Music
Note: Data in this section last updated May 28th, 2022
What are Music NFTs?
Music NFTs are certificates of ownership for unique musical pieces such as songs, albums, lyrics and instrumentals. On the surface, they are similar to an audio file that one would purchase on iTunes.
What differentiates music NFTs is that they often offer the holder full ownership of the work and therefore exclusive rights to determine how it is used.
Although the category currently represents fewer than 0.4% of the NFT markets, there have been several notable developments in the last year including:
March: Kings of Leon becomes the first band to release an album as an NFT
April: American artist Vérité auctions the perpetual master recording rights for the song “by now”
September: Snoop Dogg reveals himself as Cozomo de’ Medici, a formerly pseudonymous NFT collector with a nearly $20 million collection
October: PleasrDAO purchases the NFT for Wu-Tang Clan’s unreleased “Once Upon a Time in Shaolin” for $4 million
November: Universal Music Group partners with Timbaland to create a Bored Ape band
December: An unreleased Whitney Houston track sells as an NFT
January: Nas releases two singles on Royal that grant holders royalty rights
February: Coachella sells 10 lifetimes passes as NFTs (which currently trading at $1M right now)
Given the large global fanbase of music aficionados and numerous developments in the space, many analysts are bullish on the long-term prospects of music NFTs.
What are the benefits of Music NFTs?
Owing to a shift to digital formats and the resulting explosion in piracy, the music industry experienced a steep decline from the early 2000s to 2014. Fortunately, digital and streaming markets matured during this time to stop the bleeding and reverse the trend.
Today, over 83% of music sales are streamed and the space is dominated by three players: Spotify (32% market share), Apple Music (16% market share) and Amazon (13% market share).
While these giants have undoubtedly provided value to the industry as a whole, these benefits have come at a heavy cost to artists, who now have yet another stakeholder to pay. Indeed, after the cut taken by distributors and record labels, the average musician only yields ~12% on their works.
Moreover, like any average, this figure is further skewed by the handful of larger artists with negotiating leverage – the typical musician makes much less. According to Venture Beat, the top 1% of artists receive 90% of streaming revenues and fewer than 0.8% make more than $50,000 per year.
Recording Artists Capture Less Than 12% of Music Revenue
NFTs can buck this trend by cutting out the middleman and allowing artists to sell directly to consumers. This means the elimination of platforms, record labels and publishers – potentially increasing the artist’s share to 90%!
In aggregate, Bankless estimates that selling music NFTs could yield an artist 7.5x more earnings than a year’s worth of streaming on Spotify.
Music NFTs also offer substantial economic benefits to consumers. For instance, an artist could create an NFT of her work, sell it directly to fans who then could collect royalties every time the work is streamed.
In addition, music NFTs will likely improve the overall function music industry as they offer:
New Streams of Revenue: Music NFTs will likely create the potential for an entirely new suite of products including digital memorabilia (such as Snoop Dogg’s “Doggies”), NFT-based album art, concert tickets with perpetual royalties and collaborative works
Enhanced Consumer Benefits: Owning music NFTs could entitle fans to exclusive access to parties, special shows, 1-on-1 interactions with artists and more
Irrefutable Provenance: Musical work often have several owners and the details of these owners can be spread across dozens of physical contracts. Recording ownership on a blockchain eliminates this confusion and establishes a clear record of ownership
Transparency: The current system for royalties is opaque and inefficient. NFTs make it easy to see who has streamed what and calculate payments accordingly
Censorship Resistance: From Elvis to the Rolling Stones to N.W.A, censorship of music has been a long-standing problem. Decentralized platforms have the potential to eliminate censorship by allowing artists to upload any content, any time they want, no matter how controversial
Finally, Music NFTs will likely increase the incentives for collaboration between an artist and her fanbase. For instance, users could gain economic benefit from creating derivative works and remixes, or even building decentralized applications that incorporate a piece of work.
How Do Music NFTs work?
Explaining the mechanics of music NFTs is difficult because there are so many different types of assets.
Despite being only a few years old, we have seen several major categories emerge that include:
Digital Works: Albums, songs, lyrics, etc… that have been made into an NFT
Generative Music: Music that is created by computer algorithms, such as EulerBeats
Collaborative Works: Although all music NFTs can be theoretically modified, remixed and sold, some – such as Snoop Dogg’s “Dogg on it: Death Row Mixtape Vol. 1” – are designed specifically with this purpose in mind
Merchandise: Including album art, special editions, digital avatars
Live-Event Tickets: Concert tickets that can be programmed to include access to merchandise, food and beverages, etc…
Let’s take a deeper look into each of these use-cases below…
Digital Works
One of the first, and most basic, iterations of music NFTs are as simple digital collectibles.
Artists can leverage the technology to create scarce digital representations of albums, songs, lyrics and even soundbites and sell them to superfans who are eager to collect these limited editions.
Although many music NFTs don’t currently offer ownership or royalty rights, some platforms – such as Royal – are pioneering a new model that gives fans an economic stake in the works.
In January 2022, Nas raised over $560K in revenue selling royalty rights to two singles – “Ultra Black” and “Rare” – on Royal.
Ownership of Nas’s “Rare” Grants Holders up to 1.6% of the Song’s Royalties
Each NFT gives the buyer a percentage of streaming royalties for the song, ranging from 0.0133% for the “Gold” edition (~$99) to 1.5789% for the “Diamond” edition ($9,999). In addition, ownership of the NFTs comes with several additional perks that may include:
Access to an invite-only Discord channel
Exclusive merchandise
VIP Concert Tickets
Exclusive Signed Vinyl
Video Conversation with Hit-Boy
The collection consisted of 1,870 NFTs and sold out almost immediately, generating over $560K in revenue.
