NFT sales soared in 2021. From a trading volume of just US$40.69 million in 2018, NFT trading volume has jumped to over $44.2 billion in 2021 and continues to shatter records and reach new heights. The NFT segment is expected to reach a market capitalization of $80 billion by 2025. In December 2021 alone, NFT transactions worth $4 billion were recorded.
Despite speculation and skepticism surrounding the seemingly volatile and unregulated nature of NFTs, one thing is certain: they’re here to stay. NFTs have grown in popularity, particularly with millennials and Generation Z, and have become a way to get closer to their favorite artists.
While artistic NFTs and metaverse collectibles have taken off, NFTs are said to be transforming the music industry too.
The dark side of the music industry
Music is a universal experience. At the end of 2020, the global music industry generated total revenue of $21.6 billion, and this was the sixth consecutive year of growth within the industry, with a CAGR increase of 7.4% over 2019. Despite this seemingly successful record for the industry, it is plagued by a host of problems.
Musicians are finding it extremely difficult to stay in the industry and make a living from their music. It’s no secret that artists are not fairly compensated for their talent and efforts. This arrangement is usually reinforced by the complex recording and legal contracts they are obliged to sign when integrated by the record company.
Successful artists have often spoken of this skewed power dynamic between record company and artist. Take the example of Kanye West, who has gone so far as to call record contracts “modern-day slavery”, with all the artist’s rights ceded to the record company in exchange for initial funding, strategic advice and marketing.
Here’s what Akon had to say about artist exploitation: “Throughout my career, I’ve always felt that artists have never really received their fair share of the profits for the work they’ve produced and that people listen to.” “If you don’t own your masters, your master owns you,” Prince declared for Rolling Stone in 1996.
According to reports, only the top 1% of artists receive 90% of all streams, and only around the top 0.8% of seemingly famous and leading artists earn an average of USD 50,000 a year from streaming. This is mainly because the overall income is split between the artists and the record companies, agents, lawyers, distributors and other “stakeholders” in the artists’ music. Furthermore, since the record company holds all rights to the “masters” or original recording of the song, the creator has absolutely no control over where and when the song is released. As a result, the artist’s creative freedom is severely restricted.
This has led to a quest to overturn the music industry’s entire label model. While social media platforms such as TikTok, YouTube and Instagram have somewhat given the power back to creators to promote and market their music, there’s still a long way to go before artists can properly monetize them with a viable tool.
The NFT revolution: a change of direction for the music industry
When COVID-19 regulations brought live sports, concerts and shows to a complete halt, blockchain-based non-fungible tokens emerged as a way to connect fans around the world with the companies, teams and creators they love.
The NFT revolution began as collections of profile photos (PFPs) that buyers could display on their social media handles to indicate that they were part of the particular NFT community. These PFPs dominated the news, with celebrities and other NFT enthusiasts buying famous digital collectibles such as Bored Apes, Cool Cats and CryptoPunks.
But what makes NFTs so innovative and disruptive?
For starters, NFTs are non-fungible (or immutable) digital files on the blockchain, which are distinct and irreplaceable. Housed on blockchains such as Ethereum, Solana and Binance Smart Chain, NFTs are rare, verifiable and valuable. However, most large NFT projects, such as Decentraland and Axie Infinity, are appreciated not for their art, but for their utility, which stems from the underlying smart contract and use cases. For example, on Decentraland, digital terrains can be purchased in-game as NFTs, which can then be used to host events, rented out, etc.
For the media and entertainment industry, this means that NFTs offer artists and creators a new way to showcase their work, market it on the blockchain through NFT marketplaces and engage their community of fans. NFTs have the potential to establish the scarcity of digital assets and thus enable creators to set their prices for creations, as well as control the secondary market for them. They therefore democratize access to new marketplaces for creators worldwide.
Artists and fans take more of the cake
NFTs can also give creators back the power to control the supply chain and the rights associated with originals and related collectibles.
