Interview with Sergio Mottola, the Visionary Founder of Music Protocol

July 04, 2024 – (SeaPRwire) – Today, we’re talking to Sergio Mottola, the visionary founder of Music Protocol. This specialized Layer 1 blockchain focuses on advancing the music industry, focusing on RWA, by tokenizing music rights and royalties, transforming them into liquid, tradable digital assets.

With a mission to bring transparency and efficiency to the management of music royalties, Music Protocol is unlocking a $500+ billion market for capital providers and positioning itself as a leader in the Real World Asset (RWA) space. Join us as we delve into Sergio’s insights on Music Protocol’s journey, challenges, and future.

Sergio Mottola is a visionary leader with over two decades of experience in corporate strategy and policy development. He previously served as Chairman, CEO, and Director of the Scientific Committee for the Republic of San Marino Innovation Institute, where he developed the groundbreaking “San Marino Blockchain” legislation. Sergio has worked extensively with high-profile institutions such as the OECD, IMF, and various international diplomats, highlighting his strategic prowess and international relations acumen. His leadership and expertise are instrumental in advancing Music Protocol’s mission to revolutionize the music industry by tokenizing music rights and royalties.

Liquidity is often a challenge in the music royalties market. How does Music Protocol transform these traditionally illiquid assets into liquid, tradable digital assets for investors?

Sergio: By tokenizing music royalties, we convert them into digital assets easily traded on specialized platforms. This process brings several benefits. Firstly, it provides immediate liquidity, allowing artists and rights holders to access funds quickly without waiting for traditional royalty payment cycles. Secondly, it opens up the market to a broader range of buyers who can now buy and sell these tokenized assets seamlessly. Additionally, tokenization enhances transparency and reduces transaction costs, making the process more efficient. Integrating music royalties into the blockchain ensures that all transactions are secure, verifiable, and immutable, increasing trust among holders. This approach democratizes the music royalties market and creates a stable, attractive asset class for capital providers, leveraging the continuous consumption and inherent value of music.

Music is a great alternative asset because it has a consistent and predictable revenue stream and is less correlated with traditional financial markets, offering diversification benefits to investors. According to Goldman Sachs, the global music industry is expected to reach $153 billion by 2030.

Tokenizing music rights and royalties sounds groundbreaking. Can you walk us through how this process unfolds on your blockchain, turning traditional assets into digital treasures?

Sergio: Sure, it’s pretty straightforward. We start by digitizing the music catalog, creating a digital representation of the rights and royalties associated with each track. Then we attach a licensing agreement (attribute) to the catalog, for example, the cash flow from streaming distribution and we allow digital assets to represent participation to that cash flow.  This process turns traditionally illiquid assets into liquid, tradable digital treasures, making it easier for IP owners to monetize music assets and for investors to participate in the music industry. The whole process of tokenizing the catalog is underpinned by our $RECORD token on the blockchain.

The journey of Music Protocol seems nothing short of revolutionary in the music industry. What was the beginning of its development, and how did you gain such remarkable traction when other projects have failed?

Sergio: It all started when we identified the inefficiencies and complexities in the traditional music industry. The pivotal moment was realizing how blockchain could bring transparency, efficiency, and democratization to music rights and royalties. Because we work very closely with the music industry globally, we were able to listen to their pain points and build a solution that truly addressed them.

Unlike other projects, we didn’t just focus on the technology; we focused on gaining the trust of industry leaders. We’ve now onboarded over 50 partners, including global labels and top-charting artists, showing the industry’s confidence in our approach.

As we step into 2024, the crypto market is buzzing with trends from meme coins to RWAs. Where does Music Protocol fit into this landscape, and how does it leverage these trends to solidify its place in the market?

Sergio: We’re right at the heart of the RWA narrative, with IP Cash Flows Tokenization being a dominant sector within the RWA space. Music Protocol transforms music royalties into digital assets, bridging the gap between traditional finance and the digital economy. By leveraging blockchain technology, we provide investors with a stable and attractive asset class.

The $RECORD token is at the heart of your ecosystem. How does it function within Music Protocol, and what unique utilities does it offer to artists and investors alike?

