The Disruption of the Music Industry via Web3 and NFTs
The foundation of the world of music as you know it is changing.
The foundation of the world of music as you know it is changing.
The rise of Blockchain technology, namely NFTs, is changing the way artists and fans experience music. The introductions of ownable digital assets and smart contracts offer tools for artists to build more connected fanbases, capture the value they create, and allow fans to benefit both emotionally and financially.
Laying the Groundwork
Most of you will likely be well versed in the world of NFTs, but for those who are not, let’s provide some background.
In a nutshell, an NFT (Non-fungible Token) is a file whose data has been verified and permanently documented on a blockchain. The beauty of this is that it is 100% provable that you own the real thing. In the case of music, an .mp3 file is minted, or verified on the blockchain, but any type of file can be an NFT.
The most prevalent example of this currently can be seen in projects such as Cryptopunks or Bored Ape Yacht Club. Both of which have made national news as they are being sold for millions of dollars.
You may think to yourself, how can a .jpeg be so valuable? Can’t I just take a picture of it and say I own it too?
The difference between the two is the same as taking a picture of Vincent Van Gogh’s Starry Night and actually owning the painting. Even then it can be hard to tell if it’s the original painting or just a replica. With NFTs, there is no way to fake what you have, as the history and contents of what you own are visible to the public and completely documented.
You may be asking, how the hell is a “verified” .mp3 file going to completely disrupt the music Industry?
We will get to that. But first, let’s start with the current state of the music industry.
The Status Quo
As you know, the music industry is currently run by the record labels, streaming giants, and platinum selling artists. This has been the case for almost the entirety of the music business. Under this current structure, most artists struggle mightily to capture the monetary value that they produce, no matter how poetic or groundbreaking.
Streaming changed the world for the consumer, putting almost every song created in your pocket. For artists, it made making money even more difficult. In a tweet from RAC, he breaks down how much an artist makes on each platform if they receive 1 million streams…it’s not much. One million people – and all Spotify gives you is four grand.
Artists have struggled to overcome the greedy and overreaching record labels for decades. DJ and Producer, MELVV, experienced this firsthand. After years of being at the mercy of his label, waiting for approval on songs, and trying to maintain his creative direction, he found the tools needed to take control of the narrative.
Streaming changed the game for consumers, but it put even more power into the hands of the labels.
Shaken to the Core
The ability for artists to mint their music on a verified, public ledger gives them the power to control their own narrative. They will be able to interact with their fan base directly and add another layer of creativity. Fans will be able to benefit from their passion in ways they never have before.
Let’s explore some of the most powerful use cases that NFTs will bring to creators and fans alike:
Direct-to-Consumer
NFTs will change the game financially for artists, by completely restructuring how they monetize their work. Instead of fans paying Spotify to listen to the music they love, they will pay the artist directly.
Why would they do that if they can pay $10 a month for unlimited music? - Scarcity and Community.
When a fan buys an NFT directly from an artist, they receive something that is rare. Something that has intrinsic value. Artists can add more value by adding VIP tickets, merch, and vinyl records to your purchase.
We all know the super fans that are ultra-proud to be in the top 1% of Drake listeners. Those are the people that want to be a part of this tight knit community, that will spend $1,000 on a 1/1000 exclusive Drake NFT.
Think of buying a music NFT as buying a song on iTunes, but there are only 100 available and you can sell it. This idea of scarcity makes it that much more valuable.
Most fans would rather pay their favorite artists than the companies that exploit them. NFTs will cut out the middleman in the music business and allow artists to interact directly with their fans.
World-building
This is one of the things that I am most excited to see creatives explore. Some of the most beloved creations are the result of well-thought-out stories and characters.
Imagine an album where each NFT also has visual components that change depending on how many tracks you have. If a “secret track” is unlocked after you listen to an album 100 times. When you have every song, they fit together to create a totally new narrative.
As artists see the value in NFTs, they will begin to create their music with those tools in mind.
A new way to tell their story.
Collectibles
Anyone who has collected vinyl understands the pure joy you get from thumbing through the dollar bin and finding a diamond in the rough.
In the age of music streaming, the experience of collecting music is no longer a centerpiece of the music world.
Think of buying NFTs as buying virtual vinyl. It is at its essence a collectible. Most in the younger generations don’t know that feeling, but I believe they will discover it for the first time by collecting NFTs.
Investment
That friend of yours who always brings up how early of a fan they were, can now monetize their remarkable ear. By buying NFTs of an artist early in their career, fans have the opportunity to capitalize on the explosion of those careers. They can even receive a portion of the streaming royalties a song receives, although this is not always the case. It is ultimately the artist's decision on what additional value the NFT can provide.
