New and emerging technology in the music industry.
The music industry has faced a lot of changes in technology. With the arrival of phonographs, CDs and the brute force that followed the mainstreaming of the internet in the 1990s. Blockchain technology has emerged with the potential to reshape the music industry by giving artists the ability to receive fair remuneration for their work and will change the landscape of how fans can interact with their music icons. With its unique features and capabilities, blockchain is poised to revolutionise the future of music interaction, offering artists fair remuneration systems, and transforming how fans can engage with their favourite artists. This essay will focus on the exploration of how blockchain technology is bringing about significant changes in the music landscape, empowering artists, and enhancing the fan-artist relationship. By providing a transparent and decentralised platform for transactions, blockchain is set to create a more equitable and interactive ecosystem that benefits all stakeholders involved. The complete history and future of NFTs and blockchain technology are beyond the scope of this piece, albeit the topics contained have been reviewed at length.
Blockchain technology represents a significant evolution in the digital landscape building upon previous iterations of the Internet. Web 1.0 was characterised by uneditable websites while Web 2.0 introduced interactive platforms and social media, we can see site traffic and create our own content (Garrett 2022). Web3 has emerged as a response to growing concerns regarding data privacy and the architecture that governs user data. It is a decentralized version that uses blockchain technology — Blockchain is a digital record system that verifies and saves transactions across a network of computers. Its purpose is to enable transparency, security and is a permanent and unalterable history of data. It is what forms the foundation for NFTs (non-fungible tokens) (Rauman 2021).
NFTs are unique digital assets that are stored on a blockchain. The decentralised nature eliminates the need for intermediaries which gives the ability for peer-to-peer transactions. NFTs are unable to be divided and represent ownership or proof of authenticity for items such as digital art, concert tickets, and songs. Blockchain provides the infrastructure for storing and validating NFTs, ensuring transparency. Each NFT has a unique identifier that makes it distinguishable, and this is what gives it value (Mutohir 2023). A music-related NFT is a distinct digital asset that’s issued on a blockchain and is linked to an individual song, EP, album, or video clip. Music NFTs possess the potential to transform the music industry by revolutionising how artists create and distribute their work. Through NFTs, artists can generate digital assets representing their music, exclusive merchandise, and virtual experiences. These assets can be traded and used to support artists shifting ownership from companies to individuals. While labels still provide valuable connections in industry knowledge, NFTs are allowing even emerging artists to generate income independent of intermediaries without relying solely on building a large following or investing significant sums into marketing. Additionally, NFTs enable the creation of token-gated communities where fans can engage in exclusive events and promotions fostering new dynamics between artists and their fandom. This opens secondary markets for fans creating additional avenues of interaction and potentially greater earnings for an artist, in contrast to the income derived from streaming services alone (Chainlink 2023). According to a Digital Music News report, to achieve a monthly income of USD 1,400 which is a liveable wage, an artist requires either 230,000 plays on Apple Music or 380,000 plays on Spotify. Considering that most bands consist of multiple members, these figures would need to be multiplied by two to four, to ensure each member can cover their rent expenses. “For a four-piece band, they’ll need 1.5 million plays each month to even scrape by” (John 2017). During a 2021 Spotify presentation, it was revealed that out of the estimated 11 million artists and creators on the platform, only 7,500 are earning $100,000 plus per year. Which works out to a mere 0.0681% of the total creators that are earning that amount of money (Carman 2021).
Artists such as Snoop Dogg are currently utilising the technology. In the first quarter of 2022, Snoop sold $44 million in NFTs (JengaX 2022). Kings of Leon generated a revenue of $2 million from selling NFTs from their album. The sale included various tiers, with the highest-priced option providing the holder with four VIP concert tickets for every upcoming tour. Rhianna released a hit song that was offered as an NFT through Web3 music startup “anotherblock,’ which allowed holders to receive partial streaming royalties (King 2022). The platform collaborates with rights holders such as artists, producers, and writers to share a portion of their streaming royalty rights which are then transformed into fractionalised NFTs (Perper 2023).
Arpeggi Labs is another example of how blockchain technology is being utilised in ways that are advantageous for artists. It is an open-source platform on Web3 that promotes transparent consumption and creation of collective and solo music. It ensures a high level of trust when sharing unpublished works and offers the option to either pirate or pay for sampling, remixing, or referencing sounds from other artists. It simplifies the navigation of complex rights registries by identifying multiple rights holders and facilitating permission requests, thus obtaining legal clearances for using other artists’ work. Arpeggi introduces a groundbreaking approach to music creation, allowing listeners to remix and share their songs of choice. Unlike other Web3 projects that prioritise the creator economy, Arpeggi directs attention towards the creative process, emphasizing its significance over relationship-building needing to be the first point of contact. In emphasis, “It provides a solution to overcome collaboration challenges in the music industry” (Zheng et al. 2023).