Sergio: First of all, the token secures the tokenisation executed on the network, and it’s essential to reward participants to accelerate adoption and position Music Protocol as the leader. I believe tokens are the accruing tool of economic value executed on a network and therefore their value depends on the increasing participation to that economic network. Music Protocol is addressing a **$500+ billion** market, providing a groundbreaking network for the music industry to fully digitize catalogs and automate on-chain royalty distribution and settlement. Further the token rewards important actors such as the Catalog Validators which guarantees that the underlying Music Rights registered on the blockchain are correct and compliance with the real world economic licensing relationships.

Navigating financial regulations is crucial, especially with innovations like the $RECORD token. How does Music Protocol ensure compliance, particularly with the approval from FINMA?

Sergio: So, my background as a regulator was very beneficial for this aspect. In the Republic of San Marino, I worked extensively on the “San Marino blockchain” legislation approved by Parliament in 2019. I’ve also worked extensively with institutions like the International Monetary Fund, the European Commission, and Financial Intelligence Units. When we decided to work with a network token, I immediately ensured everything was set up to be fully regulated. We decided Switzerland was the best option.

Switzerland is one of the most advanced blockchain countries with clear regulations on digital assets. Regulatory clarity is crucial for long-term success and market trust. That’s why we also set up the association in Zug and went through the process with FINMA to ensure everything was clear.

At Music Protocol, we’ve leveraged this knowledge to ensure our operations are transparent and fully compliant. The $RECORD token is classified as a utility token, not a security or payment token, simplifying our regulatory landscape. We’ve engaged with legal experts and worked closely with the FINMA to achieve this classification. Ensuring compliance builds trust with our users and positions us favorably within the financial markets.

Scaling any innovative protocol comes with its set of challenges. What obstacles do you foresee for Music Protocol, and what strategies are you deploying to overcome them?

Sergio: One of the main challenges we foresaw was ensuring widespread adoption within the music industry. This foresight led us to create the Web3 Music Association to onboard and collaborate with the music industry effectively. By focusing on adoption first, we’ve been able to build strong partnerships with industry leaders, which has significantly helped us get to where we are today.

The key was not selling technology directly but rather focusing on first building the Web3 Music Association as an industry trade association. Our value proposition is centered around education, learning, and collective decision-making. This philosophy resonated with the industry and led to valuable participation from various stakeholders. Tech-first projects tend to focus solely on the technology without facilitating strategic partnerships or strong relations with the industry.

I have been in tech for a long time and the most basic principle we should all follow is product market fit with your target audience. Actually, all the theories around lean startup suggest to go to market as early as possible to make sure your product has early traction. This is exactly what we have done. In blockchain, a developer-led industry,  often you have great tech searching for adoption. Our strategy-oriented approach focuses on understanding market needs and creating relationships to provide technological solutions that will be immediately adopted.

Looking ahead, what exciting developments or innovations can we expect from Music Protocol as it continues to evolve and shape the future of the music industry?

Sergio: Our LBP on Fjord Foundry, launching on July 8th, will showcase our innovative approach to token distribution. This event is crucial as it emphasizes our community-driven ethos, ensuring our supporters and early adopters are at the forefront of our journey. We are going to market before the announcement and partnerships are formally announced to provide the community the best opportunity to join the journey. We’re also expanding our presence in Southeast Asia, a region with immense potential and where we already have established partners. This expansion aligns with our goal to bring the benefits of tokenized music royalties to a broader audience. Additionally, we have exciting partnership announcements coming up, so stay tuned. These initiatives, combined with our focus on compliance and real adoption, will solidify our position as a leader in the RWA space and advance the music industry.

Imagining Taylor Swift joining Music Protocol, how would the transformation of her catalog into tokenized assets revolutionize the future landscape of music royalties?

Sergio: It’s not just about individual artists like Taylor Swift, but about bringing the entire music industry onboard. This is why we have assembled such an experienced team. For example, Ted Cockle, part of our team, looked after Taylor Swift while he was President of Island Records. By transforming catalogs into tokenized assets, we enable a more transparent, efficient, and democratized approach to managing music royalties. This approach allows for greater liquidity and accessibility, making it easier for artists to monetize their work and for buyers/fans  to participate in the music economy. Ultimately, this transforms how music royalties are managed and distributed, benefiting the entire industry.

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