Written by
Tim Soens
- Analyst at
PIXELYNX
and
KOR Protocol
.
Over the past 50 years, we've evolved from physically distributing vinyl records and putting up event flyers by hand to having the world’s entire music catalog at our fingertips and artists achieving overnight fame through TikTok. The internet has drastically removed the barriers for creation and distribution and effectively democratized creativity. Musicians can now compose, record, and release tracks from their bedrooms; filmmakers can edit entire films and documentaries on their laptops; and gamers can stream live gameplay to millions—effortlessly reaching audiences that span continents and cultures.
Yet despite the unprecedented opportunities for creation and distribution, many artists find themselves struggling to sustain a viable career. How can this be, when the digital age offers what seem to be “godlike” tools for creativity and connection? The answer lies in the fact that while the rules of creation, distribution, and consumption have been rewritten, the frameworks meant to protect, manage, and monetize creative work and intellectual property (IP) have not kept pace. Legacy IP laws and structures, designed for a world of physical media and traditional distribution channels, have become dangerously obsolete in the fast-moving digital society we live in today. Artists and IP owners are unable to fully capture the value of their work, hindered by outdated copyright laws, fragmented licensing models, and convoluted royalty structures. The rapid evolution of artificial intelligence has only intensified these issues, exposing the fragility of current IP management systems.
The entertainment industry needs a radical overhaul of its IP infrastructure: one that is transparent, flexible, and suited for a digital-first, AI-driven world. By redefining how we protect, manage, and monetize creative assets, we can create a future where artists no longer have to abandon their passion due to a lack of perspective for a sustainable career.
From Obsolete to Optimized: Addressing Inadequate IP Management Systems with the KOR Protocol
In this blog post, we examine the current challenges surrounding intellectual property and the urgent need to redefine how it is protected, managed, and monetized. We propose the KOR Protocol as a solution, highlighting how its blockchain-based IP infrastructure empowers creators to gain greater control over their work, implement transparent licensing frameworks, and ensure fair compensation for IP use. If you haven’t yet read our introductory post explaining the KOR Protocol, we encourage you to check it out beforehand here.
Fragmented and Siloed IP Data Repositories
- Problem: IP data in the entertainment industry is largely fragmented and siloed, due to inconsistencies in how it is stored, processed, and managed. It is scattered across various locations, often outdated or incomplete, and exists in multiple versions that may differ from one source to another. This makes it difficult to track ownership, rights, and licensing information leading to delays in royalty payments, inefficiencies in licensing, and increased operational costs due to the need for constant reconciliation of conflicting data (W&M, 2021).
- Solution: The KOR Protocol addresses the issues of fragmented and siloed data by offering a decentralized, blockchain-based solution that standardizes and unifies IP data, allowing for consistent management and transparent tracking of rights without the reliance on centralized authorities. This not only simplifies the entire process but also builds a stronger, more reliable foundation for creators, distributors, and other stakeholders in the entertainment industry.
- Problem: Managing IP is highly complex due to the involvement of multiple entities, varying jurisdictions, and fragmented systems. Each type of IP operates under different legal frameworks, each with its own unique rules, intermediaries, and enforcement mechanisms. This complexity creates a convoluted landscape that makes it challenging to ensure compliance, enforce rights, and efficiently manage IP across different regions.
- Solution: The KOR Protocol’s decentralized operating system simplifies this complexity by allowing predefined terms and conditions for IP use to be programmed and enforced onchain. This means that various entities, jurisdictions, or systems can automate their rules and agreements on a shared blockchain infrastructure, eliminating manual processes and reducing the risk of disputes. By minimizing the complexity of IP management, the KOR Protocol helps ensure more streamlined operations globally.
Opaque Royalty Distribution
- Problem: Current royalty distribution systems suffer from metadata errors, inaccuracies, lack of standardization, and insufficient transparency. These issues frequently result in failed or delayed payments, especially in music publishing, where around 25% of revenue does not reach its rightful owners. Additionally, royalties that cannot be accurately matched to specific rights holders often end up in "black box" funds, remaining unclaimed. For example, the Mechanical Licensing Collective in the U.S. reported $424.4 million in unmatched or "black-box" streaming royalties (W&M, 2021).
- Solution: The KOR Protocol addresses these challenges through the KOR Royalty Module by automating royalty distribution through smart contracts, ensuring that payments are processed in an automatic and transparent way. This system is crucial for fostering trust among stakeholders and guaranteeing fair and accurate compensation for rights holders.
Lack of Transparency in IP Use
- Problem: IP owners whose content is utilized on consumer platforms like Spotify, Instagram, or TikTok often lack accurate insights into how their IP is being used or consumed. This absence of transparency leaves rights holders unaware of their entitlements and unable to accurately calculate their due compensation.
- Solution: The KOR DNA Metadata Standard, enhanced by the integration of the International Standard Content Code (ISCC), introduces a groundbreaking approach to tracking IP across platforms by providing a unified system for managing content rights and royalties. The ISCC adds a layer of precision by generating unique identifiers for digital content, ensuring accurate attribution and protection of intellectual property. This combined system enhances interoperability and traceability necessary to ensure fair royalty distribution.
