How NFTs Are Redefining The Music Industry
Web3 is bringing artists and fans closer together
Yet another article on NFTs. Isn’t it enough already? The hype is over.
You’d be forgiven for your skepticism and distaste at yet another NFT article. The NFT boom of 2021 has left many people perplexed and skeptical. Understandably so. The bull run saw floor prices get way out of hand and digital art peaking at unfathomable prices. I’m going to attempt to put a new spin on things and look beyond overpriced JPEGs. NFTs are a vastly powerful tool in the new creator economy and every creator should be paying attention.
In this article we’ll explore the role of NFTs in the music industry and why it’s an exciting opportunity for musicians and fans alike.
NFT music wave
In the midst of the NFT boom of 2021, the music scene was quick to enter the game. The first ever album to be minted as an NFT was When You See Yourself by Kings of Leon back in March 2021. Following that release, several EDM artists followed suit with DJ and producer 3LAU making the biggest waves in the space. After selling his album Ultraviolet as NFTs, 3LAU co-founded the company Royal, a platform that helps musicians tokenize their music and allows music lovers to own a piece of it.
But music NFTs didn’t end with the EDM sector. Since last year we’ve seen artists like Shawn Mendez, Snoop Dogg, The Weeknd, and Linkin Park’s Mike Shinoda enter the NFT scene.
The release of projects from big name artists coupled with overwhelming engagement from the music community has led to many great projects sprouting into existence. From decentralized streaming platform Audius to music video protocol Glass.xyz, web3 is about to shift the very fundamentals of the music industry and enable more artists to connect with their fans.
How does it work?
Traditionally, artists get signed to record labels and are paid a large upfront sum in exchange for the rights to their music. These contracts usually state that the artist gets a small proportion of the revenue their music generates with the majority going to the record label. More notably, none of the value accrues to the fans of the music. NFTs changes this dynamic and puts the control back in the hands of the artists.
By minting a song or an album as NFTs, artists offer direct distribution of their music to their fans and take home the majority of revenue from the NFTs. Any revenue the song or album generates after release accrues to both the artist and the token holder. So far, artists have tended to divide ownership of a song into multiple NFTs, giving fans joint ownership. If an NFT holder decides to sell their token on the secondary market, the artist receives royalties from the sale. These royalties continue in perpetuity, meaning both the artist and the NFT holders are incentivized to nurture the community and increase the value of the song over time.
Artists have also used NFTs to represent concert tickets, making it easier for fans to attend without the worry of losing their ticket or having it stolen. It’s verifiably theirs because it lives in their crypto wallet and it can provide them with “Proof-of-attendance” which they could be rewarded for in the future. Finally, artists can use NFTs as a marketing tool. They are great forms of entertainment and can help artists attract a wider audience who might not otherwise have found them.
So why buy music NFTs?
There are several reasons you’d want to buy an NFT that represents ownership in a song or an album. The main factors determining whether it’s worth buying an artists NFT in my opinion are:
- Yield
- Utility
- Community
- Rising stars
- Love of the game
1. Yield
Most NFTs that represent partial ownership in a song will grant token holders a percentage of streaming royalties. As most music lovers will know, artist streaming royalties are notoriously low which means you’d probably need to scoop up quite a lot of NFTs to get a good return. The way I see it, streaming royalty rewards are an added bonus for token holders and not the main driver. However, depending on the song and the artist, there are NFTs out there that generate double digit yields for token holders and serve as a great alternative investment asset.
Artists can choose to incorporate any benefits they want into their NFT project outside of royalties. For example, token holders might be able to claim part ownership of their upcoming album (a reward for committing to the community), or receive bonus rewards from an artist’s touring revenue. The sky’s the limit and I expect to see a lot more benefits offered to token holders as this space gets more crowded.
2. Utility of the NFT
Most NFT projects try to offer their token holder some form of utility. In the case of music, this can be anything from gated access to a private Discord community to VIP tickets. The token holders that hold on to their NFTs for a long time signal to the artist that they are true fans which can lead to surprise benefits like airdrops, exclusive access to private events, free merchandise, and plenty more. It’s an easy and verifiable way for artists to reward their biggest fans for sticking with them.