Before being able to navigate the music industry independently, there has been much evidence that alludes to a significant disparity between artists and intermediaries like labels, streaming services, and collection agencies (Rauman 2021). It isn’t uncommon for artists to experience delays or not receive payment for extended amounts of time. Collection companies like APRA/AMCOS don’t pay out royalty earnings until a certain threshold is met. As explained by Glen Bennie (2023), for all of the businesses that you can receive royalty rates from, something needs to be streamed for more than 30 seconds before a royalty rate is triggered. The work must have had over 50 streams or views before they’ll pay a royalty, but when they reach over that 50 stream threshold royalties will be earned. When APRA pay out royalties they have a cap threshold, unless your royalties are sitting at over a dollar and fractions of a cent take a while to add up to that amount.
There are certain thresholds that APRA use because there’s such a vast amount of data coming from all the different platforms. “If we paid out everything that was reported to us the royalty return would be less than a fraction of a cent… what we do is we cap it. If you’ve only had a few streams, it may take a while before it gets over that dollar threshold before we’ll [actually] pay that money to you, and for the cost itself it has to be over $10”.
Ditto Music, a distribution and services company, has developed Bluebox, a set of blockchain tools for music artists (Staff Writer 2020). Nathaniel Peacock (2023) from Ditto Music, discusses the scope of the company and how previous technology affected the streaming landscape. Ditto Music has over 900,000 artists and labels from around the world. They offer RLS Services, playlisting, release strategy, PR, and social media. Peacock explains that some services work on subscription models, where there’s an annual fee. Others will have a subscription or sign-up fee, but they’ll also take a percentage of your royalties; there can also be an exit or termination fee. “When streaming kind of started, it was solving the problem of illegal downloading. It felt really strange, about streaming music and not having it as a download or not actually owning it… just listening to it through a platform where I could transfer between devices.” With Bluebox, artists can tokenize their tracks as NFTs, enabling ownership rights to be divided. These NFTs can be purchased, granting the owner a percentage of the track’s royalties. By selling song rights as NFTs, artists can earn significantly more upon release, providing them with greater financial flexibility. Additionally, fans can wager on a song’s release and those with ownership will receive monthly royalties for the tracks from streaming platforms (Paolucci 2021).
However, purchasing NFTs that give the owner a percentage of the track’s royalties, doesn’t equate to copyright ownership. The distinction between the two is something that still needs clear definitions and still has contradictory claims that surround it, especially when looking at the different copyright laws that change depending on different locations of the world. It’s a conflicting question of bringing the old music industry ways and making them fit current technology or making a brand new system and integrating that into a worldwide ecosphere. At this point, there is no current standard in ‘digital ownership’ and currently exists closer to “a right to receive royalties.” The contracts that inform the artist and buyer of property rights are still using ambiguous language and the future of music NFTs and Web3 will require new legalese giving clear parameters to all parties involved in future sales (Water & Music 2021).
There is a movement towards that direction, demonstrated when an intellectual property attorney, Mike Kondousis, confirmed that Sony Music Entertainment filed a trademark application indicating the label’s intentions to make use of NFTs, in August of 2022 (Kimani 2022). This infers that labels as well as the individual artist are looking forward to the metaverse and blockchain infrastructure. Virtual platforms can connect music-based NFT owners with artists, facilitating unique interactions. Users can engage in virtual jam sessions with renowned artists, supported by smart contracts detailing rights management and fractional payments. The metaverse allows users to customise virtual spaces, recreating any settings the mind can conjure, and curating personalised festival lineups. Fans can also create digital collages using album covers, photography, and lyrics, which can all be minted as NFTs. In cases when labels own both the master and publishing rights or specific agreements with artists, users can remix unmixed tracks and transform them into NFTs. By incorporating gamified elements, labels can assess campaign impact, engage fans, and reward them with privileged content (Mantri 2022). NFTs bring back a form of ownership that we haven’t seen since Napster and the onset of the streaming revolution.
The emergence of this new paradigm benefits not only the individual but the music industry as a whole and provides valuable insight into what the future of Web3 will look like. Everything that the music industry is currently, such as concerts, new music drops, gig tickets and backstage passes, can be modified for Web3. There are fewer limitations in virtual reality, than in real life, especially when it comes to spatial or time constraints. Blockchain technology and NFTs will continue to have an undeniable influence on the music industry. Fostering creativity and returning the focus to making art encourages new talent. Fair compensation, global reach, engagement opportunities and rights management have valuable insight into the potential. The methods discussed provide context for the scope of its capabilities and the options of use are as boundless as the human imagination.
By Brenna Richter
