The digital era has had a huge impact on the music industry in terms of how artists make money off of their music. When it’s incredibly easy to acquire and even copy songs digitally, how do you go about ascribing financial value to them? Yes, the advent of streaming corrected the problem (sort of) in that music was no longer being distributed without copyright, but streaming services are still coming under fire for their revenue distribution model. Data shows that for every time a song is played on Spotify, the streamer will pay out 0.3 to 0.5 US dollars to the copyright agency, who then splits the earnings with artists according to their contracts.
Streaming platforms certainly offer artists a much wider stage on which to get their music heard – however, under this model, even big stars reap meager earnings, not to mention those indie musicians that are just starting out and can hardly make a living.
I believe that NFTs have the potential to offer a much bolder and far more effective solution to this problem. Imagine a future in which NFTs serve as the mediums by which artistic value is translated into financial value, taking the place of copyright and middlemen and creating new mechanisms for music collection.
The best example of what I’m describing would be to view music NFTs as collector’s items. Integrated with a visual design, a music NFT essentially becomes a digital version of the vinyl records that collectors assign so much value to.
But it doesn’t stop there. NFT issuers can create a new interaction model with owners by offering a range of premium benefits, such as VIP passes to shows, meet and greets, or airdrops of exclusive artist photos. With the ease of digital trading, these services would naturally form a secondary market. Additionally, issuers can collect their NFT commission via smart contracts, meaning their profits would scale in tandem with the market.
What’s more, the integration of music copyrights into NFTs holds incredible potential and would lead to the democratization of music investment. There are in fact many startup teams currently building up this field. Take for example UK firm Opulous, which helps artists use NFTs to directly sell the rights to their music to their core fans. The company is already collaborating with artists including Lil Pump, Tyga, and Kyle on this endeavor. This approach not only gives artists an Upfront revenue channel, NFT-holding fans will also receive future royalties on the music.
If this mechanism proves effective, music NFTs will become a digital asset that functions as a far better representation of the music’s intrinsic value. We can expect more DeFi applications to emerge around music NFTs and create an even larger market.
Lastly, using NFTs as a medium between artist and fan can help the music industry finally get rid of the middleman. Not just artists but music labels will become their own DAO. For example, on Oursong co-founder Pochang Wu’s metaverse music label 0x0, those who purchase music NFTs also receive a share in the company’s profits. What’s more, NFT owners also have a voice in the label in areas like deciding which projects to fund, creative direction, and which artists to cooperate with.
The explosion of NFTs over the last few years has certainly left many wondering if it’s just another tech bubble or nothing but hype. However, it’s my firm belief that blockchain and NFT technologies are just like the internet of the past. Indeed, there are lots of people trying to hype up the industry, but there are just as many who are working to find practical applications for the technology in human society. NFTs and blockchain are primed to disrupt the operation model of traditional industries, one of which will most certainly be the music industry.