NFTs introduce scarcity into music, and give musicians total control over the subsequent modes of distribution of their work and the rights associated with it. As a result, NFTs offer musicians the opportunity to engage with their audiences on a more fundamental and granular level with authenticity and create communities around them, while giving them complete autonomy over their work. Artists retain all rights to their music, even when their NFTs are sold on a secondary market, and also receive a royalty they have chosen to set for it on each NFT transaction. This creates a global market for music NFTs.
In January 2022, BTS, a popular K-pop boy band, in collaboration with Dunamu, is preparing to launch its own set of NFTs in the form of photocards, digital versions of trading cards featuring photographs of the K-pop group’s members.
Even popular singer Akon seems to want to dispense with record companies and release his next album as an NFT, monetizing it from day one!
On the other hand, fans who buy these collectibles or creations have total transparency over the authenticity and origin of their purchases. In this sense, NFTs allow anyone to purchase ownership rights to art or music, while enabling artists to verify their work outside the confines of the traditional music industry.
What’s more, NFTs pave the way for new fund-raising methods by allowing the public to take part in the musical process. Fans become investors in the project for a number of reasons. While many invest and buy NFTs purely as collectors’ items, others do so for speculative reasons, still others for HODL, still others to learn from royalties, and still others to trade them on secondary NFT markets for profit. This can help artists secure initial funding without giving up the rights to the master and suffering considerable reductions in income like TLC, Kanye West and Taylor Swift. In addition, it allows them to take a fair share of the profits from their success.
Fans will be able to invest in Nas’ music by purchasing shares in the royalties generated by streaming two of his songs. This investment can be made by purchasing Royal’s extended version in the form of invariant NFTs of “Gold”, “Platinum” and “Diamond” digital tokens for each song. What’s intriguing is that token owners will receive a share of the royalties each time the song is streamed, and in perpetuity!
What lies ahead for NFT and the music industry
The tokenization of assets enables a large number of people to own assets on the blockchain. In this sense, even ordinary fans are directly immersed in the value and ethos of the artist or creator they support, without an intermediary such as a streaming platform or record label. In this way, fan communities can participate in the growth of their favorite creators like never before.
What’s more, music NFEs can have an added value. Signed physical copies of collectibles, music royalties in perpetuity, backstage passes, exclusive remixes and private parties are just the tip of the iceberg in rewarding the fan community for investing in the musician’s creation. The possibilities are truly endless for artists to connect with their audience and investors.
Many artists are dabbling in NFTs, such as creative music producer 3lau, who sold 33 NFTs on the third anniversary of his album Ultraviolet for over $11.7 million, making it one of the biggest music NFT transactions ever. 3lau has even considered allowing NFT’s owners to collaborate with him on the online song and perhaps even appear in the song! What’s more, we’ve recently seen artists considering turning paparazzi photos into NFTs in order to earn income in the form of royalties. These NFT applications have the potential to transform the music industry into a level playing field for all artists.
To find out more
In recent months, NFTs have been everywhere. The music industry has not been spared, and more and more artists are now offering virtual works marketed through this new system. Mere epiphenomenon or genuine revolution? We take stock.
If you’re not into metavers and cryptocurrencies, it’s likely that the concept of NFT is still a little opaque to you, if not completely abstruse. Yet it’s hard to escape it, as the term has been omnipresent in the media and on social networks for several months now. So what is an NFT? Literally, it’s an acronym for “non-fungible token “.
In plain English, it’s a digital file containing a certificate of ownership linked to a digital or physical work, which can represent a right of access to exclusive content. In simple terms, it’s the equivalent of a certificate of ownership for a sculpture or painting, which can accompany a virtual work (clip, song, 3D image, etc.) . Purists will tell you that it’s a far cry from finding vinyl in a record shop, but it’s much the same approach: invest in a unique object, or a limited edition, and keep it preciously, or resell it in the hope of realizing a handsome capital gain. Where it gets more complicated is that, in most cases, you can’t buy these NFTs with euros or dollars, but only with cryptocurrencies such as ethers. Once the transaction has been carried out, it is stored on a “blockchain”, a digital ledger on which the information linked to these operations is stored. A kind of online account book, but ultra-secure. Do you follow?
