Now that we hear more and more about NFTs, even in the national news, interest has been aroused globally. What are NFTs and why are they so popular? It is above all the technology behind it that opens up a whole new world. Often we only think of digital art, which sells for record prices, but these non-fungible tokens are much more than that.
It has been known for some time that musicians often have a hard time keeping their heads above water. Especially starting and/or local musicians find it difficult to maintain sufficient income, after part of their turnover goes to third parties, such as producers, streaming services, record labels, and the like. Result? These central organizations earn money on the hood of the hard-working musician.
Thanks to the advent of NFTs and blockchain technology, musicians can monetize their own music and build their community in a whole new way. Discover in this article what NFTs mean for the music industry.
What is an NFT?
An NFT is a non-fungible token, a unique token that is recorded on the blockchain. Think of all kinds of digital assets. Although we know most NFTs as digital art, NFTs are much more than that. Think, for example, of the latest developments in the metaverse, which reflects the reality where almost every object is an NFT, but it doesn’t stop here:
- Digital art
- Digital wearables
- In-game applications
Types of NFTs music industry
But also NFTs pertaining to the music industry. The great thing about this development is that everything can be considered an NFT if it is recorded on the blockchain and is therefore non-fungible. The latter gives you a certificate of ownership, making you the rightful and otherwise sole owner of that NFT. But also in the music industry, these NFTs can be very diverse:
- Video images of a concert
- Illustrations of albums
Current music landscape
Before we can understand how NFTs can fundamentally change the music industry, we have to consider the current situation. There was a time when musicians made enough money selling their CDs. This is hard to imagine for the young reader, but we used to go to a music store to buy CDs from our favorite artists. Artists got their share from this sale. Despite this, all parties involved were also heavily compensated for this.
The usual split is said to be 50-50. Only 50% of all income goes to the artist and the rest is divided between all parties involved. Big names such as The Rolling Stones or Ed Sheeran earn only 50% of all sales. Special, isn’t it?
Since the arrival of Youtube and Spotify, this revenue stream has taken a completely different turn. CDs were replaced by digital tracks that could be downloaded and played anywhere in no time. By pressing the download button you had unlimited access to your favorite artist, anywhere. But what does this mean for the performing artist? In the case of streaming services, artists get even less than this 50-50 split.
NFTs in the music industry
So why are NFTs so important for the music industry. The proof of ownership of NFTs is recorded on the blockchain. The characteristic of this technology is that it wants to avoid all, often unnecessary, intermediaries. This means musicians can sell their own music directly to their fans. In addition, they can add several extra benefits to certain NFTs, making this much more than a musical NFT.
In the video below you can see an introduction to how NFTs can influence the music industry.
Democratization of the music industry
Another reason that NFTs are very important for the music industry is that until now, artists could only release their music under major labels, such as Sony. Sony decided if your music was good enough and if they were willing to release it. This means that an external party again has the choice of what happened to your music. Musicians can now release their own music via streaming services, but their revenue model is even worse.
We see a so-called ‘trend toward the democratization of the entertainment industry. Musicians no longer want to depend on big record labels and go directly into contact with their fans and the community that determines their success.
At the moment they still earn thanks to these services, but they too have the right to decide about their income. When Youtube decides to take a channel offline for whatever reason, this artist will no longer be able to monetize through this channel. This also applies to Spotify.
The fact that other parties have control and decision-making rights over the income of artists is incomprehensible to many. That’s precisely why artists want to take matters into their own hands and take responsibility for themselves and thus determine their income stream.
Not only does the performing artist earn in the traditional revenue model, but the royalties are also distributed among all parties involved. Think of songwriters, composers, record labels, marketing, etc. In short: the artist only gets a small share here.
Popular streaming services, such as Youtube and Spotify, have an immense share in the development of the music industry. We can use these services anywhere in the world and the range is unprecedented, from the local musician to the biggest pop stars in the world. For example, did you know that a new song is added to Spotify every 3 seconds?
But what is the effect of these services on artists? According to freeyourmusic , an artist earns $0.00437 per stream on Spotify, which means that you need about 250 streams to earn one dollar. A quick calculation: to earn a meager monthly salary of 1500 dollars as a musician, you need 375,000 streams. Why? Because streaming services make a lot of money unnecessarily, at the expense of the musicians.
By selling their music as NFTs, they sell it directly to their community and fans making all the revenue go directly to them. This way they get all the credits they deserve and can fully monetize their own work. With many other benefits.