The more popular the artist becomes, the more valuable the NFT will be. Being early on an artist is now more than just bragging rights.
The culmination of these use cases will ultimately result in a stronger community. Fans have direct access to their favorite artists. Super fans can prove how super they are. Artists have new tools to explore their ideas in more creative avenues. All this leads to the benefit of both the fan AND the artist.
Exploring the Landscape
There are so many amazing projects currently expanding this landscape, so I explored some of the more popular ones to provide some context.
Sound.xyz: Sound.xyz is a Music NFT marketplace and discovery platform. Artists can sell a collection of limited NFTs of their work.
An interesting twist here is that one lucky holder of the NFT can receive a “golden egg”, which gives the holder access to things like song notes, merch, or tickets.
This platform recognizes early listeners by placing them at the front of the “audience” of NFT holders, displayed when the song plays on Sound.xyz.
Once all the available NFTs are purchased, the only way to get one is to buy it from other holders on a secondary marketplace.
Artists can also host listening parties when releasing the song and opening the NFT sale, further building the community and culture.
Sound is still in the beta testing phase, and is only displaying songs from their genesis artists, but will be opening the platform up to all new artists.
WaterandmusicDAO: Water and music originated as a music industry and technology research organization, but they have since moved their platform on to web3 rails.
They conduct forward thinking, in-depth industry research on the music NFT space and incentivize independent researchers by awarding their $STREAM token to the best insights.
They recently released their Season One $STREAM report, which is the culmination of months of research detailing topics such as the potential of generative music, legal implications, and available tools for artists and collectors. For $200/year, you can become a member and gain access to their private discord, exclusive articles, and company databases.
Royal.io: Royal.io allows fans to own a piece of a song and earn royalties from it, along with other included perks.
It is currently in its beta phase, so there are limited releases from artists like NAS and Verite, but its potential to operate at scale is immediately evident.
Upon release of an artist’s NFT, you can purchase different tiers of the token. For example, on Verite’s song, He’s Not You, you can purchase a gold, platinum or diamond tier token. Gold tier offers 0.052% ownership, a signed cassette tape, and exclusive access to the collector discord for this artist. The diamond tier offers 0.858% ownership, a 1 on 1 video call with the artist, as well as all the perks of the previous tiers.
Royal allows artists to financially benefit from their fans directly. Since fans will benefit from the song's success as well, they're incentivized to share it, which provides free promotion for the artists.
GoodKarmaDAO: Good Karma Records is one of the first decentralized music labels.
As a DAO, the GoodKarma community votes on which artist to bring on, how to promote them, and how to reward their artists. To vote on these matters, you need to be a $KARMA token holder. The more of the token you hold, the more voting power you have.
The GoodKarma community consists of artists, producers, developers, entrepreneurs, and marketers. Everyone is working towards the common goal of advancing the label artists and the community itself.
Ain’t All Sunshine and Rainbows
The potential of this technology is truly limitless, but it’s not without its pitfalls.
The biggest obstacle faced by the Web3 music world may be the legal implications. Problems around copyright laws, ownership, and collection of royalties are painfully present. Who owns what, what do you actually own, and what you are actually allowed to do are all questions that are still being answered.
The technology and current platforms are in their infant stage and are not without their faults. This is to be expected with something so innovative, but it will only improve from here.
When exploring the crypto world, it is hugely important to understand how to stay safe from scams, fraudulent projects, and thieves. ALWAYS do your own research and keep your information secure before throwing money around.
What’s Next?
The best way to get involved and learn is to get your feet wet. Start with the projects I mentioned above. Join their discords, explore their platforms, interact with the communities, and buy some NFTs. The more you learn and interact, the clearer the potential of these tools become. As an artist, I suggest minting a song on one of these platforms to understand how everything flows and see how your fans respond.
The power of this technology can be utilized by both mega-stars and up and coming artists. Those with an already massive following will be able to immediately profit. By releasing NFTs of their new single to fans to purchase, those artists can capitalize on the strong community they have built.
For those with a smaller fanbase, it allows them the ability to build a lasting community from the beginning. It is better to have 1000 fans that constantly support you, than to have one million fans that only listen on Spotify.
The future of music has never been more exciting. New advancements and projects are popping up daily. There is always something new to learn and somewhere to improve.
NFTs and blockchain technologies will change the music industry as we know it.
In fact… it already has.
Never stop innovating,
Jake
Follow me on Twitter (@chefsteff_) for more insights into the Web3 world.
Additional Insights:
Bankless – Crypto Will Fix the Music industry
Coopahtroopa – Music NFT Landscape
Camoufly - Music NFTs 101: an Artist-to-Artist guide
BlockchainBrett – Music NFTs GMI
This guy just keeps getting better! Great article, I feel smarter now, thanks