Paperchain helps music labels and distributors to give the startup streaming data on their artists, then the startup uses their invoices as collateral for DeFi loans to pay the musicians more quickly. With Paperchain you’ll be paid much faster than other streaming platforms, with much lower fees.
Music labels and distributors give the startup streaming data on their artists, then the startup uses their invoices as collateral for DeFi loans to pay the musicians more quickly.
With Paperchain Musicians Get Paid The Next Day
The traffic that musicians generate on streaming platforms usually takes them weeks to be paid. An upcoming startup, Paperchain Inc., claims to be able to reduce that to a few days, generating a steady stream of income for musicians.
An artist’s daily streaming traffic is estimated in order to fast-track payments through a New York-based startup that utilizes loans from decentralized finance, or DeFi.
Observers say that delayed payments in the music industry are a common problem, especially for young artists who may need immediate access to cash to reinvest in their brands, build their careers, and make a living. Among streaming platforms, YouTube, owned by Alphabet Inc., is among the fastest payers; Spotify Technology SA, which channels payments through intermediaries such as labels and distributors, takes longer.
According to Spotify, invoices are processed within a few days.
“What has happened over the past few years, especially within streaming media, is that creators can create and distribute content instantly, but they can’t get paid instantly,” says Paperchain CEO and co-founder Daniel Dewar.
Founded in 2017, Paperchain just raised $1.6 million from venture firm Motivate Venture Capital in a pre-seed financing round. Labels and distributors use it to keep track of outstanding payments and streaming data for artists on their rosters.
In addition to working with Stripe Inc. to provide artists with banking services, UnitedMasters LLC has become an alliance partner to help expand the startup’s customer base.
Surge of Interest in DeFi Startups
Among startups riding the coattails of the cryptocurrency boom is Paperchain, which raised funding. According to research firm CB Insights, U.S. venture firms invested almost $1.2 billion in the U.S. startup sector in the first nine months of this year, compared with just $115 million in all of 2020. Startups offering DeFi products, infrastructure and protocols are tracked by the firm.
DeFi offers Paperchain more flexibility than more traditional lending channels, said Mr. Dewar. The DeFi business is based on blockchains, or digital ledgers of transactions that are overseen and validated by the people who are using them, outside of government-regulated channels, like brokerage firms and banks.
“Using DeFi, the facility is on demand,” Mr. Dewar said.
In DeFi, Paperchain gets funding by using artists’ invoices. A sea change from the days when loans were backed exclusively by cryptocurrencies, DeFi is increasingly accepting real-world assets as collateral.
On DeFi marketplaces like MakerDAO, Paperchain posts invoices as collateral for loans worth about 90% of their value. Stablecoins backed by the dollar are used to fund Paperchain’s loans, which are then converted into real dollars before being sent to the artists. The terms of the financing mean there is a small balance between what Paperchain can pay in real time and what the artist is effectively owed once Spotify pays the invoices, so Paperchain pays off the loans and rebates what’s left over to the artist.
PaperChain Has Historically Paid Labels, Distributors, and Artists Via Stripe
UnitedMasters’ Spotify artists signed up for Paperchain’s beta program for a Visa Inc. credit card that allows them to spend their streaming earnings in August. In the past, Paperchain distributed money to labels, distributors, and artists through Stripe.
The company, which has paid out $1 million to musicians for their streaming traffic, takes a 2% commission on total payments it makes to artists as well as a 0.7% cut on card purchases. It costs $7 to open an account.
In the coming months, Paperchain envisions onboarding thousands of UnitedMasters artists using the fresh capital. For growth, the company is also targeting Apple Inc.’s Apple Store and YouTube.
Paperchain estimates artists’ daily streaming revenue by using the daily reports Spotify shares with them on its “Spotify for Artists” page.
UnitedMasters executive vice president of corporate development Matt Gralen says that Paperchain has focused on accuracy in its estimates as a key aspect of its pilot.
There are various factors that determine the value of music traffic, including how much Spotify makes from music streaming overall and how much each musician gets, referred to as stream share.
Mr. Gralen said the product “works exactly as expected” and the overwhelming majority of members are willing to join Paperchain.
In today’s music industry, you need to strike while the iron is hot if you are an artist generating traction and seeing some increased activity in your streams.
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