A Spotify Ltd. logo sits on display as employees work at desktop computers inside the music streaming company's offices in Berlin, Germany, on Friday, June 17, 2016.
Photograph by Krisztian Bocsi — Bloomberg via Getty Images
By Jonathan Vanian
April 27, 2017

Spotify has acquired a startup to help it better manage royalty payments to musicians and song publishers.

The online-streaming music company said Wednesday that it had bought Mediachain Labs, a small Brooklyn-based company that specializes in so-called blockchain technology. Companies like shipping giant Maersk and UBS are all experimenting with securing and tracking digital payments by recording transactions across thousands of computers—an idea known as a distributed ledger—to minimize the risk of hacking or manipulation.

Spotify did not disclose how much it paid for Mediachain, but it’s likely to be small. Mediachain has less than 10 employees and has raised just $2 million from investors like Andreessen Horowitz and Union Square Ventures, according to deal-tracking site Crunchbase.

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Spotify said that Mediachain will help further its “journey towards a more fair, transparent and rewarding music industry for creators and rights owners.” Presumably, this means that Spotify plans to use Mediachain’s blockchain expertise to better manage music royalty payments for songs that it plays on its service.

Mediachain founder Jesse Walden wrote in a Medium post last year about how blockchain technology can be used in the music business to keep track of the owners of a song and how much they should be paid.

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Walden wrote that there is “is no good way” for people “to know the correct ownership percentages” of songs without blockchain technology. He also cited Spotify’s $30 million settlement with the National Music Publishers Association for allegedly failing to pay song royalties to publishers “because they didn’t know who to pay.”

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