Kings of Leon’s adoption of NFTs was a wake-up call for their record label and the music industry, which is now racing to avoid the same mistake that nearly killed it 20 years ago.
MMore than two decades after the release of its debut album, Kings of Leon has been honored in the Rock & Roll Hall of Fame. But what brought the Southern rock band to Cleveland last April wasn’t their music; it was his non-fungible token (NFT) called “NFT Yourself”.
The digital tokens went on sale in March for the Ethereum equivalent of $50 a pop, and included a copy of the band’s latest album, unique artwork, a unique gold record, and musical snippets. During the two weeks of availability, KoL sold 6,500 copies of “NFT Yourself” for a total of $2.2 million, including six “Golden Tickets” which sold for an average price of $100,000. These very special NFTs included lifetime access to a VIP concert for one show per tour, with driver. Since the initial two-week offering, NFTs have generated an additional $246,000 in secondary market sales, with the group picking up 10%.
Although the financial performance was not revolutionary, the ripple effects are being felt throughout the music industry.
“Record deals have lost their value, in a way,” says 42-year-old Kings of Leon drummer Nathan Followill. “Nowadays a kid can make a record on GarageBand and stream it on TikTok or stream it as an NFT or stream it in whatever form. It’s almost like they don’t have to count anymore on the recording industry as much as before, which in turn, I think, is freaking out the recording industry.
Most people know about NFTs because of the mania this spring surrounding a few digital art auctions. In March, Wisconsin lowbrow artist Beeple (real name: Mike Winkelmann) captured the imagination of the world when he sold a collage of 5,000 JPEGs at Christie’s for a staggering $64.9 million. dollars. Musical NFTs are no different, except that in addition to any artwork, they come with audio files like the MP4s sold by Kings of Leon.
‘NFT Yourself’ wasn’t a huge financial hit for the Kings of Leon: At its peak in 2008, the group, made up of three brothers and a cousin, earned around $10 million on their multi-platinum Only at night album. But “NFT Yourself” marked the first time a mainstream group fully embraced NFTs, and depending on your perspective, it’s either a game-changer, a lucrative publicity stunt, or the last. blows in the defeat of the traditional music industry that has been going on for decades.
Other acts have done much better with NFTs. Superstar DJ Justin Blau (aka 3lau) has sold $20 million worth of NFTs since he started broadcasting them last fall, after teaming up with surrealist artist Mike Parisella (aka SlimeSunday) and having sold 33 limited edition NFTs from his latest album, Ultraviolet, which included animated videos of the artist synchronized with music by Blau.
“The model I’m working on is supposed to be a reverse recording contract,” says Blau, who is 30 and has worked with artists like Rihanna, Katy Perry and Ariana Grande. Instead of what he calls the “predatory” 80% that most labels take, he plans to fund production costs by selling directly to fans. His team is now in talks with Billie Eilish, Madonna and Metallica and preparing for what he hopes will be the first blockchain music auction to be held at Christie’s London auction house.
Beyond the money directly earned by selling the NFTs, the digital tokens – each a unique and similar cryptocurrency, exchangeable on a blockchain – also provide a direct and permanent connection to the super fans who keep them. Even though buyers are just anonymous numbers floating around in the blockchain ether, music acts can use them to market and sell new music, artwork, concert tickets, and merchandise. Done right, NFTs offer the ease and ubiquity of Internet distribution (think Napster), but with built-in digital rights protection (think iTunes).
This sparked a growing effort to capitalize on the opportunity. Kings of Leon used YellowHeart, a New York-based blockchain startup founded by New York music veteran Josh Katz, to sell “NFT Yourself.” But the group had other options. Andrew Gertler, who represents singer Shawn Mendez, recently joined Jay-Z and Andreessen Horowitz in a $19 million investment in Bitski, which is building a new NFT platform for music. In May, Miami-based OneOf raised the largest NFT music round to date, $63 million, to create an energy-efficient marketplace to sell rare music from Whitney Houston, Quincy Jones and John Legend. Famous investors flock. Mark Cuban and Ashton Kutcher joined a $4 million investment in music marketplace NFT Genius in June.
It has also spurred record labels, who see the rise of NFTs as perhaps more dangerous than the pirated MP3s that sent the industry into a death spiral 20 years ago, but also potentially as miraculous as the streaming technology that has since revived it: Since 2007, recorded music revenue has jumped 35% to nearly $40 billion, exactly where it stood at the CD-fueled peak reached in 1999, according to entertainment research company Midia. Weeks after the release of “NFT Yourself,” label executives Kings Of Leon, Sony/RCA, set up a task force to learn about NFTs, with similar efforts taking root at each of the three major companies. music companies, including Sony Music, Warner Music Group and Universal Music Group.
“One of the things that has caused the music industry to go down is that we compete really hard with each other,” says Oana Ruxandra, chief digital officer at WMG. “And then technology comes along and they eat our lunch, and we’re still competing with each other and won’t talk.” Noting the clear shift in power dynamics that NFTs represent, she added, “Any developments warrant an assessment and evolution of artists’ contracts.”
As long as they can solve the problems. YellowHeart took a fraction of what a label would have charged to run the Kings of Leon NFT, but it misfired with its technology. YellowHeart had no music player and no way to support encrypted NFT audio files. Instead, he distributed unprotected MP4 files of the band’s new music which can now be easily hacked and shared. Then there were the common Ethereum transaction fees that cost some fans an additional $90 on top of the $50 cost of the NFT. All of this amid a larger NFT market experiencing extreme volatility. After peaking in May, when $294 million worth of Ethereum NFTs were sold in a single week, their market fell 75% in June, according to data site NonFungible.com, before climbing back to $302 million. dollars in July.
“I would say that in the next ten years, 70% of albums will be released in NFT form,” says Kings of Leon’s Followill, who describes himself as the band’s resident cryptogeek. Speaking to the press at the unveiling of the NFT Hall of Fame, a digital image of himself shimmering in the background, he shrugged: “Whenever you’re right in Jimi Hendrix’s road and of the Beatles, you must be doing something right.”