Music NFTs: Why Independent Artists are Turning Down Million-Dollar Record Deals for Web3
In the world of Web3, independent musical artists like Kaien Cruz blow up fast.
In 2017, Kaien released a track called ‘Love Me in the Dark’ with a local DJ in South Africa and it instantly began to explode online.
Soon Kaien was getting calls from Universal Music. “Do you want to go on tour with Justin Bieber?” A few months later Kaien was playing their second ever gig in an arena to 90,000 people. And the track entered the Apple Music charts in Africa.
Things went from zero to 100 really fast.
Kaien began getting offers from record labels. They met with almost every major label and reportedly turned down million-dollar deals.
While trying to figure out how to practice their craft without selling their life away, a new opportunity suddenly presented itself.
NFTs.
Fast forward to today and Kaien is about to drop the biggest NFT campaign of their career: a collection of generative music NFTs with SoundMint.
So why are independent artists like Kaien Cruz turning down life-changing music deals to pursue a completely unknown path?
First…here are some stats to put this independent revolution into context.
Independent Artists Sold $55 Million of Music NFTs in 2021
Independent musicians are the driving force behind web3 music, outselling major labels by a considerable margin.
In 2021, indie or unsigned artists accounted for almost two-thirds of all music NFT releases, capturing $55 million (according to Water & Music).
For comparison, that’s more than the entire revenue of XL Records in the same year, an independent label which is home to Adele, Radiohead and The XX. Independent music NFTs are now a major force in the music industry which cannot be ignored.
And it’s no surprise to see indie artists leading the way. They aren’t tied into complex rights agreements and publishing contracts which are very difficult to navigate when it comes to NFTs.
Independent artists can move fast, experiment more, and rally their community around new ideas. The independent scene is where we’ve seen the most innovation and long-term success for music NFTs so far.
Why Choose Web3 Music Over Million-Dollar Deals?
Kaien sums it up pretty well:
“A lot of people in the music industry didn’t understand the vision of what I was trying to create, not allowing me to have full creative control and reins on my future.”
This is the oldest story in music. Artists want creative freedom without giving up control and ownership of their music.
And there’s another big factor: money. Artists are growing frustrated with the tiny payouts from the streaming services and large royalty cuts taken by record labels.
Let’s dive into each problem a little deeper.
Problem 1. Artists and Musicians Aren’t Paid Fairly
This is no surprise to anyone in the music space.
Spotify and other streaming platforms only pay $0.003 per stream. That means you need approximately one million streams to make just$3,000.
Then the record label takes a cut. If you’re on an independent label, you might get 50% of that streaming revenue. If you’re on a major label it’s as low as 12–20%. (And only if you’ve recouped your advance).
Just to make this clear. An artist on a major label could generate one million streams and receive just $360 after the record label takes their cut.
Streaming is therefore only economically viable for the biggest artists with millions of monthly listeners, but even huge artists like Kanye West are fed up. He recently refused to release music on Spotify because of the unfair payments.
“Today artists get just 12% of the money the industry makes. It’s time to free music from this oppressive system” — Kanye West.
In other words, revenue from the traditional music system does not trickle down to artists. And the industry is full of middle-men.
The Answer? Music NFTs
Music NFTs mean artists can get paid directly, with no middleman, often at prices higher than streaming income. Kaien Cruz explains it:
“[With NFTs] I saw how creatives and digital artists get what they deserve and not deal with third parties that are taking most of their money… there’s no middleman involved. You can trace your own money and you know who is touching your money.”
Grammy award-winning artist RAC is a perfect example of this. This year, he released two music NFTs on Sound.xyz, generating 20 ETH in primary sales (approximately $68,000).
For context, it would take almost 7 million listeners on Spotify to generate the same figure. With NFTs he only needed 200 collectors.
And it gets even more interesting. Creators like RAC earn royalties on all NFT secondary sales. So every time someone trades his NFTs on OpenSea, he gets a royalty payment.
So far, those two tracks have generated 57 ETH ($194,000) in secondary sales, which equates to ~$19k royalties, direct to his wallet. No middleman.
There are so many stories like this. Independent artist Verité sold $90,000 of music NFTs through one campaign on Royal.io. And here on SoundMint, independent producer and DJ Kloud generated 750 ETH ($1.8 million) in generative music NFTs.
It’s easy to see why independent artists are considering the web3 model as an alternative.
Problem 2: Ownership and Control of Your Music
It’s not all about money though. Kaien’s primary reason for saying no to traditional record labels was… freedom.
“People in the music industry didn’t understand the vision of what I was trying to create.”
Most indie artists want creative control. And signing to a label sometimes means compromising on their vision, perhaps changing their sound, image or visuals. It almost always means losing control over release dates and even which tracks to release.
In the worst cases, artists lose ownership of their music entirely.
Again, this happens to the biggest artists on the planet. Frank Ocean famously released a ‘decoy’ album on Def Jam so he could be free of the label and release Blonde independently. While Taylor Swift has spent most of her career battling for ownership of her music while record labels, investment firms and big corporations carve up her back-catalog behind her back.
The Answer? Also Music NFTs
Music NFTs allow artists to raise money without giving up control or ownership of their music.
Before their drop with SoundMint, Kaien Cruz raised 20 ETH through an NFT crowdfunding campaign on Mirror (about $92,000 at the time, now $39,600).
It might not be a million dollars. But it’s still larger than the basic major label advance offered to most debut artists ($50k according to RIAA). And Kaien retains full ownership and creative control of their music and career.
Daniel Allan did a similar thing using Mirror. He raised 49 ETH through an NFT crowdsale to fund his album (approximately $147,000 at the time of the campaign). In exchange, holders are entitled to 50% of the album’s master rights. For him it was all about creative control.
“I realized how difficult it was to give up so much of my master ownership for fairly little in return.”
By the way, Daniel Allan had only 200 followers on Twitter when he started the campaign. So web3 music is open to anyone who jumps in and engages.
Music NFTs Give Independent Artists Freedom
Until now, independent artists in the early stages of their career only had two main options to generate money.
1. Sign a record or publishing deal.
2. Go out on tour.
Neither of these options are ideal. Signing any type of contract early in your career often means sacrificing ownership and compromising on your creative vision.
While going on tour relentlessly, like many indie musicians, can be draining for both physical and mental wellbeing.
We need a third option. Something that can compensate musicians to do what they do best: making music. Generating money through NFTs gives artists some breathing room to develop and work on their music without giving up ownership too soon.
One final thing we haven’t even touched on in this article: community.
NFTs allow independent artists to build a passionate audience of super fans and collectors and bring them along the journey. This is something we’ll discuss in future articles. But if Kaien Cruz goes on to global stardom, the fans and NFT holders go too. And we will soon see just how powerful that phenomenon could be.
One thing is certain. Signing a major record deal is no longer the only option. Music NFTs have arrived and a new model for artists is here to stay.
Check out SoundMint’s approach to an artist-first generative music NFT platform here.
