Crypto has a way of finding its way into new spaces. In 2021, it took the relatively conservative world of visual arts by storm, creating an entirely new art scene and challenging age-old assumptions about art ownership. Now that the visual arts NFT boom has cooled down a little, other artists venture into the crypto space and Web3, finding stable livelihoods, stronger communities and a lot more creative freedom.
Music NFTs have emerged as an alternative way for new talent to get in, but it’s not just for beginners. As grassroots artistic pursuits, music NFTs have the potential to disrupt the music establishment, and the industry is very much aware of the threat. Right now, music represents a fraction of the NFT market, but that could soon change.
What’s wrong with the music industry?
One of the strongest incentives for musicians to enter the NFT space is to win independence from traditional recording companies.
Over the years, the music industry has morphed into a gigantic money-making machine, and artists are getting but a thin slice of that cake. According to a report by Citigroup, musicians receive about 12% of the profits generated by the industry. Due to waning record sales, a large part of that tiny share comes from live shows, which emerging artists often find challenging, both logistically and financially.
Spotify is not a saint, either. In its early days, enthusiasts expected niche creators to leverage streaming to grab a bigger share of the market, but quite the opposite is true. To make several hundred bucks a month, Spotify-listed artists need millions of streams, and at present, the top 1% most successful performers pull as much as 90% of the total.
The imbalance can probably be traced back to recording companies, which have made marketing their number one priority, often at the cost of artistic freedom. When a label signs an artist, the contract almost always gives the company the right to interfere in the creative process and assume rights to the masters.
The issue applies to budding as well as established artists. In 1996, years before Spotify, Prince famously said that “if you don’t own your masters, your master owns you.” Chilling, isn’t it? Taylor Swift went as far as to re-record all of her old albums from scratch to win her masters back.
The bottomline is that the music industry has turned music into an easily digestible product, always a tap away, while struggling artists take on countless side jobs to even pay the rent.
That’s where NFTs come into play.
What exactly is a music NFT?
Actually, music NFTs can be a lot of things. Some are minted on a one-of-one basis, while others sell as limited editions.
And that’s just the beginning. In fact, music NFTs are not simply digital records someone’s put on a blockchain, but rather multi-faceted stakes in the artist’s creative process and streaming success.
Artists can issue incomplete tracks and have buyers vote on how to fill the gaps. They can break their songs into subtracks. They can load their NFTs with additional perks, like merch, seats at the artist’s gigs, or entry to Discord channels. Some even sell shares in royalty revenues, garnering support in a bid that blends crowdfunding with stock-like investment.
Music NFTs have the potential to turn a fanbase into a community, openly challenging top-to-bottom marketing strategies championed by the traditional music industry. Fans can vote on drum lines. They can meet the artist in person. They get to participate in a multi-vector exchange that artists experiment with to upend the creative process itself.
At the same time, music NFTs can make for a smart investment. At their core, they’re collectibles, and as such, they can be re-sold. Depending on the artist’s success, NFT holders can see the value of their assets grow, and grow, and grow. For the artists, it reverses the established order in which they depend on recording companies for investment, and the fan is relegated to the passive role of a customer.
Who’s winning the music NFT game?
Musicians who do well in the NFT space could be quite far from mainstream success. According to Delphi Digital, the crypto intelligence company that declared a bullish sentiment for the sector, the average artist on Catalog has about 16,000 Spotify streams a month and about 3300 Twitter followers. Compared with big mainstream names, it’s not much.
Interestingly, music NFT prices are not so correlated with Spotify streams, suggesting that rather than replicating the traditional market, NFTs are creating a new one, either because they’re attracting a different crowd or because the artist's success is governed by different rules.
Mastering NFTs can be the ultimate test before a traditional music career. It takes a fair bit of planning, storytelling and experimenting. Without the pressure imposed by streaming services and labels, artists can dedicate their time to artistic explorations. What’s more, they can get inspired by fans.
It’s not for everyone, though. While music NFTs are more egalitarian and rookie-friendly than the mainstream music industry, succeeding in the space requires commitment. To build a solid presence, artists must foster strong fan communities and deliver on the promised perks. They need to be approachable, entrepreneurial and tech-savvy.
Can music beat visual arts on the NFT market?
Some analysts do expect music NFTs to outgrow visual arts tokens. In popular culture, music sells better than visual arts and there’s no reason this couldn’t translate to the world of NFTs.
What’s more, digital music could prove less controversial than digital images. Traditional, material fine arts are so permeated with the original versus copy dynamic that ownership of fully digital pieces is difficult to grasp if the artwork is on display all over the internet. In music, there’s no contradiction between owning a record and hearing it on the radio. We just don’t think about music the same way.
It also challenges the notion of piracy, because no matter how many times a track will be copied, the original version, which sits on the blockchain, will lose none of its value. Quite the contrary—the more the song will be played, the more valueable the NFT will be likely to get.
The fact that music NFTs function as collectibles also adds to their appeal. While fine art collectors are usually after the original, collecting music is mostly about hunting for rare items. It relies on the notion of scarcity more than singularity. In music NFTs, the one-on-ones could one day carry a value comparable to a priceless original pressing, and the first few drops could become the equivalent of a legendary album’s initial edition.
Meanwhile, the internet is slowly filling up with music NFT marketplaces like Catalog, Async Art and Arpeggi, as well as Web3 artist communities such as Songcamp and Friends with Benefits. There are crypto streaming and tokenization services, companies that use NFTs to crowdfund music videos, and Web3 communities that find, fund and support up-and-coming artists.
On the other hand, gas fees and varying levels of crypto adoption can put people off. When Kings of Leon ventured into NFTs, fans expressed mixed feelings, because gas fees exceeded the value of the NFTs. Some artists also overestimate their ability to deliver on the perks they sell, and fans walk away with nothing.
Besides, the music establishment won’t go without a fight. It could find a way to colonize the NFT world or up its game to win artists back. Either way, if music NFTs do grow into a bigger movement, they are almost guaranteed to change the industry. Hopefully for the better.