How NFTs Can Turn Musicians Into Entrepreneurs and Fans Into Investors
Music is one industry that has evolved a lot in the advent of digital technology. From the days when we had to buy albums in stores and burn them on CDs, music is now readily accessible in digital format at the click of a button.
But not all have been singing praises for this evolution. Artists and producers alike suffer from the excess baggage of digital technology. As much as the web has helped make music accessible to all, it has also created an avenue where people can illegally download and share music without any consequences.
Both independent producers and large music labels face massive losses in revenues due to piracy. In addition, it has become overly challenging for producers to track and monitor the usage of their work by other people, including fellow producers.
And even if listeners do stream music legally through platforms like Spotify and Apple Music, the creator ends up seeing very little profit. For example, Spotify generally pays between $.003 and $.005 per stream, meaning you’ll need about 250 streams to make a dollar. So even big acts that get millions of streams don’t make much money — a million listens only equals a thousand dollars. To put this into context, Kings of Leon, one of the biggest bands in the world, has just over 800,000 streams in Canada for their most popular song ‘Sex on Fire”. (No wonder they are getting into the NFT game).
While the fans get to enjoy a remarkable music selection thanks to streaming, musicians are left with very little to show for their work.
Till now, there haven’t been any alternatives for up-and-coming musicians to make a name for themselves and generate enough revenue to support their music career. But this is about to change.
The Making of a Revolution
Music production evolved from analogue to digital, paving the way for increased accessibility. Using nothing more than a laptop and an internet connection, up-and-coming artists can strut their stuff on equal footing with well-established names.
Major recording labels are already turning to new ways of doing things not to be left behind. Some have even cut deals with tech companies like Spotify and YouTube, looking to improve their bottom line. Then there are independent labels using crowdfunding and other alternative sources of financing such as Patreon.
But the real revolution is happening now as a direct result of the rising and increased adoption of blockchain technology.
With a secure immutable digital ledger at its heart, blockchain is ushering in a new era of transparency, traceability, and security for all transactions and records. It brings accountability and essentially eliminates the very problem that has been plaguing the music industry for so long.
Blockchain technology enables the use of cryptocurrencies which allow anyone from anywhere in the world to pay for music, and support the artists they love. Musicians can also use cryptocurrency to purchase licenses to the music they want to produce. With billions of unbanked and underbanked people in the world with no access to financial services, credit cards and other electronic means of payment, this is a game-changer.
The ledger that blockchain technology uses to keep a record of all transitions is designed to prevent any tampering, and whenever you purchase or sell music on your blockchain-powered system, they are recorded for everyone to see.
Projects, startups, and companies utilizing blockchain technology to change the game include:
Vezt: a music rights marketplace that allows music fans to fund the artists, songwriters and producers they love more directly, and in exchange, fans can receive royalties earned from their favourite recordings.
Ujo: a decentralized platform that creates a database of music ownership rights and automates royalty payments.
Choon: a music streaming and digital payment platform that uses blockchain to fairly pay artists in a timely manner.
Mycelia: a collective of artists, musicians and music lovers looking to empower creatives in the music industry.
eMusic: a blockchain-based music distribution and royalty management platform that rewards both artists and fans.
The Revolution Goes Mainstream
While blockchain technology has a lot to offer to musicians and the music industry, it wasn’t until the explosion of NFTs onto the art, culture, and music scene this year that blockchain became more mainstream.
NFTs, a blockchain innovation that has been somewhat dormant and in slow evolution for the past 4 years, but since the beginning of 2021 it has dominated the day-to-day conversation on every level, from niche tech circles to clubhouse rooms, social media, mainstream media, and even regular people on the proverbial street.
Before NFTs news of cryptocurrency prices cast a shadow on everything blockchain, and at times when the prices were in a slump negatively impacted the whole industry
An NFT is a unique digital token, a piece of programmable code, akin to a deed of ownership of a unique item. The item can be anything from physical painting to digital artwork, a piece of music, intellectual property, domain name, patent, a piece of content, and much more.
Virtually, anything and everything you want to sell and people want to buy can be turned into an NFT.
The power of the NFT is in the underlying technology, the blockchain. When created or “minted” in NFT slang, NFTs are recorded in the ledger of the blockchain they belong to. Most NFTs are being created on the Ethereum blockchain. Other blockchain networks include Flow, Tezos, EOS, WAX, and Near.
