Music industry

NFTs are disrupting the music industry

Monday, March 28, 2022 4:06 PM

by Adi Ben-Ari, CEO of Applied Blockchain

2021 was the year non-fungible tokens – NFTs – took the world by storm. Growing from relative obscurity to a $40 billion market, the conversation over the past twelve months about NFTs in the digital art world has reached fever pitch. Today, many other sectors are gradually recognizing the multiple possibilities inherent in technology, including real estate, asset finance and luxury retail.

More importantly, NFTs are poised for widespread adoption in an industry that has only recently undergone a massive transformation: the music industry. Streaming services have completely changed the way people experience music while dramatically changing ownership and copyright models for musical artists. NFTs now represent an opportunity to return some of the agency to musicians while providing new ways for listeners to take an active role in the industry.

Streaming – who really benefits?

Streaming services such as Spotify now account for 83.1% of the UK recorded music market. This figure has grown rapidly during the pandemic, with the UK music industry recording over £700m in revenue from streaming in 2020. Despite these exponential increases in revenue, the share of royalties going to artists remains extremely low. A July 2021 Department for Digital, Culture, Media and Sport report called for a ‘complete reset’ of the funding model, with the overwhelming dominance of a handful of major labels presenting a significant concern for artists and legislators.

Once record labels, streaming platforms, and other external rights holders have taken their toll, artists’ streaming revenue is often negligible, with only a few top-selling musicians able to use royalties as their primary source of income. while most other artists depend on concerts. tours and merchandise to stay afloat, a feat that has only become more difficult amid constant live event cancellations due to Covid-19.

The existing model has been very successful in giving listeners access to vast amounts and varieties of music, connecting them with musicians and bands around the world, and transforming the way people consume music. However, the current system does not reward artists for their hard work. This is where NFTs come in.

Symbolic royalties – the future of music?

Non-fungible tokens present an innovative opportunity to solve the music industry’s royalty crisis. First, individual songs can be minted as NFTs, listing a track’s original ownership on the blockchain. This reintroduces a rarity to the music market that has been limited since the widespread digitization of audio tracks. There are also more complex ways to use NFTs for music licensing. By using smart contracts, which can be embedded in NFTs, artists can claim ownership of their music while receiving a reduction in resale value each time an NFT is sold.

The overall benefit of blockchain technology is reflected in this: eliminating middlemen. A direct relationship between artists and their fans has been undermined by intermediaries in the form of record labels and streaming services. NFTs make it possible to re-establish this direct connection and bring artists and listeners closer together.

The music markets of the future

Tokens can also be split, meaning listeners can invest in partial shares of song rights. It works the same way as buying shares in a listed company. When the business is doing well, the stock value increases. When an artist is successful, the share value of their songs also increases, allowing listeners to access a portion of the royalties collected through increased playback. Simply put, it allows listeners and fans to actively participate in the careers of their favorite artists.

New NFT marketplaces for digital art are being created every day. Today, projects like Opulous are creating marketplaces that also allow musical NFTs to be exchanged. Bringing the world of decentralized finance to the music industry, these music exchanges use copyrighted NFTs as tradable assets, creating investment space for music lovers.

Projects like Opulous are often backed by top musicians like Chance the Rapper, as well as established blockchain VCs like Borderless Capital, and promise to be highly secure and user-friendly. Most importantly, these exchanges help navigate the world of music NFTs for people who want to invest and trade but are intimidated by the sometimes confusing world of collecting NFTs.

Building communities

The potential of NFT technology in the world of music does not stop with the songs themselves. Many established artists such as the Rolling Stones or the Kings of Leon have already utilized the merchandising and marketing opportunities inherent in digital collectibles. By releasing music alongside collectible images or digital certificates that act as vouchers for fan experiences, artists can build communities around their brand while diversifying their revenue streams.

Tickets can also be tokenized. This can solve a huge problem within the music industry by preventing fraudulent resales and black market ticket dumps, as NFT tickets come with an immutable ownership record. It also allows smart contracts to be embedded in tickets, so that revenue shares can be set in advance by artists or event organizers, ensuring concert revenue is directed to the right parties.

Of course, music NFTs are still in their infancy and the current streaming model is too dominant to be broken anytime soon. Nonetheless, streaming platforms took less than a decade to transform the music industry from the ground up, and NFTs have the potential to do the same. The main difference is that this time artists will be the primary beneficiaries, presenting an opportunity too valuable to miss.