Difficulty in IP Licensing and Rights Management
- Problem: In most cases, rights holders must individually negotiate IP licenses on a one-to-one basis. Managing IP rights & licenses across multiple platforms and applications thus becomes a complex and cumbersome process, often leading to significant revenue loss. According to a report by the Copyright Society, over 20% of potential licensing revenue is forfeited due to inadequate rights management systems. Furthermore, many IP holders lack the knowledge, time, financial resources, or expertise to navigate the various licensing agreements required for their content.?
- Solution: The Vault and IP Licensing Module within the KOR Protocol empower creators to establish licensing terms that are automatically enforced through smart contracts on the blockchain. By programming rights terms and licensing agreements directly into digital IP assets, this solution facilitates their seamless use and distribution across diverse platforms, applications, and media - for anyone to access and exploit. This many-to-many licensing mechanism provides a scalable foundation for the broader application of IP beyond traditional formats, facilitating the growth and expansion of its value. Additionally, this approach minimizes administrative complexities and significantly lowers the risk of revenue loss resulting from mismanagement or disputes over rights.?
Challenges with New Media Formats - Inability to Exploit Opportunities
- Problem: Traditional IP systems are not equipped to handle emerging media formats or distribution methods related to AI-generated content, user-generated content (UGC), NFTs, and Metaverse distribution.
- Solution: Redesigning the IP infrastructure from the ground up to efficiently track and manage the entire IP lifecycle—from creation to distribution and consumption—enables IP assets to evolve alongside new innovations such as AI and the Metaverse. Introducing interactivity to these assets allows them to adapt and grow over time, ensuring their long-term value remains protected and future-proof.
Barriers for Developers to use IP
- Problem: High costs, fragmentation, and complex legal negotiations make it difficult for developers to seamlessly integrate IP assets into their applications. Licensing agreements are typically conducted on a one-to-one basis and are limited to a few major industry players, excluding smaller independent developers or teams from accessing valuable IP.
- Solution: The KOR Protocol breaks down these barriers by offering cost-effective, user-friendly SDKs and APIs that enable developers to easily integrate IP management, licensing, and royalty tracking into their applications. Its decentralized framework reduces costs and simplifies development, making advanced IP management tools accessible to a wider range of developers, including independent creators and smaller teams.
Limited IP Monetization Opportunities
- Problem: Traditional IP monetization, such as streaming, offer minimal returns to artists. Spotify, for example, pays artists between $0.003 and $0.005 per stream, which requires millions of streams to generate a livable income. The Competition and Markets Authority (CMA) from the government of the UK estimated that an artist could expect to earn even less, around ￡12,000 from 12 million streams. Disheartening if you know that 99.8% of the artists worldwide are unable to reach the 1 million stream threshold according to the CMA. This is in line with the UK Intellectual Property Office which found that a mere 0.4% of artists earn enough income to sustainably live off their music.
- Solution: By making IP programmable and interactive, new IP business models are made possible. KORUS, one of KOR’s flagship products, for example, expands monetization avenues through the Mint Module, allowing fans and users to create derivatives from registered IP or other digital assets. These derivatives can be sold or traded within the ecosystem, providing artists with new secondary revenue streams beyond traditional sales and streaming. According to a report by NonFungible.com, the NFT market reached $2.5 billion in sales in the first half of 2021 alone, demonstrating the significant financial potential of this model for artists. KORUS has launched mints that have made artists more money in 24 hours than they would receive in 4 years from traditional streaming.?
Static IP and Passive Consumption
- Problem: Traditional platforms provide few opportunities for fans to interact with IP beyond passive consumption. This is because traditional IP is static, consumption is a single-purpose goal in most cases. According to a report by MIDiA Research, 65% of music fans want more interactive experiences with the artists and IP they support, but only 10% feel they have the means to engage meaningfully.
- Solution: Interactive IP standards on the KOR Protocol enable innovative ways for fans to engage with IP assets. For instance, artists and fans can co-own IP through fractionalization. This gives fans a vested interest and a stake, while offering artists new avenues for funding and monetizing their IP. The interactivity of IP opens up new business models and ways for the artist-fan relationship to grow.?
Building a New IP Foundation for the Entertainment Industry with KOR Protocol
If the entertainment industry wants to keep up with emerging innovation, the evolving needs of tomorrow’s digital consumers, as well as empower creators to unleash their fullest creative potential, it will require a more agile and future-facing foundation for IP management. The contemporary IP crisis highlights the staticness of traditional IP and the systems which manage it. The KOR Protocol represents a new robust foundation for the entertainment industries, addressing the IP crisis and supporting creators to maximize the potential of their work; Our mission is to help creators retain more control over their work, provide transparent licensing systems, and ensure fair compensation for IP usage.?
Ready to shape the future of the entertainment industry with us? Visit our website and community channels to learn more and join the movement today.
