Non-fungible tokens (NFTs) first captured the public’s imagination when digital artist Beeple sold his work, ‘Everydays – the First 5000 Days’ for $69 million in early 2021. The crypto markets have cooled off since then, partly due to macroeconomic headwinds followed by US central bank Federal Reserve’s quantitative tightening policy, as well as the ripple effects of the Terra blockchain crash in May 2022.
As battle-hardened veterans in the volatile crypto ecosystem often say, bear markets are when the true natives block out the noise, roll up their sleeves and build new products. The NFT market, too, is ever evolving, with different niches mushrooming, and novel business models emerging. One such sub-sector gaining popularity among artists is music NFTs.
What are music NFTs?
Similar to digital art, music NFTs are digital representations of a musician’s work, recorded on a blockchain. This could be in the form of an entire song, a short clip, royalties, or the cover art of the album. Ownership of music NFTs can enable a fan to foster a closer relationship with the artist, while providing the artist with direct revenue from the fan, thus disintermediating a record label that usually takes up a large chunk of a musician’s sales revenues in addition to a claim on their intellectual property rights.
One may wonder if purchasing a music NFT is similar to buying a music track on iTunes. While the latter gives one the licence to listen to that particular track, the former confers the ownership of that file via an NFT. The NFT holds potential monetary value, which can be traded on select marketplaces for a higher price, if the artist is successful in the future.
Additionally, owning the NFT can offer various perks. For example, an artist or band may reward early NFT owners with backstage passes for future concerts, invite them for ‘members only’ events, offer personally autographed memorabilia, or sell them the band’s merchandise at a discount.
Music NFT marketplaces
OpenSea is one of the largest NFT marketplaces and has a dedicated catalogue of music NFTs. However, most artists prefer to launch on music-specific marketplaces.
Audius is one of the most popular decentralized music-streaming protocols powered by blockchain technology. The project brings in artists, fans and node operators in a manner where all stakeholders have their incentives aligned. Artists can upload music and directly engage and transact with their fans.
Another platform that’s gaining traction is Catalog where artists release a ‘one of one’, single edition music track on a blockchain which can then be directly sold to fans.
Music NFTs are still experimental in nature and generally require a user to transact using cryptocurrencies such as Ether, or the native token of the project.
However, Royal, a project that allows anyone to own the rights of songs and earn a share in the royalty, enables users to pay using credit or debit cards, with the checkout process as easy as any e-commerce site. In the event one chooses to resell the Limited Digital Asset (LDA) on a secondary marketplace, such as OpenSea, one would require a crypto wallet such as MetaMask.
India-based FanTiger follows a unique model too, enabling users to earn royalty income and privileges. Users can purchase a song of an upcoming artist for as little as Rs 99. FanTiger distributes this song across streaming platforms such as YouTube, Spotify, Gaana and Saavn where the song earns money for every stream. If the song is a hit and has earned a significant amount of royalty, the owner of the NFT earns as per his/her share of the royalty.
Says Prashan Agarwal, chief executive officer, FanTiger, “So far we have launched seven songs on the platform and sold more than 5,000 NFTs. Paying with fiat currency is also a game-changer as it helps us onboard users not familiar with the technicalities of a Web 3.0 wallet. In this case, we custody the assets on behalf of the customer with the help of a digital wallet created on our platform itself.”
Is this business model sustainable?
While this cohort of music NFT owners, and the tribe of artists selling it is growing, it is still early days for music NFTs to be considered a standalone business model. Says Mairu Gupta, chief operating officer, eDAO, a platform enabling artists to take their first steps in the Web 3.0 domain, “Music NFTs are still nowhere close to their art of PFP (a series of profile pictures) counterparts in terms of adoption or volume. For now, emerging artists should explore a hybrid strategy, where they work with record labels and build a strong fan community to engage with music NFTs.”
Priyanka Khimani, founder of Khimani & Associates, and a global entertainment and music rights expert, agrees that music NFTs are a long way from becoming a sustainable norm for artists, while adding that there is curiosity and enthusiasm towards exploring the applications. “The underlying technology also has to evolve to support the music NFT business model to a point where one can tap into its potential for more equitable compensation as compared to current streaming platforms, as well as increased transparency and rights enforcement” she adds.
While emerging artists such as Daniel Allan and Vérité have achieved moderate success with music NFTs, globally renowned musicians such as rap stars Snoop Dogg and Eminem as well as DJ Steve Aoki are already leveraging their respective brands and making their presence felt in the Web 3.0 world with this new technology.
The real win for the ecosystem, however, isn’t when established celebrities drops their songs as music NFTs. The true success for the technology will be measured by the number of new artists emerging and gaining worldwide recognition from the music NFT phenomenon.Rahul Jagtiani is a blockchain marketing adviser and writer; currently, he has no associations with any NFT marketplace, crypto exchange or music label.