Additionally, artists could offer token holders the rights to a number of 1–2–1 meetings with them or lifetime discounts on festival tickets. I think we’ll see artists get creative with the utility they offer token holders in the future.
3. The community
When you purchase and hold a music NFT, you connect with a community of like minded people who, just like you, put their money where their mouth is. It’s hard to explain the impact this can have, but you get an instant connection with people from all corners of the world and it’s really quite special.
Being part of an exclusive community that loves the same music you do is not a new invention. These communities have connected music fans for decades and sparked friendships, connections, and even new projects. Web3 pours rocketfuel on this social phenomena and makes it possible for fans to instantly connect with each other in a deeper way.
4. Bringing new artists to the scene
What really excites me about the marriage of web3 and music isn’t the opportunity to own pieces of superstar artists’ music. The real juice lies in the power this technology has to foster new artists and bring them into the spotlight. There are many talented artists around the world who aren’t backed by a label and don’t have the ability to be heard by talent scouts. It could be based on their geographical location, life circumstances, socioeconomic background, and a multitude of other factors. NFTs allow these artists to build a strong community of fans while being able to fund the future of their creative endeavors without needing the backing of a record label.
The most powerful aspect of NFTs for new artists is that they create a co-incentivized journey between them and their fans. NFT sales generate revenue for the artist and incentivizes them to continue creating great music and building their brand. Token holders are financially rewarded for being fans of their work and become like an extended marketing team for the artist. The more popular the artist becomes, the better off the token holders are.
5. Finally, love of the game
In the end, music is art. If you have a deep appreciation for the art of music, there’s a good chance you’ll be excited at the prospect of owning your favorite artists songs. It’s for a similar reason a classic art collector likes to own paintings. They love the art itself and the piece means something to them. I’m sure we all have a collection of songs that have been with us through hard times and connected with us on a deeper level. Wouldn’t it be amazing to own a piece of that song?
100 True Fans?
In his now famous article, 1000 True Fans, Kevin Kelly illustrates how the internet and web2 enables any creator to make a living off their work. I recommend reading the article in full, but in summary, ‘true fans’ are defined as people who love an artist’s work and will buy anything they put out in the world. With just 1000 true fans, a creator can make a living off their work and continue to do what they love indefinitely. This approach is based on web2 technologies and the opportunities it affords us. Web3 changes the game.
According to the CEO of Sound.xyz, David Greenstein, NFTs will enable musicians to make a living with as few as 100 true fans without ever needing a record label. Artists now have instant global distribution of their music and a marketing team (fans) that will help them grow. It’s a revolutionary time for the music industry and a pivotal moment for record labels to respond accordingly if they want their business to survive the next few decades.
My first music NFT
I recently bought my first music NFT from producers Laidback Luke and R3HAB. As a music lover and producer myself, this was one of my most exciting NFT purchases so I thought I’d briefly share my experience.
The NFT represents partial ownership in the song Weekend on a Tuesday and was dropped by Swedish startup platform AnotherBlock. You can find the song on all major streaming platforms. I’ve shared a link to Spotify here. (Full disclosure, as a token holder I receive streaming royalties from this song)
Sadly, I missed the original mint by a few days but I picked up my NFT on OpenSea as soon as I could. There were a few reasons I decided to make this purchase. First up, R3HAB and Laidback Luke are great artists and I love their music. But more importantly, Laidback Luke was the first artist I learned music production from. He used to upload mini tutorials to YouTube while he was touring (such a genuine move) and I devoured these. This helped me get started with music production and it felt great to repay him for that.
Another reason I decided to purchase this NFT was because I wanted to get involved in the game and learn more about music and NFTs. There’s no other way to do it than putting your money where your mouth is. Since picking up my NFT, I’ve had nothing but amazing experiences. The team at AnotherBlock have a dedicated Discord channel for token holders and the community there is amazing. Everyone is incredibly supportive, kind, and excited about this new frontier of music distribution. Additionally, being a token holder of their first NFT grants me access to their next drop which is rumored to be a pretty exciting artist!
If you’re interested in learning more, I suggest joining AnotherBlocks public Discord channel.
That’s it for this one. I’d love to hear your thoughts on NFTs in the music industry. If you have any questions or want to learn more about where you can find upcoming drops, don’t hesitate to ask!
