Nonfungible tokens (NFTs) have gone from an obscure type of digital collectible held on a blockchain to a virtual “gold rush” for artists, labels, and other music rights owners looking for new revenue streams

If the trend continues, the potential profits from artist NFTs could boost music catalogue and publishing values for the benefit of artists, labels, and other music rights holders, as well as give artists more opportunities to create new content and connect with fans.

In handling the legal challenges of “minting” and selling NFTs, artists and other stakeholders need to be strategic and consider a number of aspects

What is an NFT

An NFT is a digital certificate of specific rights connected with a digital asset that is held on blockchains, the decentralised computer networks that underpin most cryptocurrencies.

Other blockchain tokens — such as bitcoins — which are “fungible,” “nonfungible” simply means that each token is unique (e.g., every bitcoin is the same, just like every dollar is the same).

The significance of NFTs is that, despite the fact that digital works can be swiftly and readily copied, the NFT owner can claim rights to the “original” of the work. NFTs can also be linked to tangible items or activities, with the NFT acting as a “digital key” to authenticate the NFT owner.

While most works have only one NFT, a creator may develop a limited edition series of NFTs all related to the same work, such as exclusive access to certain films or music for a select group of “superfans” who acquired the NFTs. NFTs can also be used to generate tickets for a specific event.

Music and NFT

The music business has embraced NFTs in innovative ways in order to grow fan bases and develop new revenue streams.

Artists have produced NFTs for digital art, physical objects, and live events, in addition to enabling access to music. Mike Shinoda, co-founder of Linkin Park, for example, published an NFT in early February 2021 that included a 37-second snippet of an unreleased song and an animation named “One-Hundredth Stream.”

Legal Aspects

1. Third Parties

The capacity of a musical artist to mint and sell NFTs involves a careful examination of the artist’s legal rights as well as those owned or granted to third parties, such as music labels, publishers, and merchandise rights holders.

When a musical artist combines their work with the work of digital artists or videographers, the rights of other producers must also be considered.

Furthermore, a musical work may have multiple authors or be subject to exclusive licenses, affecting who has the authority to make an NFT. Not only is it necessary to be aware of these rights in order to avoid infringement charges, but it is also necessary to understand them.

2. Copyright

The rights required to mint an NFT will vary depending on the work associated with that NFT. For example, an artist who creates a new music video clip and wishes to “tokenize” it as an NFT must ensure that they have the necessary rights and licenses (including from any collaborating vocalists and musicians, or samples used in the sound recording and with respect to any songwriters and their publishers)

The minter of the NFT will need to review any contracts attached to that musical work, such as record label agreements, to determine who has the legal right to mint the NFT, in addition to understanding the basic copyright ownership rights in the underlying composition, sound recording, and visual work.

3. Purchaser Rights

NFT buyers don’t usually get any intellectual property rights to the work linked with the NFT. This is not dissimilar to how non-digital assets are purchased.

A buyer of a painting, for example, does not get the right to reproduce the piece as a poster. Such rights would only pass to the NFT holder if they were explicitly assigned, and most NFT marketplaces make it plain that no rights are transferred. When artists offer their NFTs for sale, they sometimes state this explicitly.

Therefore, in conclusion, comprehending the technology behind NFTs, understanding the legal rights held by the artist and third parties, understanding the terms imposed by NFT marketplaces, and assuring proper protections for the artist and the fan-purchaser are all required to optimize an NFT in the music industry.

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