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The Rise of Music NFTs - Will this unleash the next NFT mania?

@aafolabee

3 months ago ·

7 min read

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NFTs have been the talk of the town in the crypto world all throughout 2021. Knowledge and interest in it have now largely transcended the crypto world. NFT sales volume totaled $25 billion in 2021, compared to just $95 million in 2020! NFT artist Beeple’s “The First 5000 Days”, offered by auction house Christie's sold for a whopping $69,346,250. NFT marketplace Opensea reported a total EOY sales volume upwards of $14.6 billion in 2021 alone.

Celebrities like Jay-z, Paris Hilton, Serena Williams, and Justin Bieber have their NFT collections as profile pictures. With his recent acquisition of Death Row Records, hip hop legend Snoop Dogg has stated his intention to make the label “the world’s first NFT record label”. He has also announced that he would be releasing his latest album on the blockchain through a partnership with blockchain gaming platform Gala Games, via his “Stash Box” NFTs.

Global brands like Nike, Adidas, and Gucci have launched their open NFT collections, with Adidas and Prada teaming up to launch a user-generated NFT collection early this year.

Although Non-Fungible Tokens or NFTs are mostly associated with digital art, graphics, or pictures, there are limitless opportunities with the use of NFT technology. NFTs can represent anything that is unique (a.k.a non-fungible) and benefit from being represented digitally on the most secure ledger technology available to mankind: a Blockchain. The characteristics of a Blockchain make it easy to trace provenance, verify authenticity, and pay creators on an open global market. Already, Web3 enthusiasts are thinking of the next use cases like photography, digital identity, land ownership, NFTs backed by physical collectibles, and title ownership of any document you can think of.

One ecosystem that is poised to take off in 2022 is the music NFT space.

What are Music NFTs? At their core - Music NFT’s are simply tokenized audio files. To the same extent that static image NFT’s track ownership of a .jpeg or .png image, Music NFT’s point to a .mp3 or .wav file. What the NFT exactly represents legally speaking varies case by case but by default they do not come with inherent ownership rights.

The Music NFT industry.jpeg An overview of the Music NFT space by ​​@Cooopahtroopa

The vast majority of Music NFTs today can be thought of as rare digital collectibles for the most devoted fans to show their loyalty .In some cases, such as NAS’ recent single “ULTRA BLACK” they also grant owners a share of the royalties.

The latter is of course the long-term vision for Music NFT’s but requires more legal engineering and overcoming of barriers laid by the legacy music industry.

What's the big potential?

At first, music NFTs may appear like the blockchain alternative to buying songs on iTunes. However, when you buy a track, you only buy the right to listen to that music offline whenever you want. Music NFTs offer something more sentimental in value; they allow fans and listeners to own the tokenized works of artists. Think of them as extremely rare digital collectibles, with huge sentimental and also resell value.

There is usually no claim on masters, royalty rights, publishing or licensing abilities - more like limited quantity audio files from an artist that you can resell to someone else. So as a collector of your favorite artist’s music NFTs, this is the best way to build a relationship with them.

Music NFTs might sound counterintuitive: you already have access to all the songs you want on Spotify or iTunes. Why buy the music you can already listen to? The answer to that question is the same as buying JPEGs anyone can right-click and save. Markets, or people, find value in holding rare collectibles, including musical works (as long they are issued by the original artist of course).

That value is also driven by the artist and the perks they assign to their collector fanbases - access to discounted concert tickets, special areas at concerts or meetups with the artist, and so on.

How do music NFTs work?

Essentially, the artist decides what song, or songs, they want to offer their fans as NFTs and what kind of “utlility” the NFT will receive. This could be musical works like audio files, but could also be music videos, merchandise, concert tickets, and so on. Then, they will go to either the general marketplaces like Opensea or dedicated markets to mint their NFT. You can see that the entire process rests solely on the artist/musician.

How music NFTs help musicians

For so long, artists have not been fairly compensated for their work. This has been particularly apparent in the music industry.

