NFTs Are Here And They’re Redefining The Future Of Music
Interest in, and excitement about, non-fungible tokens (NFTs) exploded in 2021 and the first few months of 2022. Today, NFTs—digital tokens stored on a blockchain that can record ownership of items—have been developed for a wide swath of items, from digital art to event tickets to real-world luxury goods. The numbers are head-turning: NFT sales volume totaled $25 billion in 2021, compared to just $95 million in 2020. Already in 2022, daily sales on Opensea, the popular peer-to-peer marketplace for NFT, have reached all-time highs.
NFTs have the potential to disrupt a wide array of industries. Many experts expect NFTs to prove especially transformative in shaping the future of music. Songs, albums, music, lyrics, and soundbites can all be NFTs. Last year, Kings of Leon became the first band to release an album as an NFT. Music can even be combined with digital art in jpeg or gif formats to create unique pieces of artwork with music incorporated. For example, Lostboy NFT is a popular music collective that combines music and art, along with a focus on mental health. Thanks to smart NFTs that can support multiple formats, music-related NFTs can be displayed differently depending on how they are accessed. For example, an audio NFT can include a PDF resource that contains the lyrics to a song or a message from a musician, which would be displayed when it is opened in text-based format.
When you take a deep dive into what NFTs enable, NFTs seem especially poised to define the future of music.
Enabling equitable compensation.
For decades, musicians have not been equitably compensated for their music. This has been particularly apparent in the music industry. As reported by Fortune, the typical total revenue split is 50/50—with only 50% of revenue going to the entertainer and the rest shared among agents, lawyers, and distributors. The reality is even grimmer when it comes to musicians who distribute their content via streaming services. Most of Spotify’s top 0.8% of artists earn less than $50,000 in streaming revenue.
NFTs have the potential to ensure that musicians are more fairly compensated for their work. Consider a personal anecdote by Linkin Park’s Mike Shinoda, who raised about $11,000 for his first NFT. In a Tweet, Shinoda explained, “With NFTs, we can let the early figures speak for themselves. Even if I upload the full version of the contained song to DSPs worldwide (which I can still do), I would never get even close to $10k, after fees by DSPs, label, marketing, etc.”
One of the biggest opportunities for musicians in terms of being fairly compensated for their content relates to secondary, tertiary, and higher-order markets for NFTs. Right now, creators often relinquish ownership rights to platforms at the initial contract and have difficulty tracking where their content is subsequently distributed. As reported by The Verge, after being signed to a major indie label, one musician was owed up to $40,000 in song royalties that they never expected to collect.
Yet, with NFTs, musicians and other creators don’t need to relinquish ownership of their content to platforms from the get-go. Although they can choose to relinquish the rights of a song or album when they mint an NFT, they can also retain that ownership by baking it the NFT. So, when musicians sell content, they can be compensated directly and more fairly. If an NFT owner then decides to resell the NFT, the original creator can automatically receive royalties—and this process can continue each time the NFT is sold. This is all thanks to the fact that there’s a record of ownership built into the NFT’s metadata.
Enabling greater potential for collaborations and remixes.
Over the past decade, collaborations have become increasingly common in the music and entertainment industries. Today, entertainer collaborations are a defining feature of modern pop culture. There’s an undeniable appeal in seeing two or more entertainers come together in new and creative ways.
We’ve already seen NFTs support new and exciting collabs. Grammy-nominated DJ Steve Aoki recently teamed up with digital artist Maciej Kuciara to release an NFT collection. As Kuciara has reflected, “NFTs represent a new canvas for digital artists, that allow a whole new generation of artists to collaborate with talent from different industries, and leave a lasting emotional impact on the viewer.” With NFTs, collaborations can become more lucrative as musicians can opt to bake a royalty-collection mechanism into the NFT.
Closely related to collabs are remixes. NFTs are also able to capitalize on the increasingly popular “remix” culture—which encourages combining or editing content to produce new creative, derivative content. One popular example of remixes are “fan edits,” such as versions of music, films, or artwork that are edited by fans such that content is added to, removed, or augmented to create something new.
Musicians and other creators can incentivize remixes in ways that benefit them by leveraging “upgradeable NFTs.” As digital agency Blue Manakin has explained, “Upgradable NFTs open the possibility of more efficient distribution of music, that does not have to go through intermediaries and that facilitates the creation of exclusive material, collaborations, and remixes, without the legal implications that often arise.”
Upgradeable NFTs are NFTs that can evolve and mutate over time. For example, a musician might release a soundtrack, a chorus, or a bridge that fans and collaborators can legally build atop of, while bypassing the costly legal processes often involved in legally creating remixes. With upgradeable NFTs, the original creator can retain control of the spin-off creation and even profit from it.
Capitalizing on appeals to scarcity.
Esteemed psychologist Robert Cialdini is one of the leading researchers on influence tactics. Cialdini is famous for his “six principles of influence”—one of which is scarcity. Cialdini’s research demonstrates that products are viewed as more attractive when their availability is limited. Scarcity has a long history of generating lucrative profits in the music industry. The music industry thrives on unique and rare fan experiences, backstage passes, fan clubs, collectibles, and other scarce assets.
NFTs enable musicians to capitalize on appeals to scarcity in new ways—and, on the flip side, enable fans to capitalize on new opportunities to develop deeper connections to their favorite musicians. Consider the following question posed as part of a recent survey by media company Variety: “It’s 2022. An NFT is released by a studio for a clip from a movie you love. There are 1,000 copies of this NFT for sale. What do you expect the price range to be?”
A full 20% of respondents thought the price range would exceed $1,000. There’s a certain sense of thrill and appeal from getting access to exclusive, rare content.
With NFTs, the opportunities for appeals to scarcity are limitless. Consider the world’s largest music event organizer, Live Nation, which recently announced the launch of Live Stubs—NFTs that fans will receive for free when they purchase a concert ticket. As Michael Rapino, President and CEO, Live Nation Entertainment, explained, “Our Live Stubs product brings back the nostalgia of collecting ticket stubs while also giving artists a new tool to deepen that relationship with their fans and we can’t wait to see what the creativity of this community dreams up as it grows.” Over time, Live Stubs and similar NFTs become rare collectibles that can appreciate over time in value and be resold legally.
Other appeals to scarcity within the music industry have also been enabled by NFTs. Canadian singer Shawn Mendes has collaborated with avatar tech company, Genies, to launch his own NFT. Launched on OpenSea, the NFT included rare digital versions of his signature accessories such as his Fender guitar and gold ring.
Propelling the future of music through NFTs.
NFTs are not just another buzzy acronym. When you closely examine the value propositions of NFTs—the potential for more equitable compensation, more collabs and remixes, and time-tested appeals to scarcity—NFTs seem poised to transform the music industry. The key will be for NFTs to continually reinvent themselves and creatively evolve—as much as the musicians that they are supporting.