Every transaction involving an NFT on the Ethereum blockchain for example is recorded in the tamper-proof immutable ledger of the Ethereum blockchain which is publicly available. That means anyone and everyone in the world can know at any given moment who owns that NFT, i.e. who owns the item that the NFT represents. No need for any third party to track the ownership or prove it.
The value of NFTs only grows from there. Because they are more than just paper deeds of ownership, they are digital pieces of code that can be programmed to do all kinds of cool things. Most importantly they can be programmed to send a piece of every secondary sale to the original creator of the item.
This is a simple but revolutionary step forward for artists who no longer have to sign agreements and pay people to calculate and collect royalties, they can now rely on the code of the NFT unfailingly executing every time a transaction takes place and their share of the transaction will immediately show up in their crypto wallet.
The Evolution of The NFT Revolution
In the past 4 years, NFT sales volume has been under $100M but since the start of 2021, sales volumes surged to $10B sparking massive interest and causing many to look at NFTs as the way forward for blockchain mainstream adoption.
Republic, a company that has made a name for itself in the startup crowdfunding space with its innovative approach to the industry now hopes to revolutionize money-making in the world of music using a new form of NFTs.
According to Republic “Security NFTs (S-NFTs) combine NFT technology with an innovative investing framework. S-NFTs make it possible for fans to invest capital toward a new song or album and in return, get ownership in the royalty rights.”
Building on the idea of allowing everyone to become an investor in startups, a radical change from the convention, where only the rich and accredited investors could invest in private companies, Republic seems to eye the music industry and allow everyone to become an investor in music.
Security NFTs (S-NFTs) combine the ownership and transparency of NFTs with an innovative investing framework making it possible for fans to invest capital toward a new song or album and in return, share in the royalties.
Artists and musicians have been selling their albums and songs as NFTs, however, no mechanism exists to tie the returns from streaming distribution to the NFT.
Republic is one of the first crowdfunding platforms to offer a type of investment that allows fans to buy the music rights to a song or album. It does that through special membership units of an LLC that owns the rights to a song, album, or equivalent. The membership interest may be represented by a non-fungible token (an NFT) which is a representation of that ownership and the vehicle in which returns are distributed.
Republic is challenging the traditional paradigms and roles in the music industry. by making you more than a fan, you are an investor, and your playlist is more than just a collection of songs, it’s your portfolio. You can now go beyond buying some merch and donating to the artist you love, you can invest in the music you love and get to share in the returns.
Experience Your Investments!
For the longest time investing in was a way to grow your money, support entrepreneurs and businesses you believe can succeed, or advance a cause you believe in.
Everything else you spend your money on like music, concert tickets, games, collectables, and subscriptions is called consumption.
However, with NFTs you are no longer just a consumer, you are an investor, and thanks to this innovation made possible by blockchain technology you can experience your investment, listen to them (songs), attend them (live performances), engage with them (artists meet and greet) and so much more.
By allowing regular people to fund an artist directly, Republic cut’s out the middleman and allows fans to directly support the artists fixing a major issue in the industry that pays creators only 12% of the revenues they generate.
Republic is starting strong with hip hop artist 5-time platinum artist Lil Pump who has 7.8M monthly listeners and 1.8B Youtube views, in addition to KSHMR voted one of the Top-100 DJs by DJ Mag 6 years in a row and has 7.6M monthly streams and 250M Youtube views.
With probably more to come, the fans of those artists will most likely welcome the opportunity to invest in their favourite artists’ songs and earn returns from streaming royalties, remixes and more in addition to exclusive perks like access to tickets, merch, special events and more from the artists.
Crowdfunding The Future
For decades, few middlemen held all the power in the music industry and reaped most of the rewards. Blockchain technology gives power back to fans and creators and is capable of democratizing every aspect of the industry, but until now only a few could harness the capabilities blockchain has to offer.
NFTs encapsulate much of the magic and horsepower of blockchain technology and put it in the hands of creators and fans.
And just like crowdfunding transformed the funding game for many startups, with Republic’s entry into the space and the introduction of Security NFTs (S-NFTs), the music industry and the lives of many musicians and fans will be transformed in ways the big labels can never predict and may not be able to compete with.
The question to you and I is which new artists will we support, which new music will we invest in, and how long before the impact of our choices is felt and seen in every corner of this new blockchain world.
Original article: Hackernoon