Music x NFTs: How This Industry Is About to Get Rocked 🤘
And How Indie Musicians Are Poised to Retake the Stage
As interest in crypto and NFTs continues to shatter records, the nescient crypto-art market has innovated beyond static images of cats and punks. NFTs have matured in their utility and support for other forms of media has become commonplace, including the focus of this article: audio. 🔊
The internet has increased opportunities for artists to reach new audiences by orders of magnitude. However, musicians continue to face limited options for profitable distribution of their work. Even as the cost of production lowers the barrier of entry to new artists, and social media somewhat democratizes channels of exposure, it’s still a struggle for many artists to realize much if any revenue from distribution of their work. On that note 🎵, how can NFTs fix the current model; one where musicians give up the majority of their creative rights for fractions of pennies on streaming platforms?
As discussed in my previous article, The Artist’s Guide to NFTs (which I recommend checking out if you haven’t already, as it will help make sense of some of the key points of this article), NFTs strengthen the relationship between artists and fans. They remove dependencies on intermediaries, and allow artists to retain a greater share of potential revenue and to focus on serving their artistic niche, rather than trying to appeal to a broad market audience.
Fans also experience a deeper connection with their favorite artists through community tools such as on-chain crowdfunding models with access to exclusive NFT offerings (which we will cover below). Structured correctly with programmable NFTs, artists who retain master recording rights of their music can even share their success and revenue together with early supporters.
Leading the Bandwagon
In these innovative days of crypto-music, enterprising musicians such as RAC, Deadmau5, 3LAU, and even some K-pop groups at studios like RBW, have started to experiment with incorporating NFTs as part of their distribution models. Album art, limited edition tracks, and collaborations with visual artists are just a few of the early ways we are seeing NFTs being used. As the space draws in more mainstream attention and capital, we’re seeing household names like Eminem, Snoop Dogg, Aphex Twin, and Canadian musician/Elon Musk’s girlfriend, “c” (better known as “Grimes”) starting to get in on the action too.
🔊Sounding the Alarm on Old Models 🚨
Though most associate the value of their work with a salary and sales, sustainable value is generated by income-producing assets. In the music industry, this can take on forms such as licensing agreements and royalty streams. The key to unlocking this wealth, which has traditionally been controlled by the record labels, is ownership - a key trait of NFTs.
A Wealth Transfer From Record Labels to Artists
The music industry has a pattern of being entrenched in its ways, but when it gets disrupted, it get rocked. Near the end of the 20th century, the multi-decade physical record sale model broke when music went digital. As a response, companies adopted the 360 record deal model: providing advanced early financing and branching into broader monetization channels beyond sales of recordings (for context, fast-forward to today and musicians on average retain only ~12% of the revenue their work generates).
Since the early 2000s, there has been no real way to limit the creation and distribution of online data like digital music files (see Napster). Prior to the maturation of blockchain technology, streaming services such as iTunes and Spotify would be the closest thing to limited distribution of digital content we could get. In the process, we learned that people are, in fact, willing to pay to support creators, and for the convenience of subscription models on streaming platforms. Unfortunately for artists on these platforms, their cut of the revenue is less than one cent for each time their track gets played (~$3000 per one million streams on Spotify). 😟
Today, led by the true ownership model that crypto and NFTs enable, I believe we have entered the music industry’s next phase of disruption - one that will shift the balance of power and revenue distribution back to musicians. In addition to recapturing the limited distribution model of retro vinyl in the digital age, it is likely that valuable IP such as master recording rights will also be tokenized,
Recoupment Through Royalties
Residuals (basically when a creator frontloads work and earns passive income from it later) are one of the most rewarding revenue streams an artist can secure, but record label companies today still take the lion's share (~80% of royalties, with some of whatever is left over to the artist). NFTs can serve as both bearer assets, and as programmable income streams on secondary sales. Organizations like the Mechanical Licensing Collective are already taking steps to modernize royalties in the music industry through blockchain technology. For more in-depth coverage on NFT royalties, please check out my previous article on crypto-art: 👇😉
Of course, we can’t forget about all the non-fungible spokes of the music monetization hub, such as event merchandise and concert tickets. In addition to bringing digital sophistication to traditional events, expect demand for NFT tickets and virtual wearables for online (virtual) events to rise in tandem with mainstream adoption of metaverse platforms.
Examples of innovation in with live events have already started to emerge:
Musical performer, Citizen Cope, released what appears to be the first VIP concert ticket NFT on Open Sea in Spring, 2021.
This hour-long audio-visual experience was minted as a digital concert NFT (the auction for which included the only physical copy, supposedly).