Changes in distribution and the introduction of streaming services have changed the business model of the music industry. Yet, streaming does little to help artists get fair compensation- only the top 0.8% of artists on Spotify earn $800,000 and above. The vast majority of artists still have a hard time retaining control over their work and monetizing it.

So how can Music NFTs help?

  1. Collectibles: Fans always attach a sentimental value and worth to the work of their favorite musicians. Music NFTs allow music works to be collected as digital collectibles allowing early fans to show support and thereby finance the production costs of an artist's album/song. This way, the early supporters turn into ambassadors/ marketing army for their favorite artists and are part of their growth

  2. Royalties. Music NFTs allow artists to earn money by selling their products and music directly to fans without the need for traditional music industry intermediaries such as record labels, publicists, managers, etc. They can grow their fan base as well. NFT airdrops, for example, allow musicians to reach new audiences.

  3. Unique fan experiences, such as selling one-time meet and greet events with their fans in person or virtually, are another possibility.

  4. If you purchase the music NFT of your favorite artist, apart from the commercial value, there is also the sentimental value of becoming an owner of their work.

  5. Newer artists have great opportunities because there are no barriers to entry to the music NFT scene. You can tailor your content to fit particular audiences and upload/market your work to your fans directly without the need for industry middlemen.

  6. Music NFTs allow artists to hold on to ownership of their work, even if they market them as NFTs due to the record of ownership built into the NFT’s metadata. So, if the subsequent owner decides to resell the NFT, the original creator can automatically receive royalties—and this process can continue each time the NFT is sold.

  7. There are also “upgradable NFTs”. Think of this in terms of remixes. NFTs can capitalize on the increasingly popular “remix” culture—which means editing content to produce new creative content, either from artists themselves or the fans. So, music NFTs incentivize remixes, such as “fan edits” that allow for more efficient distribution of music and the creation of exclusive material, collaborations, and remixes.

Top marketplaces for music NFTs

  1. Sound.xyz: Music NFT platform Sound seeks to bridge the relationship gap between listeners and artists. It wants to “create a platform for a more collaborative music movement, built on web3 technology and values”. On Sound, fans have the opportunity to support the artists they love directly. Essentially, early fans buy the work of artists as collectibles and stake their claim on being there before everyone else.

  2. Royal.io: In contrast, Royal allows fans and collectors to buy a claim, in the form of royalties, on musical works. Musicians use Royal to sell royalty ownership in their songs and also give collectors access to special perks and benefits. Collectors can buy royalty ownership in songs directly from their favorite artists in the form of tokens, and claim royalties for the music they own after they’ve accrued. The bigger the artist becomes, the bigger the gains.

  3. Audius: Audius is a free music streaming platform directly competing with the likes of Spotify and Soundcloud. Unlike their Web2 counterparts, it is structured as a DAO allowing holders of its $AUDIO token to unlock premium features for curated engagement and participation in voting. It also allows artists to engage more directly with their fansby unlocking special features and benefits with the $AUDIO token, allowing artists to monetize their audience without the need for industry middlemen.

  4. MusicFund: MusicFund distributes membership via NFTs, and holders vote each month to donate ETH to three musicians through the community fund. The top three artists receive 0.6 ETH, 0.25 ETH, and 0.15 ETH, respectively.

Conclusion

Will NFTs truly disrupt the music industry? These are very early days, and it has to be said that a lot of hype around music NFTs is a direct effect of the explosion of profile picture NFTs in the last year. Yet, music NFTs provide some real value and disruption to a traditionally repressive and underserved industry. There is the unfair compensation and distribution of revenue, ownership of creative works, uniqueness of the artist, connection to fans and so much more

As we have seen, there are lots of different players tackling these problems from very different angles and it yet remains to be seen which one of these platforms will find most traction among music enthusiasts and artists. But it’s clear already that NFT’s enable artists to reimagine cultural and artistic expression of music as art and at the same time help them financially.

@aafolabee

3 months ago ·

7 min read


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