Is blockchain technology the next leap forward for the music business? NFTs (Non-Fungible Tokens) became the biggest buzz word in the music industry recently. Without being able to tour for well over a year due to the COVID-19 pandemic, musicians desperately sought ways to create new revenue streams. Is this a new cash source for creatives? Or yet another technology that’s not going to make you any money? Get ready for the deep dive.
Enter cryptocurrency and NFTs. A non-fungible token is a digital collectible sold via blockchain, which is a public and digital ledger proving ownership. They provide an innovative new opportunity for artists to creatively engage with fans and earn revenue.
First becoming popular in the fine art world, popular musical artists across every genre have jumped on the trend and released their own material through NFTs – from Kings of Leon and Taylor Swift to electronic artists like Deadmau5 and the Chainsmokers. They are a good way for artists to make up for some lost revenue due to pandemic restrictions and the under-payment of the streaming era. Artists are able to make money directly from the fans, without having to go through a third party like a distributor, manager, or record label. Even if the NFT is resold, the creator earns a royalty from every transaction. This means they can possibly accrue more value as an artist’s popularity increases.
Put simply, NFTs are digital items with limited availability. Think of it like a certificate of authenticity. Whoever owns it can transfer it, but it can never be copied. According to basic economics, this means that a small supply will drive a high demand – but only if there’s a demand (more on this later).
The most common use of NFT for musicians would be exclusively released albums and singles. But it can take many other forms like concert tickets, images, contracts, handwritten lyrics, custom sound samples, and more. Public distribution of said items helps to ensure transparency and keep things honest by preventing tampering and fraud, perpetuating the attributions of rights, and track transactions. In this digital age it is far too easy to simply copy a work. But buying an NFT provides individual proof of ownership regardless of how many other copies exist.
It might seem like the price is inflated, but it raises a fantastic point that all artists can be on board with – a song is worth more than hundredths of a cent per listen.
Benefits of NFTs for Musicians
NFTs benefit musicians in a number of ways. The additional revenue stream can certainly be a boon to all artists in light of how COVID devastated the music business.
They are extremely convenient for fans to consume. It is really no more difficult than online shopping. But if you’re a new and emerging artist still trying to get the attention of listeners and build a fanbase, there are might be more important things to focus on.
It cuts out the middlemen. Whether fans are purchasing a full album, streaming a song, or buying concert tickets – somebody that is not the artist is always taking a cut. As with all crypto exchanges it is a direct transaction.
The technology also helps with keeping ticketing sales honest. It could end scalping and resale on secondary markets altogether because NFTs are non-transferrable. Blockchain could also possibly stand in for copyright registration, since it is acting as a time-stamped proof of a work’s creation.
It’s Not All Good
Not everything is gold though. Artists with notoriety can easily capitalize on the sale of verified, limited-edition items. But new and up-and-coming artists have a difficult time making the NFT movement work for them. The idea is also very new, so it could continue booming or completely bust in the future. As an artist, it begs the questions – will my/our fans pay top dollar for content they could get elsewhere for much less, or free? Do we even want to not make all of our work as widely available as possible, as we’re doing everything possible to build a fanbase at this point?
Most independent artists do all, or most, of everything. Between songwriting, rehearsing, booking and performing to social media content scheduling and marketing there is no bandwidth or time to produce content specifically aimed at the NFT audience. If you come up with gold, it’s to the independent artist’s advantage to make it as widely available as possible. NFT demand is generated by the market for the art of a musician. It goes without saying that popular artists should have no trouble selling them, but for up-and-coming artists the demand probably isn’t there yet. Therefore, new artists don’t have nearly the benefit that established acts do.
And what about false scarcity? The real idea behind NFTs is that something is limited when it’s really not, so it appears more valuable than it might really be. Bubble concerns are also very real, as NFTs are booming and might be overvalued right now. If consumer interest fades value will go down, which could leave those that invested in these items in the lurch.
There is a rising trend of artists that are releasing sample packs as NFTs, allowing the buyer to use them in their own productions. This could present some legal issues, however, as artists that are under record contracts need to tread lightly so as not to breach the terms of the contract. And as copyright law is complex and varies by country, this decentralized way of transacting could raise more issues in the future.
I Want to Release an NFT!
If you’ve read this far and you’re still interested in creating your very own NFT, the process might be a little confusing. Minting an NFT requires computing power, and in order to offset that cost there is a charge that’s called a “gas fee”. There is a minting fee to turn your work into NFT, and you will also be charged a gas fee for that. The minimum cost of minting an NFT on the Ethereum blockchain can range between $70 and $100 – or more.
There is also a fee for using the platform to sell NFTs. The most important thing to remember about gas fees is that it is a highly variable price, based on market demand.
How to Monetize
There are currently a number of platforms that can help you monetize your work, and likely more marketplaces that will open in the future.
Take XLR8r for example, a marketplace targeted exclusively at electronic music genres. Rocki is the streaming platform re-imagined, providing more transparency by conducting all transactions via blockchain. Zora bills themselves as a “universal media registry” from which you can publish your work and transact.
The music business is one of the most volatile in the entertainment industry, and the pandemic made things all that much harder. NFTs could be the way of the future, or they could fade away as quickly as they appeared. Only time will tell.