How NFTs Could Revolutionize the Music Industry

Non-fungible tokens (NFTs) can appear relatively random to the untrained eye. So far, NFTs have been something you look at rather than listen to for the most part. But that could be changing. Music tokens are on the rise and could not just revolutionize how music is experienced and shared between people but how its economic value is stored and traded within the industry.

Popular current tokens range from stone-faced bored apes to hyper-cutesy squishy squads and from classic art masterpieces to cartoon memorabilia like Stan Lee's autographed portrait.

But thanks to big-name early adopters like the Kings of Leon, Shawn Mendes, and Ja Rule, who had success trading in on their vast audiences, smaller independent artists are moving in and building the ecosystem from the ground up.

Artists Cash In

NFTs have the potential to reintroduce scarcity to the music market not seen since the days of CDs. This allows artists to profit by selling a finite number of NFTs to their superfans.

For some artists, this additional revenue stream can make a big difference. Bajan rapper Haleek Maul reportedly made north of $200,000 in sales on Catalog – a music NFT marketplace – while his Spotify earnings for a whole year were just $178.

Though Maul's tokens were incredibly lucrative, the five top-selling artists on Catalog made 7.5 times more annual revenue via the exchange than on Spotify. Of course, it probably helps that the platform doesn't take a percentage cut from sales.

This isn't the only option for artists, though. Other platforms, like Sound.xy, specialize in music tokens, while OpenSea, the world's largest NFT marketplace by trading volume, has a dedicated catalog for music NFTs.

Listener or Investor?

Music NFTs also allow fans to jointly own their favorite songs and profit from the digital asset.

Since tokens can be fractionalized – meaning their ownership is divided between a group of people – these listeners-cum-investors can buy and own a portion of a song's rights. Just as the value of a stock reflects a company's profitability, a listener who owns fractional royalty rights can profit from increasing play counts of the song.

This creates a virtuous cycle between artists and their fans. Both are incentivized to see the tracks explode in popularity.

Gil Cang recently auctioned a portion of his songwriter royalty rights to the Michael Jackson song ‘Whatever Happens' as an NFT on the luxury digital asset trading platform Deliciae. Whoever owns the NFT will take 10% of the song's net publishing income.

Having racked up over 8 million plays on Spotify more than two decades after its release, ‘Whatever Happens' is the kind of classic hit that could generate lasting passive income.

Record-making NFTs

Another industry trend running parallel to NFTs is the resurgence of vinyl. Vinyl record sales in the U.S. reached a three-decade high in 2021, eclipsing 40 million. Yet now, the paths of music collectors from the physical and digital worlds could be crossing.

Enter Vinylkey, a company that merges vinyl records and NFTs into a music “super-collectible.” Vinylkey embeds its discs with near-field communication (NFC) tags. Then, when users hold their phone near the vinyl, it will bring up the matching NFT and its owner's info on the screen.

Their first vinyl-pressing/NFT-minting was for Ghanaian-American artist Moses Sumney. Vinylkey added a smart contract to ensure artist Sumney receives 10% of all resales going forward, a common practice in the NFT ecosystem.

Vibrant communities of collectors support both vinyl and NFT markets. Deeper convergence between these two groups could fuel further value creation in the new hybrid asset.

Not only are music NFTs making their mark on legacy mediums like vinyl, but they are also integrating with the broader decentralized Web 3 ecosystem. There are decentralized autonomous organizations (DAOs) being built around music NFTs and music video NFT marketplaces in a nod to what's next.

Bottom-up Beats

The pioneers building out this new ecosystem share a vision for what it means for music. They see music NFTs as a way of disrupting the industry's power structures.

“I think the future involves the breakdown of all big corporations controlling art forms, which is of interest to people,” said Gil Cang.

They see the technology restoring complete creative control to musicians.

“We need disruptive new models that give artists more autonomy, control, and earnings in distributing their work,” say the founders of Catalog.

“Anything that moves us away from this monopolistic, homogenous tunnel vision and creates a more creatively operative place, I'm interested,” said Jacob Frazer, who bought the Moses Sumney NFT.

They also aim to cut intermediaries to keep the music's economic value between the artist and their fans.

“Before, your fanbase couldn't be in the label meetings with you. But now we all are the label together,” Maul told Time Magazine.

The industry has gone through waves of disruption over the decades. From vinyl, cassettes, CDs, Napster, and the iPod to Spotify, a new way to make music has always been around the corner.

It's too soon to see how far music NFTs will go, but judging by the impact NFTs have had on the art world, anything is possible. A new era for music may soon be upon us.

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This post was produced and syndicated by Wealth of Geeks.

Featured Image Credit: Pexels.

Liam Gibson is a journalist based in Taiwan who regularly publishes in Al Jazeera, Nikkei Asia Review, Straits Times, and other international outlets. He also runs Policy People, a podcast and online content platform for think tank experts.