Web 3 and the Music Industry
An exploration into the broken history of monetization in the music industry and the promise of Web 3 to empower artists.
Thank you for joining me again in my series exploring the promise of Web 3 and blockchain technologies! Last time, I laid out a series of propositions about how they have the possibility to change our world, it included the following assertions:
These allude to Web 3’s potential to remedy systemic issues that have long plagued the music industry, which I will elaborate upon throughout this article.
Part I: Defining the Problem
The broken history of monetization in the music industry
The Traditional Model
Traditionally, artists seeking to record and release music have been beholden to The Record Label, an institution that writes a binding contract with an artist to produce a certain amount of content over a specific period of time. Artists seeking to get noticed or to put their music out into the world would try their hardest to court the attention of labels and often shaved off their square edges to fit into the label’s round holes. There was a wild frenzy to get signed to a label because of their ability to help artists produce the art they wanted to make, and to widely disseminate that art, bringing their music to hundreds of thousands of new ears.
but this King making ability came at a steep price, with record labels often controlling the artists’ creative freedoms by restricting and shaping the art that they could make, as well as taking an outsized cut of their earnings, leaving the artists with crumbs. Artists often were caught in abusive environments, where they worked tirelessly to produce music that the label wanted to make, only to receive a fraction of their earnings, led along by promises of the potential for stardom and new reach for their music.
The Digital Revolution
Then, the digital revolution and the advent of the computer age happened, allowing songs and other forms of data to be endlessly replicated and shared with no marginal cost of production. Soon enough, people could share their music with their friends, endlessly producing copies after purchasing, borrowing, or renting a cd only once! This presented a great problem, how were artists to make money when their music was now freely accessible online? things got worse in July of 1999 when the peer-to-peer file-sharing network Napster, went online. Napster allowed users to send each other digitally-encoded music files, MP3s, peer-to-peer, over the internet, with no centralized intermediary, widening the floodgates for piracy, and sending shockwaves through the music industry. Several artists spoke out, in fear of this threat to their livelihoods, including award-winning Heavy Metal band Metallica, with the high profile Metallica v. Napster inc. court case making headlines as the first of many lawsuits from an artist against peer-to-peer software companies. A sign of the seemingly insurmountable climb to come.
Artists continued on like this for some time, forced to spend most of the year touring in order to make ends meet. Their contracts gave them only a small portion of the earnings from their record sales, leaving them little time or resources to create or do other things. Slowly an improvement came along, in 2003, Steve Jobs launched the iTunes Store, where people could purchase high-quality mp3s of their favorite songs individually for 99 cents. even then, the artist didn’t receive the full fruits of their labor, but this was still a meaningful improvement when the same files were previously getting passed around for free. Notably, artists could also self publish on a major platform for the first time with iTunes, as well as MySpace, a platform formerly known for platforming independent artists. Soon, music streaming started to become popular with services like Pandora and Jango, and then, services like Spotify, which changed the landscape forever.
Spotify and the rise of the independent music scene utilizing platforms like MySpace and Bandcamp changed the game completely. allowing artists to self-publish for little to no cost, they no longer had to vie for an extortionary contract with a big label in order to produce and distribute their music. Although most artists still sign with labels at one point or another in their career, it was no longer a requirement. Artists now had much more creative freedom, they could create what they liked as long as they could find an audience. The issue with pay remained an unsolvable thorn in their side however, as Spotify pays cents per stream, leaving all but the most popular artists again with table scraps. Thankfully the internet put a band-aid on this with the advent of crowdfunding sites like Patreon, again, not solving the problem, but yet another meaningful improvement in the ability for artists to attain more creative and financial control.
This brings us to the present day, where artists still face many of the issues outlined above, admittedly less severely than under the “Label-only” days, namely the gross discrepancy artists face in pay, caused by paying middlemen a sizable cut to distribute their music, forcing them to tour 8+ months out of the year to make ends meet. Unfortunately, the Covid-19 Pandemic has shut down live music across the country, leaving many artists stranded and unable to afford to make the art they love without that crucial source of income. Even after the easing up of lockdowns, it has permanently shuttered the doors of beloved music venues across the globe.
and then NFT’s were discovered..
Part II: What are Blockchains and NFT’s and how do they relate to the problems raised earlier?
