How NFTs Could Redefine the Future of the Music Industry
Join today’s top leaders online at the Data Summit on March 9. Register here.
This article was written by Jake Fraser, Business Development Manager at Mogul Productions.
NFT sales skyrocketed in 2021. From a trading volume of just $40.69 million in 2018, NFT’s trading volume jumped over $44.2 billion in 2021 and continues to grow. to break records and reach new heights. The NFT segment is expected to reach a market capitalization of $80 billion by 2025. In December 2021 alone, NFT transactions worth $4 billion were recorded.
Despite speculation and skepticism surrounding the seemingly volatile and unregulated nature of NFTs, one thing is certain: they are here to stay. NFTs have grown in popularity, especially among Millennials and Gen Z, and have emerged as a way to connect with their favorite artists.
While artistic NFTs and collectibles for the metaverse have taken off, NFTs are said to be transforming the music industry as well.
The dark side of the music industry
Music is a universal experience. By the end of 2020, the global music industry generated total revenue of $21.6 billion, and it was the sixth consecutive year of growth within the industry with an increase in CAGR down 7.4% from 2019. Despite this seemingly successful track record for the industry, it is plagued with a host of problems.
Musicians find it extremely difficult to support themselves in the industry and earn a living from their music. It’s no secret that artists aren’t fairly compensated for their talent and effort. This arrangement is usually reinforced by the record contract and the complex legal contracts they are required to sign upon onboarding by the record company.
Successful artists have often come out and spoken about this skewed power dynamic between the record company and the artist. Take, for example, Kanye West, who went so far as to call record deals “modern day slavery“, with all rights to the artist assigned to the label for the bait of initial funding, strategic advice and marketing.
Here’s what Akon had to say about the exploitation of artists: “Throughout my career, I’ve always believed that artists never really get their fair share of profits for the work they produce and that people are listening.” “If you don’t own your masters, your master owns you” says Prince for rolling stone in 1996.
According to reports, only the top 1% of artists receive 90% of all streams, and only about 0.8% of seemingly famous and top artists earn an average of $50,000 per year from streaming. This is mainly due to the fact that overall revenues are split between artists and record labels, agents, attorneys, distributors and other “stakeholders” of artists’ music. Additionally, with the record company owning all rights to the “masters” or original recording of the song, the creator has absolutely no control over where and when it is played. It also imposes serious restrictions on the creative freedom of the artist.
This led to a quest to overturn the entire record label model of the music industry. While social media platforms such as TikTok, YouTube and Instagram have somewhat re-empowered creators as a way to promote and market their music, there is still a long way to go for artists to properly monetize them through a viable tool.
The NFT Revolution: Changing Tides for the Music Industry
When COVID-19 regulations caused a complete shutdown of live sports, concerts, and entertainment, non-fungible blockchain-based tokens emerged as a way to connect fans around the world with businesses, teams, and organizations. creators they love.
The NFT revolution began in the form of Profile Picture Collections (PFPs) that buyers could post to their social media handles to indicate that they were part of the particular NFT community. These PFPs dominated the narrative with celebrities and other NFT enthusiasts purchasing famous digital collectibles such as Bored Apes, Cool Cats, and CryptoPunks.
But what is it about NFTs that makes them so disruptive and novel?
For starters, NFTs are non-fungible (or immutable) digital files on the blockchain that are distinct and irreplaceable. Hosted on blockchains such as Ethereum, Solana, and Binance Smart Chain, NFTs are rare, verifiable, and valuable. However, most big NFT projects like Decentraland and Axie Infinity aren’t valued for their art, but for their usefulness that stems from the underlying smart contract and use cases. For example, on Decentraland, digital lands can be purchased in-game as NFTs which can then be used to host events, rented, etc.
For the media and entertainment industry, this means that NFTs offer artists and creators a new way to showcase their work, market their work on the blockchain via NFT marketplaces, and engage their fan community. NFTs have the potential to establish the scarcity of digital assets and thus allow creators to set their prices for creations, as well as control of the secondary market for them. Consequently, they democratize access to new markets for creators around the world.
Artists and fans take the pie
NFTs can also give back to creators the power to control the supply chain and the rights associated with masters and associated collectibles.
NFTs bring rarity to music and give musicians complete control over how their work is subsequently distributed and the rights associated with it. Therefore, NFTs provide opportunities for musicians to engage with their audiences on a more seminal and granular level with authenticity and to establish communities around them, while giving them complete autonomy over their work. Artists retain all rights to their music even when their NFTs are sold on a secondary market, and also earn a royalty they choose to set on each transaction of the NFT. This creates a global market for music NFTs.
In January 2022, BTS, a popular K-pop boy group, in collaboration with Dunamu, is set to launch its own NFT set in the form of photocards, digital versions of trading cards containing photographs of the members of the K-pop group. .
Even popular singer Akon seems to be ditching the record labels and releasing his next album as NFT to monetize it from day one!
On the other hand, fans who buy these collectibles or creations have full transparency about the authenticity and origin of the purchases they make. In this sense, NFTs allow anyone to buy ownership rights to art or music while allowing artists to verify their work outside the confines of the legacy music industry.
Additionally, NFTs enable new ways to raise funds by allowing audiences to participate in the musical process. Fans become investors in the project for several reasons. While many may invest and buy NFTs purely as collectibles, others may do so for speculative reasons, some may HODL, some may do so to learn royalties and others to trade them on secondary NFT markets in order to make profits. This can help artists get seed funding without giving up the rights to the master and suffering huge revenue cuts like TLC, Kanye West and Taylor Swift. Moreover, it allows them to take a fair share of the profits of their success.
Fans will be able to invest in Nas’ music by purchasing shares of royalties from the streaming of two of his songs. This investment can be made by purchasing the extended version of Royal in invariant NFT form of “Gold”, “Platinum” and “Diamond” digital tokens for each song. The intriguing part is that token owners will receive a portion of the royalties each time the song is released in perpetuity!
What lies ahead for NFTs and the music industry
Asset tokenization allows a wide range of people to own assets on the blockchain. In this sense, even ordinary fans are directly immersed in the value and ethos of the artist or creator they are supporting without an intermediary like a streaming platform or record label. Thus, it allows fan communities to participate in the growth of their favorite creators like never before.
Additionally, musical NFTs may have additional value on top of themselves. Autographed physical copies of collectibles, perpetual music royalties, backstage passes, exclusive remixes and private parties are just the tip of the iceberg in rewarding the community of fans who invest in creation. of the musician. The possibilities are truly endless for artists to connect with their audiences and investors.
Several artists are testing the waters of NFTs, such as creative music producer 3lau, who sold 33 NFTs on the third anniversary of his album Ultraviolet for over $11.7 million, making it one of NFT’s largest music deals. 3lau even considered allowing NFT owners to collaborate with him on the song online and maybe even feature in the song! Additionally, there are recent examples of artists considering turning paparazzi photos into NFTs so they can monetize them through royalties. These applications of NFTs have the potential to transform the music industry into a level playing field for all artists.
Jake Fraser is Head of Business Development at Mogul Productions.
Welcome to the VentureBeat community!
DataDecisionMakers is where experts, including data technicians, can share data insights and innovations.
If you want to learn more about cutting-edge insights and up-to-date information, best practices, and the future of data and data technology, join us at DataDecisionMakers.
You might even consider writing your own article!
Learn more about DataDecisionMakers