Non-fungible Tokens Disrupting The Music Business
NFTs have had an impact on the art and music industries, but these terms are still unknown to those outside the bubble, causing their eyes to glaze over in bewilderment. In actuality, “non-fungible” just means “one-of-a-kind.” The token acts as a digital ownership certificate for whatever the author, in this case a musician, chooses to sell. This can be anything from a single standard CD to a package that includes concert tickets and exclusive extra tracks.
Fans buy NFTs with cryptocurrency, an online currency that contains a record of who owns what, which is kept on a distributed ledger called the blockchain. Because the artist sets the terms, they can include “smart contracts” that guarantee a share of any resale value. The oddest thing is that, despite the fact that each NFT sold is supposed to be one-of-a-kind, its contents can be shared, copied, and sold to anybody else in the future. This indicates that the NFT’s value is influenced by its scarcity: the fewer the copies, the higher the value, with the original copy being the most precious.
A print of the Mona Lisa, for example, can be carried by everyone, but only one person can own the original, which hangs at the Louvre and is seen by millions of people. Even if the premise appears strange at first, the bottom line is clear: there is a lot of money to be made. In less than 20 minutes, Grimes sold $6 million (£4.2 million) in NFTs, while Steve Aoki sold a collection for roughly $4.25 million (£3 million) and Kings of Leon sold a batch for around $2 million (£1,4 million). 3LAU, an early crypto user, outshone them all when he sold his NFT collection for $11.6 million (£8.2 million).
Musicians are Jumping on the NFT Train
The music business is undergoing a transformation. The demise of CDs and digital downloads in favour of internet music streaming has resulted in a significant reduction in income, particularly for musicians. Last month, more than 150 musicians wrote to UK Prime Minister Boris Johnson, including Paul McCartney, Kate Bush, Shy FX, and Kano, demanding new legislation to appropriately safeguard artists in the present context. “Songwriters make half of what they make on the radio, but just 15% of what they make on streaming,” they pointed out.
Recognising the significance of the transition, the UK’s Department of Culture, Media, and Sport has been accumulating data on how billions of pounds made by services like Spotify, Apple Music, and Amazon Music Unlimited are distributed. Nadine Shah, whose album Kitchen Sink was named one of BBC 6 Music’s albums of the year, made headlines when she told the committee that she was compelled to return home with her parents because “earnings from my streaming are not significant enough to keep the wolf away from the door.”
Prior to the pandemic, artists were more reliant on travel to make ends meet. However, given the uncertain future of live music, the prospect of using NFTs to supplement income has a lot of appeal. This is particularly true because it allows artists to bypass a large number of rights held by labels, distributors, and publishers. NFTs allow musicians to avoid the costs and hazards of dealing with so many intermediaries, as well as save time, by selling directly to their fans.
The Future of NFT Music
If NFTs are used to benefit both artists and fans, they have the potential to become more generally recognised in the future. This could just be a transitional period, as we’ve seen in the music industry before. When MP3s initially became popular, some people declared that they would never buy or use them. As evidenced by the current state of the industry, the same can be said about streaming.
The industry is at a crossroads, with several pathways to choose from, particularly in terms of digitalisation. Many artists wish to be better compensated for their work, both financially and creatively. Royalties are a hot topic right now, and one of the hottest topics is how to pay them faster and more fairly. This is a problem that blockchain and cryptocurrency can solve. Despite the fact that this technology is still in its infancy, it offers a lot of promise. All that is left is for it to be accepted and improved.