Generative Music – EulerBeats
Generative music is the recording industry’s answer to Art Blocks. Like generative art, it is created by computer programs and random factors are introduced into the code to make each track unique.
EulerBeats is one of the earliest iterations of this new art form. It is a collection of 27 original tracks that are algorithmically generated using the Euler Phi function. Each track comes with 120 copies and its own unique digital album cover.
EulerBeats Tracks
Holders of EulerBeats own the full commercial rights to the music and receive an 8% royalty on every copy sold.
One interesting feature of EulerBeats is that all data (artwork + music) is stored entirely on-chain. Unlike other NFTs, which require third-party servers to host their content, EulerBeats will exist forever on the Ethereum blockchain.
Collaborative Works – Snoop’s Mixtapes
Another emerging category of music NFTs is collaborative works. Although most NFTs allow users the right to modify and sell derivative works, some are specifically created for this purpose.
One recent example is Snoop Dogg’s “Dogg on it: Death Row Mixtape Vol. 1”. Each NFT contains four audio files including:
Vocals only
Instrumentals only
Instrumentals and hook, but without the verses
The complete song
As such, purchasers have numerous options to create derivative works – such as creating their own instrumentals to go along with the vocals, using the instrumental to create their own rap or remixing the song in anyway they desire.
While it’s unclear at this time whether users will be able to sell these derivatives (and if they’ll have to provide royalties to Snoop), the ability to do so would be consistent with the NFT ethos. In fact, the description reads “Own it. Remix it. Master it.”
Merchandise
The global market for music merchandise is nearly $4 billion, and it is estimated that artists often earn up to 35% of their income peddling hats, t-shirts, sneakers, etc…
NFTs have the potential to expand this revenue base by allowing artists to monetize digital merchandise as well, selling limited edition album art, collectible editions, avatars, etc…
Once again, Snoop Dogg is a pioneer in this space, with multiple releases including:
Doggies: 10,000 programmable and playable avatars intended for use in the metaverse
Snoopverse Early Access Passes: Exclusive access to the “Snoopverse”, the artists own branded world within The Sandbox
Stash Boxes: “Goody” boxes that include a variety of random items such as music tracks, commemorative NFTs and even metaverse land parcels
Snoop Dogg’s “Doggies”
Tickets
One particularly interesting use-case for NFTs is as tickets to concerts and other live music events.
We are already seeing traction in this area, artists Lupe Fiasco and Gucci Mane have sold blockchain-based tickets, and Coachella recently sold 10 lifetime passes (with VIP access) in the form of NFTs that are currently retailing for more than $1M on the secondary market.
$1M NFT Ticket for Lifetime VIP Access to Coachella
NFT tickets have several benefits including:
Less Counterfeiting: It is estimated that up to 20% of second-hand tickets are fakes. NFTs could eliminate this problem by allowing purchasers to independently verify a ticket’s legitimacy
Resale Potential: NFTs can be coded to give an artist a percentage of every ticket resale, granting artists access to a multi-billion dollar market that has historically been dominated by scalpers and
New Revenue Opportunities: Tickets can be programmed to come with free food, drinks, concert merchandise, etc…
While the potential use-cases for NFT ticketing are vast and only beginning to emerge – indeed, it probably warrants an entire article given – it is becoming clear that they are poised to disrupt the $25 billion live-music ticketing industry.
Who are the Key Players in the Music NFT Space?
As of March 28th, 2022, the top selling music NFTs include WVRPS by Warpsound, The Orbs by BT, EulerBeats Genesis, EulerBeats Enigma, Audioglyphs, Dogg on it: Death Row Mixtape Vol. 1 and Snoop Dogg’s B.O.D.R.
Music NFT Infrastructure
Like the traditional music industry, infrastructure such as streaming services and marketplaces will be critical to the success of music NFTs.
One of the most popular infrastructure plays today is a project known as Audius.
Founded in 2018 by Forrest Browning, Ranidu Lankage, and Roneil Rumburg, Audius is a decentralized music streaming platform built on the Ethereum blockchain (in many ways it’s similar to Spotify or SoundCloud).
Unlike traditional streaming services, however, the platform does not charge a fee – allowing artists to earn 90% of revenue vs. 12% on Spotify! (the remaining 10% goes to miners on the Audius Network)
Artists Can Earn Nearly 8x More Using Audius
The backbone of the Audius platform is a decentralized storage system known as AudSP (which is an extension of IPFS).
In this system, artists upload their songs and then the data for each song is split up and stored across a global network of computers called content nodes. When a user wants to stream a song, these pieces are sent back to the user and reassembled.
Audius also employs another type of node – known as a discovery node – that indexes the AudSP ledger and makes it easier for users to find songs.
The platform is powered by the native ERC-20 token AUDIO, which provides:
Security: Both content and discovery node operators are compensated with AUDIO, receiving up to 10% of the platform’s revenue
Staking: Artists and users can get premium features by staking the token
Governance: Tokens grant governance rights, allowing holders to make proposals, participate in strategy and vote on important issues affecting the platform
As of December 2021, Audius hosted over 100,000 artists and 6 million monthly users.
While still early, the music infrastructure space is booming is already very active. Other notable decentralized streaming services include Emanate, Opus and BPM. In addition, there are also several music-specific NFT marketplaces such as Catalog, Royal, Decent and Sound.xyz
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