CEEK launched the first H&M concept store in the metaverse a few days ago, in early January 2022. After Dolce & Gabanna showed off their digital wearables, which are worth over a million last year, cheaper brands and fashion houses are also being added to the metaverse.
A source of income for musicians is of course the mechanics. After concerts, fans can buy their favorite shirt or sweater here to show the world that they are a fan. This is also possible with the development of the metaverse. Musicians can create their own NFT collection as merchandise to sell to the community as well. The possibilities of NFTs in the music industry are endless!
The importance of a community
A musician can only live off his music if he has built a community. A community of fans who are willing to invest in the purchase of CDs, LPs, albums, and the like. But the way this community is built is also changing.
There are several dApps (decentralized applications) that function as a community platform where musicians can directly build a community with their fans. Rally, for example, is such a popular platform. They go even further and let musicians create their own tokens. In this article, we limit ourselves to NFTs only.
A musician may choose to add additional benefits to an NFT. We’ve seen this before with GaryVee’s NFT collection, but musicians have this opportunity too. For example, they can launch a limited edition album as NFT that gives you access to a presale for their next concert, or a discount on a meet & greet or exclusive behind-the-scenes footage. Can you see how powerful and important NFTs will become to the music industry in the near future? Artists have complete control over this and therefore have more artistic freedom.
Another application that NFT can realize in the music industry is participation. Thanks to these NFTs, fans could, for example, choose the illustration of the cover art, the merchandise, and the order of the songs that will be played at different concerts. You name it, the possibilities are endless.
We often see such NFTs entitle them to access a Discord channel where such points are discussed. The direct contact with the musician is present here, which is already a reason for many to purchase such NFT.
Of course, these NFTs can also be sold purely as a collector’s item. Think of limited-edition releases of certain tracks or albums. Fans really do everything they can to get close to their favorite artist and will therefore invest in collector’s items. The price is again determined by the artist himself. If this comes directly from the artist, and not from a record label or distribution platform, it’s worth more to the fan. This will ensure an even better connection between artist and fan.
What for many still sounds like the future, is already a reality for other artists. Several artists have already made some serious money thanks to NFTs. Canadian musician Grimes, and now ex-partner of Elon Musk, earned a whopping $5.8 million in just 20 minutes. But the odd one out Post Malone wasn’t selling music, but an NFT that allowed the buyer to play a game of beer pong against him. You can’t think of it that crazy. Let’s take a closer look at some artists.
Kings of Leon
At the beginning of March of 2020, the band Kings of Leon was one of the first to sell their music as NFT. The album “When You See Yourself” was released as an NFT. An additional limited edition vinyl was also sold. The album sold for $50 a piece, with owners automatically participating in a certain lottery. This lottery allowed them to win VIP tickets, unique digital art and even lifetime concert passes. With this release, the band raised no less than 820 Ethereum, which at the time was equivalent to $1.45 million.
The Dutch DJ Don Diablo has also made a lot of money in 2021 from the technology of NFTs. He decided to record a DJ set called Destination Hexagonia which he made available. The aim of his concert was to create a live set with science-fiction influences, making the whole set a futuristic work of art. The winning bid was no less than 600 Ethereum, a nice $1.26 million.
Whoever thought that only forward-thinking hip-hop artists would use NFT is completely wrong. Verdigris Ensemble is a classical choral group that sang the song ‘Betty Notebook’. The digital song was listed through Async Art and sold for Ethereum 56.46, or $375,000.
Artists and musicians are earning less and less money for their own work. A large part of their income is distributed to external parties, which is of course disadvantageous for the musician himself. That is why there is a great demand for a new revenue model and democratization of the music and entertainment industry.
In the past period we also see that in addition to NFTs, social tokens are increasing explosively because more and more musicians and artists use these decentralized platforms to connect with their community and in this way sell their music in the form of NFTs.
This new revenue model can bring about a radical change in the way music is made, but especially in the way musicians sell and finance their music.
Thanks to blockchain technology, artists and musicians can work completely autonomously without the determination and decision-making power of large record labels. They themselves have the artistic freedom and independence to release music in their own way and thus monetize their own music.
This allows both smaller musicians who otherwise wouldn’t stand a chance to finally generate income. But even bigger musicians can seriously scale up their income, thanks to the use and application of NFTs in the music industry.