Audius: Shuffling-Up Music Distribution
Audius is an up-and-coming player for music distribution on the blockchain. It is a decentralized, community owned and operated music streaming hub built on Ethereum; think of it as something like SoundCloud as a Web3 dApp that connects creators and listeners in familiar yet novel ways. As of April 2021, the platform boasts over 4.5 million users and growing (click here to see real-time dashboard metrics of the Audius protocol).
Since the Audius network is decentralized, there is no central server that can go offline or be censored due to often baseless copyright claims (like on YouTube), since the content is streamed by nodes across the network. The protocol itself is governed by users who hold the platform’s token ($AUDIO), which is earned in most part by users that add their computers to the network as nodes. Users can also “stake” their tokens (lock them to the protocol to help secure it) to earn revenue generated by the network. Perks are also unlocked based on how much $AUDIO is held (kind of like loyalty rewards). During Audius’ current growth phase, any additional revenue the network generates looks to be go towards developing and expanding the platform, but the eventual roadmap to monetization plans to allocate a generous portion of streaming revenue to creators.
Audius has NFT support relevant to artists in the form of Audius Collectibles, which are unlockable at a certain tier (badges that unlock perks for users who hold a certain threshold of $AUDIO). It enables users to pick and choose NFTs they hold on several big platforms, including OpenSea (which has a Music category), SuperRare, Rarible, KnownOrigin, Foundation, and Zora to showcase on their Audius profile. For artists, this makes exposure and distribution of their brand through NFTs directly with their fans easy (see RAC’s collectibles page for an example). Audius has plans to expand the utility of NFTs on the platform further, including allowing artists crowd-fund albums, create track drops, and sell tickets.
With a growing artist and listener base (including artists like Skrillex), the reception seems to be fairly positive from users so far. If you feel like platforms like SoundCloud are chasing shareholder value over the interests of independent artists and listeners (counter to creator economy values), give Audius a try. They also offer a newly released mobile app (available on Android and iOS) and optional free track downloads that should continue to attract new users to the platform.
Rhythmic and Algorithmic 🤖
It wouldn’t be a crypto article without touching on the programmatic capabilities of NFTs (not just transactions and ownership). Algorithmic composition is to music as generative art is to design, and both can leverage the utility of the medium by having all their data live entirely on-chain.
EulerBeats is a 100% generative music project that used mathematic algorithms to produce a collection of 27 NFTs, each with its own unique audio track and cover art. Each release is composed of one original piece (unique one-of-one) and 120 prints (limited edition copies). The kicker here is that because these pieces are completely synthesized by code, the make-up of each track (its “metadata”) is light enough to be stored completely on the blockchain (free from reliance on third-party hosting platforms like Amazon and Google)!
Crypto-Music Markets and Makers
As we start to see mainstream musicians collaborate with NFT platforms such as Nifty Gateway, NFT services that focus specifically on music have come into demand. While most general NFT marketplace/minting platforms like OpenSea and Rarible do support audio files, services that cater NFTs specifically for musicians and fans are still few and far between. Some of the more interesting ones on my radar at the moment are:
Catalog Works, a curated marketplace for verified artists to sell one-of-one digital records. It’s built on the Zora protocol, which allocates 100% of primary sales to creators and supports a generous royalty structure as well. As of April-May 2021, Catalog Works is currently in beta mode but fully functional.
YellowHeart is a platform that aims to connect fans directly with artists through the use of innovative NFTs. Use-cases include tickets and album releases that include both digital and vinyl versions,
Async Art (you might remember them from my previous crypto-art article for their multi-layer composite NFTs) is a curated platform that helps artists to create programmable art NFTs (no coding skills required). They now support a similar framework for audio NFTs (so cool!), which you can read more about here.
Artists have long struggled to realize the full value of their creations in the digital age. The ability to share work and expand reach using the internet, while a powerful exposure tactic, is ultimately a means to an end: monetization via traditional sales channels. The potential of NFTs on Web 3.0 platforms is staggering, and I think the music industry will be one of the biggest adopters of this new technology, whether they like it or not. 🔥
“Imagination creates reality."
Are you a musician or music enthusiast with questions or more to add to the discussion? Please drop a comment below or reach out directly - I’d love to hear what you have to say!
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⚠ Disclaimer ⚠ Cryptocurrencies and NFTs are a speculative asset class. Be aware of the risks involved and know that you could lose money. Everything I share references an opinion and is for information and entertainment purposes only. It is not intended to be investment advice. Please consult a licensed professional before making any investment decision.