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The Basics of NFTs
In a nutshell, Non-Fungible Tokens (NFTs) are a way to prove the ownership and authenticity of a digital asset on the blockchain through the use of a smart contract. In short, a smart contract is a program stored on the blockchain, attached to the NFT.
Smart contracts are automatically executed when certain conditions are met throughout the NFT's life. They are typically used to automate the execution of the underlying NFT agreement so that all participants can be immediately certain of the outcome, saving time for all parties involved, while also ensuring transparency.
Music is one of several trends happening in the NFT space right now, and it's pretty exciting. Let's dive in.
What are Music NFTs?
A music NFT is a certificate of ownership for an original piece of musical work. Purchasing music as NFTs may seem like the blockchain way of acquiring music from your favourite artists, but buying music as NFTs holds numerous benefits over traditional music collecting - for the collector as well as the creator.
Buying music as NFTs gives the collector full ownership of the song or musical piece. Many may ask, why buy the music if you can just stream it or listen to it for free? This is a valid question, but many find value and satisfaction in provably owning digital assets. Owners of these assets can also resell the music NFTs for a potential profit.
Music NFTs have the potential to benefit artists majorly. Not only do they have the potential to earn more from their work, but they also have full control over where their work is sold and distributed. Artists can earn the majority of the initial sale, but will also earn through secondary sales in the form of royalties.
Collectors also have the potential to earn from engaging in musical NFTs. Purchasing NFTs from artists who grow in popularity dramatically over time will result in their first releases being worth a lot more, and collectors can list and sell these NFTs for a profit.
Different Types of Music NFTs
Music NFTs are not limited to individual tracks/songs. A musical project is composed of various elements. Whether it’s lyrics, the drums, the album, or even the album cover design, each of these elements can be minted (or created) and sold as NFTs.
The beauty of this is that it promotes collaboration and the potential to earn from various components of music production. For example, a producer that specialises in drums can sell his work in stems or layers. Other artists can purchase these layers as NFTs and add them to their songs.
All of these elements can be bought and sold on open marketplaces. Async.art is an example of a marketplace where artists can mint their work as an NFT - whether it’s a song or any other element of a musical production.
Before we really dive into the benefits that NFTs can bring to the music industry as a whole, let’s first look at the current state of the music industry and how artists earn from their work.
The Current State Of The Music Industry Means Artists Earn Little For Their Work
It is no secret that the music industry exploits artists for the gain of the large corporations that control it. Record labels and streaming companies turn the musical artists into the product, leaving the artists with very little income after the streaming companies and labels take their cut.
Only those who manage to get into the spotlight are able to generate a sustainable income from their music, leaving the vast majority of smaller musical artists to struggle while the labels and streaming companies earn money on the back of the musician’s hard work.
There is a major issue with this scenario, because, with the current status quo in the music industry, artists have to share their music in streaming services in order for them to get listeners, but this also means that they effectively lose ownership of their work due to the tiny royalties these services payout.
Here are some of the PPS (pay per streams) for the biggest music platforms:
- Tidal - $0.12
- Apple Music - $0.01
- Amazon Music - $0.004
- Spotify - $0.033
- YouTube Music - $0.002
This is beginning to drive a movement away from streaming services onto other means that pay the artist better, such as buying individual tracks or albums on platforms such as Bandcamp, or even buying vinyl records.
There is also a clear shift in music consumer behaviour towards physical ownership of music, with vinyl record sales reaching a 30 year high in 2021, and seeing as Gen Z has shown to buy more vinyl than Millennials, it’s safe to say that this trend will continue to increase for the foreseeable future.
The combination of the movement away from streaming services, coupled with the increase in physical music ownership, along with the rapid increase in NFT adoption, is bringing about the perfect climate to incorporate NFTs into the music industry.
3 Ways that NFTs Will Benefit Artists in the Music Industry
After highlighting the current issues with the music industry and how they take advantage of artists, here are some ways in which artists can benefit from the introduction of music NFTs:
1. Earning Potential
With more music collectors hopping onto the NFT bandwagon with the intention of having full ownership of their favourite artists' music, artists will have the potential to earn a lot on each piece of music sold.
The actual marketplace where the music NFTs are sold will take a small cut of the sale, while the artist will earn the majority. Artists will also have the chance to earn royalties on secondary sales of their NFTs.
Right now, many artists are limited to tiny amounts earned off each stream or small percentages of each album sale. This system has been unfair for a long time and NFTs have the potential to bring about fair compensation for the pioneers of our favourite music.
2. Full Control and Ownership
The beauty of NFTs and blockchain technology is that they give full control and ownership over digital assets. Musicians can launch their work as NFTs and have full control over where their music is sold as well as how it is distributed.
Right now, artists leave the music in the hands of large corporations. They do this to obtain the necessary exposure because of these corporations' giant user bases, but the music is in full control of the corporations rather than the artists. In my opinion, this should be the other way round. Musicians/artists should have the power to decide how their music is shared.
3. Collaboration and Inspiration
As mentioned earlier, music NFTs aren’t limited to individual songs/tracks. Musicians can tell their work as individual layers/stems which represent solo parts of a song. Other musicians can purchase these stems and apply them to their own.
This will bring about collaboration amongst artists/musicians as well as bringing about inspiration and creativity among artists.
Exciting Music NFT Platforms
There are many exciting music NFT platforms just kicking off. Let's talk about some of them.
1. Catalog Works
Platforms like Catalog Works let music fans bid on digital records which can then be added to their Ethereum wallets. This is an incredible way to support artists considering the fact that some of the NFTs on here cost more than 1 ETH (+/- $3000). Over $2.3 million has already been paid out to artists using this platform, so it’s clear that music fans are happy to spend money to support the artists they love while also getting a unique digital collectible out of it.
2. LimeWire
The infamous LimeWire also announced their return after a decade of inactivity, this time in the form of a music-focused NFT marketplace. Julian Zehetmayr, the new CEO of LimeWire, announced that the core focus of the new LimeWire will be to give the majority of the revenue and control to the original artist, which is going to be a very exciting addition to the music NFT landscape.
3. Async.art
Async.art lets musicians create NFT tokens of the individual layers or stems of their track. Basically, this means that one final track can be made up of multiple musicians’ work. However, Async takes this one step further. Each stem is uploaded with different variations, meaning that each track will have multiple permutations, meaning that almost every time you come back to the same track, you will hear a different version of it. Each variation is also available for purchase as an NFT, and the secondary sale market pays out the original creators in royalties.
While the exact future of NFTs in the music industry is still quite uncertain, the avenues that have been explored already, coupled with the possibilities that NFTs have to offer make it safe to assume that we will definitely see plenty of innovative music-focused NFT projects coming up in the near future, which will hopefully help more musical artists (as well as other creators) transition into Web3 and get the compensation they deserve for their craft.
