By Jeff John Roberts
June 20, 2018

Microsoft announced an ambitious plan on Tuesday to collect royalty payments for authors, software developers, and other creators using blockchain technology, which creates a tamper-proof record system across multiple computers.

The project aims to streamline the current process of tracking and collecting copyright payments, which has long relied on a series of middlemen, and which critics say shortchanges creators.

Microsoft says it will begin deploying the blockchain tool in its vast online gaming system, working with partners like video game giant Ubisoft to implement it. But the company says it views the technology, which it designed with consulting firm EY, as appropriate for any creative industry.

“EY and Microsoft designed the solution to serve any industry where intellectual property or assets are licensed to other parties and where the creators are paid royalties based on royalty agreements,” said the companies in a statement.

When the project is fully deployed, the companies predict they will be able to process millions of transactions a day, and replace a royalty distribution process that can take 45 days with one with daily pay-outs. The process, which relies on a species of blockchain technology known as Quorum, is also designed to protect confidential business arrangements.

The idea of using a blockchain to track copyright royalties is not new: Blockchain evangelists have long touted it as an example of the myriad ways the technology can be used to make society more efficient. But so far the solution has remained a theoretical one—in part because of the incredible complexity involved in managing copyright and payments.

A video game featuring a musical clip, for example, could give rise to different royalty payments: the software developer; the songwriter; the performer; and so on. The task is made harder since the rights to a given work are often bought and sold, meaning it is not always clear who is entitled to a payment and where the money should go.

If the Microsoft-EY project is going to succeed, it will have to account for such complexity, and also persuade numerous creators and their management agencies to come on board. The companies appear to believe this will be possible, in part due to smart contracts, which use blockchain technology to automate a wide variety of transactions.

“The scale, complexity and volume of digital rights and royalties transactions makes this a perfect application for blockchains. A blockchain can handle the unique nature of each contract between digital rights owners and licensors can be handled in a scalable, efficient manner with an audit trail for the participants,” said Paul Brody, EY’s Global Innovation Leader for Blockchain.

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