A DAZZLING SUCCESS
According to a study conducted by American journalist and web culture expert Cherie Hu, music-related NFT sales reached over $60 million between June 2020 and April 2021.
And which musical styles are leading the demand? Electronic music leads the way, accounting for 80% of sales, followed by hip-hop (8.6%) and rock (6.7%).
In the U.S., every artist is on board. Their digital works most often take the form of videos or animated images accompanied by previously unreleased tracks.
In France, the practice has its followers, but on a much smaller scale. Among the pioneers is Booba. Last autumn, the Duc de Boulogne (now based in the USA) sold 25,000 copies of five animated cards giving access to his “TN” video clip (unreleased at the time), as well as the chance to be entered in a draw to attend his concert at the Stade de France on September 3.
At the same time, to coincide with the release of his new album .dev, producer and DJ Agoria proposed a collaboration with researcher and microbiologist Nicolas Desprat. Their organic works combine electronic music with microscopic images of bacteria. And this is just the beginning. The Lyon-based producer and DJ is excited by this new technology, as he recently confided to the Les éclaireurs du numérique podcast: “Two years ago I didn’t know what NFT was, and today it’s becoming the main driver of my creative inspiration. It seems certain to me that NFTs and everything that comes out of them will be the best gateway of expression for artists, as well as a good way for the public to discover and talk about them. What’s happening right now is only phase 1, it’s all going to develop at lightning speed.”
“CROOKS AND SUCKERS”
If NFT has its fans, it also has its detractors. And not the least. Like electronic music pioneer and genius producer Brian Eno. most people who imagine NFT are thinking about how they can make money from it, not about how we can make the world a better place,” he recently told online media outlet The Crypto Syllabus. I’ve been approached several times to do an NFT. So far, I haven’t been convinced that there’s anything interesting to do in this field. To me, “doing something worthwhile” implies creating something that adds value to the world, not just to a bank account… The people I like and trust are convinced that nothing better has been invented since buttercream. I’d like to have a more positive vision, but for the moment, I see mostly crooks looking for pigeons. And a lot of artists ready to play that role.”
He’s not the only one to resist the digital siren song. Kanye West recently explained on his Instagram account that he doesn’t want to participate in this frantic race, at least not for the time being. Amazing words from the American star, always on the cutting edge of technology: “I focus on building real products in the real world, real food, real clothes, real home. Don’t ask me to do fucking NFT.” Before concluding, “Ask me later.” To be continued.
THE FUTURE OF MUSIC?
For some, NFTs are a quick way to earn colossal sums of money, but the lure of money is fortunately not the only motivation for artists who embark on this adventure. Not only because NFT doesn’t necessarily mean success, but also because many see it as an opportunity to explore a new playing field.
Such is the case of minimal electro producer NTO, who raffled off his first NFT work last December. All fans had to do was fill in their contact details. this operation was launched a month after the release of his album, Apnéa,” explains Adrien Bosom, Digital Marketing Director at Believe, the label that hosts the artist. The album was born out of his meeting with Arthur Guérin, world champion apnea diver. So we came up with the idea of shooting a video with Arthur and offering it on NFT.” The result of this partnership, a unique and exclusive clip (which has not been broadcast anywhere), now belongs to the young woman who won the competition.
This is the only NFT project launched by this 100% digital label to date (which has signed major artists such as Jul and PNL). A strategy that may seem surprising given the current craze for this new way of thinking about and consuming music. innovation doesn’t necessarily mean haste,” explains Adrien Bosom. For the moment, we’re still in the observation phase. Artists are in demand, but this type of operation has to be part of a relevant project. We’ll probably do other NFTs. It remains to be seen when and how
Whether we like it or not, NFTs have every chance of becoming indispensable in the music industry. It’s enough to get artists’ brains racing (and the servers that host all this new kind of data).