Musicians are turning to NFTs in search of new profits

DJ Justin Blau was opening up for his superstar counterpart Avicii on a beach in Mexico when he met the Winklevoss twins, who introduced him to bitcoin. “It couldn’t get more cliché than that,” he says of his 2014 encounter with Mark Zuckerberg’s Harvard classmates, who have since become blockchain evangelists.

As a college student, Blau dropped out of finance studies and turned down an internship at asset manager BlackRock to pursue a career as a DJ. Years later, he combined his two interests – music and finance – in a venture to disrupt the recording industry through blockchain technology. On Tuesday, he teamed up with longtime friend Diplo, the popular electronic musician, to sell 20% of a song’s streaming royalties to fans in the form of digital tokens.

“I’m just fascinated by the idea that there’s value to music ownership,” Thomas Pentz, known professionally as Diplo, told the Financial Times. “The more people behind your record, whether it’s fans or investors interested in technology, it’s great to have more people on a team.”

Over the past few months, the hype surrounding Web3 — the buzzword for a decentralized, blockchain-powered iteration of the internet — has swept through the music industry, luring the world’s biggest music companies into the scrum and fueling the hope that non-fungible tokens will become a new source of money for musicians.

Rapper Snoop Dogg recently sold an NFT attached to his latest album © Kevin C. Cox/Getty Images

To sell an NFT, musicians assign their song, video, or other media to a digital token. The token is sold through an online auction enabled by blockchain technology, which keeps a record of the transaction. Beyond songs or pictures, NFTs could also be used to sell perks like backstage passes or celebrity meet-and-greets.

Head-turning examples abound. Rapper Snoop Dogg in February sold an NFT attached to Bac on death rowhis latest album, which would have generated over $40 million in sales in just five days. DJ Steve Aoki complaints it made more money from NFTs than it did from decade-long advances from record companies.

“Some of these valuations are out of control. As an investor, I see a lot of it and have to laugh every once in a while,” said a senior executive at a major music label.

But having been overthrown by the internet via the advent of file-sharing company Napster two decades ago, major music companies are looking to get ahead of technological change this time around, making them willing participants on the Marlet.

American artist Diplo
American artist Diplo: “I’m just fascinated by the idea that there’s value in music ownership” © Tiffany Rose/Tailgate LA/Getty Images

Universal Music, the group behind Taylor Swift and Drake, has entered into partnerships to create NFTs for its artists – including a virtual band featuring characters from the Bored Ape Yacht Club – as have rivals Sony and Warner.

After spending more than half a billion dollars to buy the copyrights to Bob Dylan’s songbook, Universal and Sony are now working with the musician to sell Bob Dylan NFTs. Spotify has drawn up plans to add blockchain technology and non-fungible tokens to its streaming service, the FT reported earlier this month.

“There’s been a lot of growth and decline in irrational exuberance around this space,” said Jonathan Dworkin, senior vice president of digital strategy at Universal. “As the smoke starts to clear, there are some really exciting opportunities . . . there is a real revenue opportunity,” he said, highlighting how tokens can directly connect fans to artists. .

But so far, most participants in music NFTs have been crypto enthusiasts rather than mainstream fans, and the market is tiny – accounting for just $83 million in primary sales last year, according to the blog. ‘industry Water & Music.

There are many skeptics. “It seems like the music industry is desperately trying to find a way to fit into NFTs without really thinking: what is the underlying use case?” said Mark Mulligan, analyst at Midia Research.

Mulligan has argued that it is hypocritical for musicians to sell streaming royalties to fans, after years of complaints about the tiny payments artists themselves receive in streaming royalties. “If you sell someone a fraction of that fraction and charge them a lot of money because it’s an NFT, I don’t know how that would be a worthwhile investment.”

Diplo argued that it was a good investment for music lovers. “For a fan, what you can do is buy merchandise, you can buy tickets to a concert . . . but really, that’s why you’re a fan. You’re a fan because of the music .

Most of the $17.7 billion worth of NFTs traded last year were for visual arts, games and collectibles, according to market tracker Nonfungible.com. While the NFT market itself has shown signs of slowing with daily trading volumes on OpenSea, the largest NFT market, down year-to-date, some people see music as a ready space to burst this year.

Column chart of daily volume (millions of dollars) showing trading on OpenSea falling

Royal, Blau’s company, is one of the most prominent of a generation of blockchain music start-ups that aim to revolutionize the industry. Thanks to Blau’s personal connections — and Silicon Valley optimism around blockchain — Royal secured $55 million from investors, including Andreessen Horowitz and Peter Thiel, without ever making a pitchbook.

Blau, who last February sold $12 million in NFTs attached to his songs, wants to turn this into a business through which ordinary fans can own music, “as opposed to just record labels, private equity and funds. speculative”.

Don’t Forget My Love: a musical digital token in numbers

$99

0.004% streaming royalty fee

$999

0.05% streaming royalty rights and more music

$9,999

0.7% streaming royalty rights and a meeting with Diplo

Royal’s project with Diplo, for example, offers fans the chance to pay $99 for a token representing 0.004% of the streaming royalty rights to “Don’t Forget My Love,” the lead single from his recently released album. got out. For $999, you get 0.05% royalty rights, plus an “exclusive DJ mix,” while $9,999 gets you 0.7% royalties and an encounter with Diplo at a concert. These tokens do not correspond to copyright ownership of the songs.

When asked if it was a good investment for fans, Blau said there was an emotional attachment to the property, as well as the ability to bet on an artist’s success before they he becomes a star. ” In the real estate. . . if you own a single family home, there’s the rental income and then there’s the actual appreciation of the asset, right? he argued.

Another longtime music label executive said some of those projects ‘didn’t happen because people were worried about the nature of the exploitation’, referring to questionable investment value streaming royalties.

“There are a lot of detractors who say it’s only rich white dudes who do this and drive up the price of NFTs.

“But I don’t think we can ignore that technology is changing,” the executive added. “We’ve been in playlist country for the past decade. I think blockchain tokens are going to be fundamental to our world 10 years from now, and anyone who says that’s not true isn’t looking back.

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