‘It’s Not Easy To Turn Live Into Digital’: Q’s With Daniele Sestagalli of Utopia Genesis Foundation

He’s currently Chief Strategy Officer at Utopia Genesis Foundation, a Switzerland-based company aiming to create a blockchain framework for everyone working in music. It’s a bold ambition, and one that other companies have embarked upon – and failed at – in the past.

Still, utilizing the efficiency, transparency, security and decentralized nature of blockchain and crypto technology to make the music industry better, remains an appealing idea. Pollstar reached out to Sestagalli to find out what Utopia Genesis aims to do differently, and what his vision for the music business of the future looks like.

Daniele Sestagalli: Financial markets work in efficiency. When you find an asset, any type of asset class, that’s currently inefficient, and you make it efficient for example by making it liquid, then you’re gaining value. 

There is a lot of inefficiency in the music industry, for example in the case of music rights, which can be made liquid as a token on the blockchain. The token represents the catalogue of an artist and its copyrights and brings it to market. It thereby becomes liquid, and over time overall efficiency of that asset, in this case the artist’s catalogue, increases. It gains value, because it moves, it becomes something that is potentially owned by more people. 

And it’s more cost effective, it’s easier to transfer, easier to deal with [on an open ledger like the blockchain]. It’s the equivalent to what the stock market does for companies: making it very easy for anybody to transfer shares. There’s value that gets generated by making the process leaner, much easier. 

Now let’s look at the music industry: if you would like to acquire, for example, a part or the full catalogue from an artist, you would have to first get to the bottom of the deals in place. You would need even to find out who the other rights holders are, which is often not very clear. You have to do an insane amount of due diligence to understand what happened to that catalogue in the past, to find out who’s the actual owner of those copyrights. Even though copyright law is probably the only law recognized worldwide – the right to receive compensation for your art – but the world process is terrible.

What crypto allows, is to create efficiency in this inefficient market. It’s not that its value didn’t exist before, it’s just never been as accessible, and accessing it has never been this cost-efficient. The value goes up, and it goes to the asset instead of the intermediary.

Daniele Sestagalli: We have basically two kinds of ways to deal with this specific point. One of my dreams is to see artists getting empowered right from the beginning, by a platform that allows the artist to issue his or her own token and to be represented by him or herself. It’s what I imagine the future to look like.

On the other hand, everything that has come before should be still represented by the PROs that currently do the best they can with the technology they have. They can adjust to use our technology to improve their efficiency, and thus also improve their business.

We are not trying to disrupt. I don’t think disruption is any good in a place like the music business, because has already been disrupted too many times, and none of it has been too beneficial, actually, to anybody. 

We are just trying to create a financial market for music. We don’t represent artists directly, but we are the platform, which artists, labels, PROs, anybody can use in any way that’s valuable to them.

Daniele Sestagalli: It’s a security token, it represents a securitized copyright, and it can be sent, received and sold. The interesting part is that it’s fungible. 

Let’s say, me and you have created a new hit song. We would like to raise money for it, because we believe, that in the age of social media, we are as well-positioned as any label to do our own marketing and distribution. We are willing to give the same cut to our fans, that a label would take from our copyright, let’s say 20% of the value of the track. We promise 20% of the copyrights to our fans in exchange for the funds to make, market and distribute this song how and where we please. We are the owners, after all.

In this example, we could issue tokens, each of which represents a share of 100% of the copyright. We sell 20% of those tokens to our fans, or even investors that like the genre, to raise the money.

That token is a certificate on the blockchain, it therefore also streamlines payments, which are funneled automatically to the address that holds that token in dollars, for example, via a stable coin like US dollar tether. Token holders can see the value of that token being represented by the dividends it’s receiving, just like a stock. A smart contract automatically regulates the efficient distribution of dividends among everybody that holds that token. 

Our fans could have a section on our forum, for example, in which they over-the-counter-trade our tokens. They might want to buy more tokens, because they really like the song, or buy their first token after missing the first round of issuance. This creates very interesting opportunities.

The more fans willing to buy anything from you, the more you’re able to just live off your art. Tokens escalate this idea, because they bring out not only participation, but also the opportunity for those fans to [have an actual stake in your career and] grow with you as an artist. They receive a share for being part of your system, at the same time they get paid for it. It creates an even tighter bond between the artist and his fan base.

Daniele Sestagalli: We are creating an infrastructure that we will release in the coming months, where any publisher can connect directly with our Utopia Genesis Foundation. Artist can then decide which publisher is going to be the right one for them. 

We don’t dabble in distribution directly. We allow the artists to choose, because some in the UK might prefer a UK one, another might prefer an Indian one etc. There is always a choice, that’s what’s at the core of open source and decentralization.

Daniele Sestagalli:  NFTs [non-fungible tokens] offer a new income for artists, because the contracts they have usually do not include digital items, even if they include ancillary income like physical merchandising. Until recently nobody thought that there would be any value in digital items sold on the blockchain. The principle of non-fungibility works very well in the ticketing industry, for special experiences and events that can be both digital and physical.

You can create a limited edition that, in addition to a special version of the art you’re selling, includes an access code for a zoom call with you. And it’s auctioned. You could sell digital passes for livestreams and take backstage pass holders behind the scenes prior or after the actual stream, or create and tailor other very interesting experiences during the live stream. The fact that that there is no fungibility means only the person that bought that token is going to be able to access the platform or the backstage.

It’s not easy, though, to try to understand how we can turn the live industry into a digital experience, because there is something very valuable to the physical experience, moving together with other people, feeling the vibrations. But I’m sure that the digital alternatives [will become more sophisticated], the more mainstream VR and AR become.

Daniele Sestagalli: Yeah, because each individual ticket is unique. We cannot simply exchange one ticket for another, because they have different values, depending on the quality of the seat in the stadium, for instance. Tickets can also be auctioned. Promoters of non-profit events can be very transparent, to help everyone involved understand what is happening with the money. Transparency is also of relevance to the reselling markets, where there’s still a lot of gambling taking place, not knowing how many and what kinds of tickets are actually up for sale.

Last but not least, the barrier and the costs of issuing tickets are lowered significantly. Blockchain and NFTs can really streamline the entire ticketing process and make it very, very clean.

Daniele Sestagalli: We have been contacted by a platform that is trying to create a booking platform for artists and live events, specifically, that would like to use blockchain technology for the escrow accounts. A lot of value gets lost in escrowing, for instance when you’re paying an artist way in advance to come to a festival, but they never show up. With smart contracts, digitally signed, you can make sure these payments get done in an efficient and safe manner for both parties.

There’s also a huge market to get bookings for lesser known artists that DJ in restaurants and pubs, for instance. That market is growing very fast, it’s missing an Uber-style booking platform.

Daniele Sestagalli: In technology, I don’t like to give timelines, because you end up like Elon Musk, who is always late. But, but by the end of this year, we should have everything we talked about in place.

Daniele Sestagalli: I think we should start with the smaller guys, because we need to start giving the best deal possible to those who need it the most. Usually, it’s the small guy that gets wrecked, constantly. We need to make sure that this goes to the people in the true spirit of blockchain. I’m not a huge fan of always giving the opportunity to the big fish. 

We come from the bottom, just like Bitcoin, we come from the street. I think the future lies in helping those artists, who have embraced our systems, become big. It’s where sustainability lies, and this is our mission at the end of the day.