO) and pay an annual fee based on each PRO’s formula. Below is the document BMI asks venues to fill out to calculate the blanket licensing fee for the right to perform songs within its repertoire.

This ordeal gave me a crash course on PROs, performance rights, and music royalties in general. As the years went by, I would periodically read about the various PROs and I began studying them. I quickly appreciated how cash-generative they were and how archaic their systems, processes, and approaches were.

As luck would have it, when we ran Upshift through a start-up accelerator in 2016, one of our advisors was the co-founder of a startup named Soundstr. Soundstr was a music recognition platform that identified live and recorded music in a venue via a piece of hardware named Sounder Pulse. Soundstr’s goal was to provide extensive analytics for music usage reporting to clients, including venue owners, radio station management, musicians, labels, publishers, and PROs.

The idea for Soundstr made a lot of sense to me, except for one thing: why would a venue ever agree to install the Sounder Pulse? Especially if they were not paying any fees to a PRO or were under-reporting information on their blanket licensing agreement questionnaire. Soundstr never really took off, but having a piece of hardware that detects and recognizes public performances would solve the problem of not knowing which songs are being performed and lead to a pay-for-play model. Yet, the incentive for venues to opt into such a tool was lacking.

In 2020, Mario Gabriele of The Generalist published a piece listing Helium as one of the emerging companies in crypto. I deeply explored Helium and similar DEPIN (or Token Incentivized Physical Infrastructure Network—TIPIN—back then) projects. Over the next few years, I was an active Helium participant, one of the first 20 global contributors for Hivemapper, and an investor in various early-stage DEPIN projects. As with any technology or business model, my mind was constantly chewing on new applications to solve societal problems.

By 2022, the early idea of what would become the UVO Network started percolating. But DEPIN was still small, and crypto was in a deep winter. Yet, folks like Kyle Samani from Multicoin and Mahesh Ramakrishnan from EV3 started writing great literature. I developed a relationship with Mahesh and tracked his fund’s progress closely.

Meanwhile, Upshift’s business continued to scale, and we were onboarding thousands of hourly workers monthly who embraced the flexible hourly shifts we matched them with at our client’s businesses. The future of work was in full effect, and we found that these workers were not the traditional temp workers one would find through a traditional staffing agency. They all had smartphones, were looking to monetize their off days and extra hours, and were tech-savvy.

2024 was the tipping point when the moons aligned. It became clear that PROs will continue to be focused on being a toll both for performance royalties, especially with BMI’s takeover by New Mountain. DEPIN, thanks to several investors' thought leadership and capital, was seeing serious momentum. And Upshift had over 250,000 workers seeking ways to monetize their time.

Jeff Bezos had a moment when he first saw a figure back in 1994 that web usage was growing at 2,300% and we see a similar dynamic at play now in the DEPIN space. UVO is our stake in the ground where we plan to participate in what will become an eventual global movement - DEPIN. But before we jumped head first into building UVO, we asked ourselves why is now the right time? What unfair advantage do we have over PROs, and why haven't folks like Soundstr, Audoo, and various other versions of on-premise music detection hardware ever gotten serious traction?

To answer these questions, it is best to start by defining the ideal state of the performance rights industry and work backward from there.

Ideal State

Imagine a world where any device with audio sensors (either purpose-built for live music recognition or generalized sensors embedded with an agent located) detects, recognizes, and tags exactly where, when, and what song was performed publicly, immediately rewarding the sensor owner with a token, charging the appropriate venue a small fee, and paying the rights owner the correct royalty—all on-chain, globally, and in real-time. This network would facilitate payments and earn a small percentage anytime a song is performed publicly globally.

In the world described above, performance royalties collected globally will soar 20-50x and create positive externalities not even imagined today. However, many things need to happen that currently do not exist; mainly, sensors ubiquitously located where public performances occur must detect and recognize live music performances. Let’s explore how UVO takes us to this ideal state.

Sensors

Venues have little incentive to install any sort of sensor to “snitch” themselves out or, if they already pay a blanket licensing fee, invest the money in a device that will not alter the amount they currently pay since blanket licensing fees are juicy for PROs. Anything else would pose a classic innovator dilemma for PROs.

How do we reach the end state where sensors are ubiquitously located where public performances occur? It happens in phases over time and eventually requires a PRO powered by the UVO Network.

Smartphone Phase

This is the starting point. This is where we are today; individual contributors via UVO+ identify public performances: where they occur, record the song, and gather location data around frequency, occupancy, etc. This stage is where the SoundMap is created, complete with the locations of known public performances, actual song names performed, and corresponding geo/time-stamped data of the songs. UVO+ will also have validators, who are rewarded for annotating music audio data with proper songs should the contributor not know the song. Staked UVO Tokens by these validators will incentivize accurate annotations.

This proprietary corpus of data will be useful on several fronts. For starters, it arms a UVO-powered PRO with the world’s most robust and accurate dataset of where public performances occur, data needed to calculate blanket licensing accurately, and the actual songs performed at these locations. PROs will salivate for such data, and UVO will charge accordingly.

Individuals will pioneer venues and build a mosaic of songs being performed at these venues. UVO contributors will identify public performances at venues that existing PROs have no idea about and no way of ever identifying, along with the bonafide data to prove public performances. This data trove can allow the UVO-powered PRO to have the stick to compel every one of the venues identified to enter an accurate blanket licensing agreement that allows for future payment based on actual usage of songs within the repertoire.

UVO will not initially have its own PRO, but word will quickly spread that this corpus of data exists, and rights owners will want to partner with a PRO that captures and monetizes 100% of the venues in their respective jurisdictions, not just 5-10%, as is the case with PROs today.

UVO will have the opportunity to establish PROs in countries where none exist or partner with existing ones to give them an unfair advantage and take market share from others. After all, which rights owner wants to collect only 10% of the royalties owed to them if there is an option to collect 100%?

The smartphone phase is the stick phase, which uncovers the locations globally where public performances occur, compels them to comply, and opens the door to the next phase.

This phase also creates the largest dataset of live performances known, which will be used to train models to detect and recognize live music. This will become important in the next phase. No model currently recognizes live music with sufficient accuracy. As documented in a recent study, it is feasible, but training data is the missing piece of the puzzle.

Dedicated Hardware Phase

In the smartphone phase, UVO Network mostly rewards individuals for uncovering and annotating music performance data needed to build the largest dataset of live music performances and the venues that host them.

UVO Network will begin rolling out custom hardware sets that venues can install during this phase. Venues will now earn tokens for detecting a song performance onsite and a discount on their annual license fee to keep the hardware operating. In many instances, this will lead to accurate payments to rights owners for the actual songs from the repertoire being performed. It will also lead to immediate payments to rights holders and burn UVO tokens.

These custom sensors will be sold by UVO and be embedded with the model trained using the dataset built in the smartphone phase.

Without getting all the venues into compliance in the smartphone phase, there would be little incentive for them to participate in the hardware phase, i.e., buy, install, and earn via listening hardware. This was the missing piece in previous attempts by the likes of Sounstr.

In a world where UVO tokens are burned anytime a song is played in public globally, the data layer (SoundMap) built by the UVO Network will need to be created. Nothing like this exists and never will if PROs continue to operate as they have for the past hundred years. This data layer only happens because of DEPIN, the infrastructure that will fuel several other applications built on top in the future, which we will discuss in later posts.