How NFT’s Can Help the Music Industry
Giving power back to the artists
The music industry has been providing entertainment to people for decades. As technology has advanced, fans have had more options and accessibility to listen to their favorite artists. Even with all the improvements, musicians today face many issues. NFTs can help solve some of these.
Issues in the industry
One issue in the music industry is that most artists do not get a large share of the revenue from their music. Revenue has to be spread out to all participants, which can include record labels, managers, distributors, promotors, public relation companies, producers, songwriters, sound engineers, and more.
Another reason that artists do not make much money from their music is the many different royalty contracts between artists and the before mentioned contributors.
For each revenue-generating stream, certain contributors get a certain percentage of profits. One of the main streams of revenue for artists is physical sales; which could be vinyl, cassette tapes, or more recently, CDs. Artists typically only receive 13–20% of revenue from physical sales.
In recent years, consumption of music has gone digital via streaming, with applications such as Spotify or Apple Music. On average, Spotify pays artists $0.0032 per stream and Apple Music pays $0.0056 per stream.
Another issue in the music industry recently is who owns the rights to a song. Even the biggest names in music, from multiple generations, haven’t had the rights to their own songs.
When Taylor Swift signed her original contract with a record label, the label received ownership rights to her first six albums and Swift received a small cash advance to help start her music career. Those album rights were then sold this past year for millions, to which Swift did not receive any of the profits from the sale.
Another big artist, Kanye West, also had an issue with music rights, as he fought to gain the rights to his music back from a record label.
How NFTs can help
NFTs, or non-fungible tokens, can help artists reclaim their content and bring real value back to their music. These tokens, which are more like unique digital assets, open up a world of possibilities for artists to design and package their content to be sold directly to their fanbase, without the interference of record labels and other intermediaries.
Artists can exclusively release their music through NFTs.
“I think this will be how people release their tracks: When they sell 100,000 at a dollar each, then they just made $100,000” - Josh Katz, CEO of YellowHeart
In this marketplace, a musician can finance their music by selling or “offering” a finite amount of rights of ownership on their created work. For example, an artist can have an initial rights offering (IRO) of 20,000 serialized rights to a new album. Each right will be offered at a set price ($10). In this example, the artist receives $200k in funding to help finance any production changes, distribution and marketing costs.
However, users who own the rights to the songs/albums can resell these rights in the marketplace. An ownership right that was purchased for $10 could be potentially resold for thousands of dollars. The total sum value of the marketplace for the album will give the piece of art a “market cap.”
This marketplace could help established and new artists. Mature artists such as Taylor Swift and Kanye West can remove themselves further from the control of the traditional music industry. It can also help new artists get started by removing the burden of some costs.
Additionally, the authenticity of the tokens can always be verified, so the purchaser can know with confidence that they are not purchasing a counterfeit product, which can be especially useful in secondary repurchasing markets.
One way artists currently generate substantial revenue is through merchandise and collectibles. Artists may sell limited-edition records or signed music equipment to fans. Once an official, signed item is distributed by an artist, it is hard to track it and verify that it is real and not a counterfeit. Too many counterfeits in the market can reduce the value of legitimate items but with NFTs this wouldn’t be an issue.
Current Uses
Kings of Leon recently released an album using NFTs. Their tokens came as a package, which in addition to the album, included other live-show perks such as front-row seats for life to all future Kings of Leon concerts, as well as exclusive audio-visual art to accompany the album itself. The album is still streaming on all of the major music platforms (iTunes, Spotify, etc) but the NFTs offer exclusive perks to the album.
The Weeknd is also using NFTs for his music. He sold an unreleased song and visual art through an auction.
NFTs are becoming more mainstream by the day. The music industry is a ripe marketplace for NFTs and blockchain to disrupt the industry and benefit the creators of the content themselves.