Unless you have been hiding under a rock, you have likely heard all the buzz around NFTs in the art world and how they have already begun to revolutionize the industry. In fact, the humble NFT has had so much of an impact that artists, art enthusiasts, and investors are starting to question how (and what) gives art its value and through what means it should be experienced.
Of course, this has not been without its fair share of criticism from a sizable portion of the creative community, particularly when it comes to concerns of a lack of regulation and quality control. However, it is difficult to ignore the plethora of benefits that NFTs provide to artists, such as probable ownership, scarcity, easy access to a global market, and, of course, the prospect of making money.
So, do NFTs have a place in the music business? Do they truly have the potential to replace record labels and streaming juggernauts, or are they just another flash-in-the-pan idea? Let’s investigate further.
What are music NFTs?
If you are a complete newbie to this space, make sure you check out our beginner’s guide to NFTs to get a deeper understanding of what they are and how they work. For those looking for a brief refresher, an NFT is a one-of-a-kind cryptographic token representing a digital (or sometimes physical) asset recorded on the blockchain. An NFT cannot be altered or duplicated once it has been generated (this is what gives them their inherent value).
Thus, music NFTs are tracks that have been recorded on a blockchain in the form of unique non-fungible tokens that belong solely to the NFT’s owner. However, unlike mp3s downloaded to your smartphone, music NFTs can be sold on the secondary market, allowing musicians to earn royalties for each subsequent sale (more on this later).
How NFTs work in the music industry
In the music business, NFTs can take on a variety of forms. Amongst other things, a music NFT might be a song represented by an audio or video file, album artwork, a concert ticket, or official merchandise. Essentially, any sort of digital content associated with the music industry can be minted into an NFT.
The principle is the same for creating or selling music NFTs as it is for creating or selling other NFTs. A musician or band will decide what they want to sell to their audience before choosing the blockchain that they want to utilize to mint their NFT. In general, the most commonly used blockchain for music NFTs is Ethereum, with Polygon trailing at a distant second.
After determining the preferred blockchain and minting the NFT, the artist will notify their followers of the release of their NFT drop and make them available for sale at whatever price they wish to sell them. This can either be set as a fixed price, or as an auction.
Due to the fact that music NFTs cannot be duplicated or counterfeited, artists can choose whether to arrange a one-time auction for an audio file, with the highest bidder receiving the original audio file. Alternatively, they may create a limited number of NFTs of the same audio clip and sell them on an NFT marketplace. As a result, any fan who purchases the artist’s NFT becomes the sole proprietor of that particular piece of work. From here, the NFT owner can store them on their crypto wallets, or try to sell them on to a higher bidder in the future.
Examples of music NFTs in action
Despite music NFTs being somewhat overshadowed by the staggeringly expensive NFT sales in the digital art industry, there have been several examples of musicians making a pretty penny from music NFTs. Some of the most noteworthy include:
- Grimes made $5.8 million with her WarNymph Collection, Vol. 1
- 3LAU raised $11.7 million from his Ultraviolet NFT album auction
- Steve Aoki dropped his inaugural NFT collection, Dream Catcher, for $4.25 million
- An unreleased demo recording of a 17-year-old Whitney Houston sold for $1 million at auction.
Five ways music NFTs could empower artists
Now let’s take a look at some of the primary benefits that musicians and artists can expect from music NFTs, compared to more traditional routes of music publishing.
No need to surrender rights to your music
Typically, when participating in the traditional music industry, musicians are required to surrender the rights of their work to studios, record labels, and sometimes even streaming services. This can become a thing of the past through NFTs and NFT music platforms such as Catalog.
Cutting out the middleman
There are countless examples of how middlemen have destroyed bands and made the lives of musicians a misery. By controlling their creative output or taking profits for themselves, these middlemen interfere in ways that damage a musician’s career. Thankfully, NFTs allow musicians to regain full control over their work by gaining a direct line into their fanbase. Not only does this give them ownership of their work, but it also means they have the potential to earn more profit.
NFT royalties are a condition that is entered into the metadata of an NFT when it is minted. In general, NFT royalties mean that the original creator, in this case, the musician, will receive a certain percentage of any future sales of the digital asset. Currently, the industry average for NFT royalties seems to be somewhere in the range of 5-10%. Once again, this gives the musician a chance to earn even more money from their work, and the best part is that it is completely autonomous.
The chance to make unique content and experiences
With NFTs, the world is your oyster. You can make a single and create just one version of it, or 10,000 of the exact same track. You could also sell entire albums, discographies, or even album artwork as NFTs in order to create new and more personalized experiences with your fan base. In addition to this, things such as merchandise and concert tickets, both virtual or physical, can be brought on-chain.
Directly build an active fan base (and monetize it)
Musical NFTs enable musicians to build a fanbase by creating a space where fans may access the specific NFTs related to the artist’s work. For example, events involving NFT drops allow musicians to reach previously inaccessible audiences (and monetize them).
Potential downsides of music NFTs for artists
While there is plenty of potential for NFTs in the music industry, it’s important to acknowledge that some downsides need to be taken into account.
Difficult to establish demand
One of the major benefits of record labels is their capacity to establish demand and market their musicians. Therefore, if a musician chooses to sell their work through NFTs rather than a record label, it will be entirely their responsibility to interact with their followers and generate publicity for their projects. On the one hand, this can be a huge benefit for musicians who already have a significant fan base, but it can be a daunting prospect for those just starting out.
No physical distribution
While streaming and digital downloads make up the bulk of music consumption these days, a significant portion of global sales is still carried out physically. Whether it is through CDs, cassettes, or vinyl, plenty of music consumers prefer to get their hands on digital musical products. Thus, selling your creations as NFTs may be neglecting this market.
You could write an entire book on the nuances of copyright in the music industry. Middlemen, managers, and record labels still have a huge say in how music is distributed and consumed, which may present a problem if a musician decides to sell their work as NFTs. This is because, while NFTs have the potential to give artists more control, there are currently no clear limitations in place about who owns the intellectual property of a song if it is issued as an NFT.
In fact, many artists are against the use of NFTs in the music industry for this very reason, as we covered in our recent article.
In short, it was discovered that a site named HitPiece illegally listed NFTs of songs and albums for live auction from prominent musicians such as John Lennon, Taylor Swift, Bob Dylan, and other independent artists, all without consent. Of course, this caused alarm among creatives in the space that feared that others might be profiting from their work without permission.
There’s no denying that NFTs empower musicians in a way that we have never seen before. With factors such as provable ownership, scarcity, and immutability, NFTs seem the perfect medium for artists and musicians to take full control of their work and become their own platform. Although, it’s important to note that the NFT space is still in its early stages, and it is unclear how labels, music industry techs, and companies will react to NFTs as they become more popular. For now, they certainly hold a lot of promise.