Could Music be NFT's next jam?
Musicians are constantly screwed by large record labels, NFTs can fix this
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Scooter Braun bought Big Machine Records for $300m in 2019. Included in the deal were the rights to all of Taylor Swift’s first six studio albums.
Whilst Swift tried to get back the rights, Braun played hardball with her and eventually sold the rights to her music for between US$300 - US$450m.
How much did Swift make from all of this?
In my previous posts, I’ve spoken about how NFTs come in different shapes and sizes. They can be basic JPEGs, IP contracts, GIFs, utility passes and more.
To date, the most popular form of an NFT is a JPEG. The likely reason behind this is that it’s easy to view, share and show off. NFTs are effectively status symbols in their current form and so the easier it is to share or attribute value to, the more popular it is.
Moreover, for artists, the ability to monetise their art in the form of an NFT has allowed them to access royalties and access people that they previously hadn’t been able to, through the internet.
In that same vein, musicians are notoriously shortchanged when it comes to commercial agreements and licensing making the industry ripe for disruption.
So how does the music industry actually work?
When someone writes a song, there are two paths that they can go down:
Stay as a songwriter and pitch the song to other performers
Be the performer by finding a recording studio and a producer to help construct the performance
Focusing on the second option, hiring a producer and renting a studio costs money, not to mention paying people for instrumentals and promoting the album. As a result, either the musician pays out of pocket for these services or they sign with a record label that is able to front the costs and connect the musician to the right people.
In exchange for doing so, the label will take a portion of the future earnings of the album to repay the loan and own the Master Recording of the album. This means that the artist doesn’t actually own their own work, nor do they get a bulk of the proceeds for creating the album.
And then once it gets published on streaming platforms, they end up taking a chunk of the total revenue driven by their platform. This can be up to 1/3 of all revenue driven by a song.
Without going into the weeds, an artist might only see ~15% of the total revenue driven by a particular song after paying out various parties like the label, Spotify, publishers, collecting societies and other pesky middle people.
Ripe for disruption
Web3 was literally made to disrupt business models like this. Labels are able to help in 3 ways:
Initial seed capital
Distribution to various platforms
Marketing and Promotions
Web3 can solve all of that efficiently, without needing 10 different parties between the listener and the musician.
Web3/Crypto has proven to be one of the best fundraising mechanisms ever. Musicians can raise funds through NFTs or Tokens from their 100 or 1000 true fans. This immediately eliminates the need for risky loans.
NFTs have proven themselves as useful tools in any marketing toolkit. The ability to get better fan alignment whilst also tracking early believers is crucial for a musician's career. Through NFTs, we’ll be able to see unique approaches to musician-fan engagement such as collaborative curation and creation, private shows, unique experiences and much more. Keep in mind, however, that traditional marketing still has a place in all of this. People need to be able to discover artists after all and web3 hasn’t solved the issue of discoverability just yet.
Web3-native audio streaming platforms are starting to pop up (e.g. Audius). Since all streaming data will be held on-chain, we can finally have transparent revenue sharing and royalty agreements in place powered by smart contracts that do all the heavy lifting. Indeed, the user experience of such platforms needs to match the existing standard for widespread adoption, but this is the case with most dApps.
In web3 it’s possible to build a full record stack. Think about it as a platform play, where people can come together in groups and create their own Music Investment DAOs based on their shared taste in music. This lends itself to a new way of collectively curating music.
In an ideal state, you can also offer tools to make it easier to discover underrated musicians and up and comers through better search filters, a transparent listening algorithm and maybe a messaging interface. Again, focusing on collaboration is likely to bring out the best curators which can all be tracked on-chain.
Web3 thrives when it comes to distribution. Since the data layer in web3 is shared, all the musician has to do is use a smart contract to get their music on-chain and from there, various platforms can pick up the song and stream it without any other engagement from the musician. In that same way, royalties can be streamed back to the artist using integrations with payment streaming services like Superfluid. This allows for instant and transparent remuneration.
So who’s building the Music Stack?
There are tons of builders trying to replicate the traditional Music stack in web3.
Here’s a spotlight on a few interesting projects:
Royal - is a basic primary marketplace for Musicians to sell future royalties to individual songs or albums. This directly replaces the initial loan process that most musicians will go through in order to pay for the production of their songs. At the moment, the platform is predominantly focused on onboarding established artists in order to drive users to the platform. NAS, 3LAU and Diplo are leading artists who have used the platform to establish a more aligned connection with their fans.
Serenade - is similar to Royal, but is built out of Australia! Serenade interestingly have had more of a British tilt to the artists on the platform, partnering with the BRIT awards to onboard Musicians.
Audius - is the decentralised version of Spotify for web3, built on Solana. It gives artists greater control over how their music is monetised and enables them to establish a closer relationship with their listeners. Artists can upload their tracks for free, and users can listen to them for free whilst both parties earn AUDIO tokens for using the protocol. Artists can also earn AUDIO tokens if they end up on any one of the top 5 leaderboards, opening up more ways of earning money than traditional music platforms.
Emanate - is an Aussie based protocol, that is similar to Audius, with a key focus on discoverability. For Musicians, Emanate serves as a distributor, being able to disperse music onto over 30 different platforms seamlessly. Moreover, artists are able to access premium features, earn more per stream and upload more tracks if they simply hold 10,000 EMT (Emanate’s governance token). For listeners, you can curate playlists and have them featured if you hold at least 10,000 EMT (Emanate’s governance token). As an added bonus, Emanate has both iOS and Android apps, which is weirdly unique in web3 where everything is a web-based dApp.
Highlight - gives artists access to tools that allow them to design and mint NFTs easily. It also gives them a platform to host their community and understand who their top listeners are. The platform is built on polygon and uses Arweave for decentralised file storage. The offering looks fairly basic at the moment, but given the over complicatedness of web3, this is somewhat refreshing.
Yup - is a social network for curators. It rewards anyone who rates an NFT, and depending on the performance of the NFT they get rewarded for the early curation in $YUP tokens. Users simply install a chrome extension and can interact with it through overlays on certain websites including SuperRate, Audius and Rarible. Over time people build up their influence and are able to earn more $YUP tokens with each interaction. The tokenomics for $YUP is a little too in the weeds for this post but is quite interesting.
So where are we headed?
The hardest part of getting adoption for music NFTs is onboarding new entrants into web3. It's fairly likely that an artist's top fans aren’t crypto natives, but more A-List musicians are being onboarded into crypto through PFP NFTs. This is an easy sell for artists as they get more clout and can grow their fan base with crypto natives. This in turn makes it more viable for them to launch their music NFTs - but it doesn’t solve the problem of helping underrated artists get discovered.
I think whilst ideologically Music NFTs are well suited to help alleviate a lot of the problems new artists have - the age-old problems of discovery still exist in web3 and aren’t focused on enough by developers. Artists still need to find a way to get their work in front of people so that listeners can gain the conviction to financially back them. At the moment, I don’t believe this problem has necessarily been solved.
Protocols like Yup and Emanate are attacking this problem, but still, need to acquire more customers in order to make this count. It’s still early days for Music NFTs and there is potential for disruption - it’ll just take time.
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Thanks for reading and see you next time!