Some artists within the music business have picked up on NFTs’ versatility and potential in the industry, with some major artists already venturing into NFTs. And even though NFT marketplaces have been trading music NFTs for some time, some start-ups are creating platforms exclusively for, or at the very least with a focus on music, creating a competition with streaming services.
What Exactly Are NFTs?
Although NFTs were initially only associated with digital art and collectibles like the Bored Ape Yacht Club and CryptoPunks, NFTs can represent just about anything: from videos, images, songs, and physical items to plots of land, be it virtual or physical.
NFTs or non-fungible tokens are cryptographic assets stored in a blockchain, like any other crypto. So, they function much like them, except that each NFT is unique and indivisible, hence non-fungible.
But what are NFTs exactly? Well, if you leave aside all the technicalities and complexities behind how exactly NFTs work, they really are just digital certificates of authenticity that prove ownership over whatever a particular NFT represents.
NFTs in the Music Industry
Some within the music industry have already picked up on NFTs’ versatile nature and found a way to make a profit by tokenizing music and selling it directly to consumers. EDM artists were the most significant front runners in bringing NFTs to the music industry. 3lau set a precedent in February 2021 when he tokenized his album Ultraviolet and released it as a set of 33 NFTs, garnering $11.7 million.
Since then, other artists have followed suit and released their own NFTs, including popular artists like The Weeknd, Shawn Mendes, Grimes, and more. Even Snoop Dogg, who acquired his label Death Row Records, has announced his intention to turn it into an NFT label.
A New Way to Connect Artists and Fans
Given the decentralized nature of blockchains and the technology NFTs rely on, they are ideal for connecting artists with their fans. NFTs represent a great opportunity for artists to monetize their music by selling directly to their fans without the need to rely on third parties.
Although music NFTs have been traded on NFT marketplaces from the beginning of the craze, new platforms are now emerging that are either exclusive for, or have a major focus on, trading and minting music NFTs.
Among them, you can find Royal or Audis. But an ambitious start-up stands out, Sound.xyz; an NFT marketplace focusing exclusively on music NFTs that promised to help up-and-coming musicians monetize their music by tokenizing it into NFTs.
It was also announced that LimeWire is making a comeback as an NFT marketplace with a focus on music NFTs. Though it will not work exclusively with them as other types of non-fungible tokens will be traded on the marketplace as well.
LimeWire’s comeback, though ambitious as any entrepreneurial bid ought to be, is the shyest of the two proposals in their approach. As Julian Zehetmayr, LimeWire’s co-CEO put it in a statement to Business Insider:
We are not relaunching LimeWire as an alternative to streaming platforms, but rather as an additional channel for artists to sell exclusive music and art directly to collectors.
Sound.xyz is more straightforward about its ambition to challenge the music industry’s current status quo. According to the Sound.xyz FAQ page, the company is set out to solve two major issues with the steaming-dominated music industry: that 90% of the streams go to the top 1% of artists and that they only earn a minuscule amount per stream.
The Music Industry’s Flawed Model
One of the main problems with the current paradigm is that music has become too cheap. This is the result of technological advancements; the combination of the MP3 format and the internet brought about streaming services and allowed music to become too readily available.
Today, about 80% of the music industry’s revenues come from streaming. But according to a report by Rolling Stone, around 90% of all streaming revenue goes to the top 1%. Although now around 12% of said revenue goes to the artists, as opposed to 7% before the internet came along, most artists on streaming platforms are still struggling to build a sustainable career.
This is coupled with the fact that artists are only paid mere cents per stream. Spotify pays around $0.003 and $0.005 per stream, which means that your songs need to be streamed around 16,670,000 times for you to make $50,000 off them. The problem reaches even larger proportions when we take into account the numbers: there are only 13,400 artists that make $50,000 or more per year on Spotify.
Enter Music NFTs
NFTs cut out the intermediaries. With NFTs, artists no longer need labels to put their music out. When an artist mints their music into NFTs, it permanently records who created the music and when. Plus, they can sell it directly to their fans. Also, Artists can continue to earn money from the resales of their NFTs on secondary markets.
By tokenizing music into NFTs, artists can launch unique, collectible versions of their music. And in claiming uniqueness and scarcity, the value of their music is thus driven up.
According to David Greenstein, Sound.xyz’s CEO, music NFTs allow artists to make a living from their music with only 100 true fans, as opposed to millions of listeners. This is specially true thanks to how easy it is to make an NFT. Plus, there are many marketplaces to mint an NFT for free, so artists don’t need a lot of budget to start generating revenue.
Will NFTs Overtake the Music Streaming Industry?
With music NFTs, the crypto world has certainly secured a foothold within the music industry. And under the current paradigm that streaming services dominate the music industry, the incentives are high for artists to start minting their music into NFTs as a way to monetize their work.
Perhaps it is a little early to start talking about a direct competition between streaming services and NFTs in the music industry. But with even a lot of major artists launching their own music non-fungible tokens, it seems the industry is starting to move in that direction. We’ll have to wait and see if both models can coexist or if one dominates over the other.
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