People Are Building Their Own Record Label
(Sort of..) With Music NFTs and Web3
I know you’ve probably heard a million and one times that music is a dying business and streaming doesn’t make artists any money.
Well, let me ask you this. Why do you think record labels exist?
They’re not charities that sign artists from the kindness of their hearts. Record labels are thriving businesses that make money off one thing: Music.
Finally, you can get in on the action.
Goodbye Labels
Blockchain technology is revolutionizing the music business and leaving blue-chip record labels in the rearview mirror. Music NFTs have enabled individual fans and investors to join their favorite artist’s journey through joint ownership of their music.
Investors and collectors have already started swarming into this space. In 2023 alone, NFT collectors on Sound.xyz doubled in just a few short months and with a total of 100,000 NFTs minted on the protocol.
While artists on Sound.xyz generally doesn’t offer ownership rights in their music, this is a great place to get started. NFT collectibles on Sound tend to come with a cheaper price tag and offer other benefits to the collector. Some artists may even use their list of early collectors as a way to determine priority access for investors when they finally do release NFTs that represent ownership in their work.
Don’t sleep on music collectibles.
How To Invest In Music
To get in on this excitement, you’ll first need a crypto wallet and you’ll need to fund it with some cryptocurrency, most likely ETH.
Next, you need to find music you like that you want to buy. You can do this in a few different ways.
- Straight from the artist
- NFT companies
- Decentralized streaming platforms
- Secondary marketplaces
Let’s explore what this means.
1. Straight from the artist
Some artists go straight to their fanbase and offer them a chance to purchase their NFTs directly. If you’re lucky enough that your favorite artist does this, you might be able to scoop up a few tokens. This is a rare occurrence though as launching your own NFT drop can be technically and legally challenging. Without the right team, it can be a disaster. However, this is getting easier with tokenization as a service tool for web3 creators so I wouldn’t be surprised if this becomes more commonplace soon.
2. NFT companies
There are just a handful of great companies out there who help orchestrate music NFT drops today. They handle all the technical and legal side of the NFTs and ensure your experience as an investor is as smooth as possible. Two of the leading platforms out there are AnotherBlock and Royal.
3. Decentralized streaming platforms
Part of the value proposition from streaming platforms such as Audius and Sound is that users can discover and collect music right in the streaming player. This is game-changing and allows users to collect music they love the moment they discover it. Be aware though, these NFTs don’t always represent royalty rights. They could simply be collectibles to help back emerging artists. Nonetheless, these platforms are worth investigating as they give you an indicator of which artists are prone to web3 music distribution which could be a leading indicator that they’ll launch ownership of NFTs in the near future.
4. Secondary marketplaces
Finally, using secondary marketplaces to find music to invest in is a great option. Most music NFTs that have been minted can be found on marketplaces such as Opensea, Blur, and Rarible. This may be where you find the largest selection of music to invest in.
Be aware of the price you pay though. Music NFTs represent a percentage of royalties and the more you pay for an NFT on the secondary market, the more that premium will eat into your royalties. Try to find out what the original mint price was and the expected return on the NFT (or realized return if the NFT has been in circulation for a while) and then decide if the secondary market price is worth it.
As this space is still early, using a combination of these approaches to find the right music investment for you is a good idea. The total available catalog up for investment remains slim and limiting yourself to one method will drastically limit your options. At least for now.
Spend some time educating yourself and investigating the space. Once the ball gets rolling it could take off quickly. If you want to be along for the ride, you best be prepared.
Make It Legal
Finally, something to look out for when buying music NFTs is understanding what you’re actually buying. Are you picking up an artist collectible that only comes with bragging rights (many of the NFTs on Sound.xyz)? Are you buying ownership rights in the master recording of a song? Or are you buying a fan token that gives you perks such as merch or tickets to a show?
These are important distinctions to make because owning a collectible generally won’t make you any money.
The best way to distinguish this is by navigating to the original drop page of the NFT and locating a link to the legal contract or ownership agreement for the song. This should specify what you’re legally entitled to when you purchase the NFT. If such a contract doesn’t exist, it’s a safe bet you’re not buying legal rights to royalties in that piece of music.
Hope you enjoy your journey into the world of music NFTs! Remember, don’t invest anything that you can’t afford to lose. Like any new technology, this is risky business 🙂