Put simply, a blockchain is a new kind of database, that allows data to be stored in an immutable, decentralized way. Information is written into a container called a block, and it can never be erased or changed, with each new block linking to the previous block. A network of computers around the globe verify the authenticity of each block by coming to agreements in a publicly auditable and verifiable way. Blockchains allow for people to engage in economic activities and transfer value (in the form of tokens) with one another in ways that would usually require trusting a third party.
Tokens are representational units of value that exist on blockchains. There are fungible tokens, like Bitcoin and Monero, where each unit is fully interchangeable with another unit of the same kind (dollar bills are mostly fungible, for example.) and then there are what are known as Non-Fungible Tokens, which are a form of token that can represent any kind of media, that is provably unique, scarce, and not-interchangeable with another token of the same kind. Put simply, NFT’s allow for the creation of scarce, unique, digital objects. as opposed to the abundant digital copies one could make of a digital piece of music before. It allows for us to own scarce digital objects that, as we’ll see later, can be programmed in surprising ways, conferring unique benefits to the owners and creators.
What can NFT’s do for creators and their fans?
NFT’s allow artists to create and sell content that cannot be replicated. this content can have unique properties programmed into it. Crucially, you can program an NFT such that every time it is bought or sold, a portion of the funds is distributed back to the creator as a royalty. The implications of this are profound. artists can spend more time on individual pieces of art and receive 100% of the proceeds of the sale, and have a passive income stream that can’t be arbitrarily changed by a record label or streaming company. Fans can support their favorite creators in new and exciting ways.
The NFTs as songs angle, while promising, can run into unexpected issues, such as Music becoming an unaffordable speculative asset, similar to fine art, which, while still a great boon for creators, allowing them to sell their art for the sums it reasonably can and should fetch, it can make music inaccessible to most people, especially since most people have gotten used to music being extremely inexpensive, as well as diminishing the reach artists have come to expect from streaming services making music accessible. There is also concern that the royalty method described above incentivizes artists to make art that is bought and sold a lot as opposed to something that is held on to, as if the resale volume is low, it can negatively affect their earnings under that particular model.
but perhaps, more interesting to me than NFTs as songs, for the reasons I described above, are NFTs as access passes, NFTs as merch, NFT ticketing and the ability for fans to own equity in a song or artist. I think the world we’re likely moving to is one where music is still free or low-cost (to give creators strong exposure and network effects) but the power and support of their more devout fans allows them much more creative freedom and financial backing than they used to have. This retains the benefits of the streaming era, both for artists and consumers, as consumers won’t have to deal with the music they’ve grown used to being cheap or close to free exploding in value due to speculation, while artists retain the exposure and volume benefits that streaming services provided, while being able to be financially supported in ways that make the earnings from streaming services pale in comparison.
NFT’s can be programmed to allow holders exclusive access to experiences, communities, and future ‘drops’ of other NFTs or rewards, allowing artists to build deeper relationships with their fans, and their fans to build deeper relationships with each other. For example, popular Alternative Metal band Avenged Sevenfold, released their genesis NFT collection The Deathbats Club, which is a kind of Fan Club that can be joined by owning a Deathbat NFT. Avenged Sevenfold plans to regularly reward holders with unique experiences, with frontman Synyster Gates stating he would like to eventually pay out royalties to fans from their music, an ambitious way to deepen their relationship with their fans. Electronic Artist BT had interesting plans for his work “Metaversal” which is an interactive musical experience that takes the form of a treasure hunt? I’ll let BT describe it. “Metaversal is the first album imagined as a programatic blockchain experience. It encompasses beautiful audio reactive art, music that adapts to time, and collection of physical fine art sculptures from the audio waveforms of the songs themselves. The Metaversal engine has Web 3.0 connectivity that allows fans to solve a cryptographic treasure hunt and win 1/1 NFT’s”. as you can see, Web 3 offers innovative and exciting ways for creators to create new experiences for and reward their fans.
The most ardent and devout fans of an artist are constantly seeking new ways to support their favorite artist and have access to new merch or experiences. I would totally buy Metallica or Deftones NFTs that give me access to some kind of content, especially when I will be able to own it and show it off! The possibilities are enormous because we underestimate people’s willingness to spend on things and people that are important to them, especially in a digital social world where we can easily show off our exclusive content and be able to say we supported our favorite artist. The phenomena of Superchats on Youtube is a very crude example, people spend hundred of dollars for Superchats and membership just to support their favorite content creator and have their name read out to the world. Now imagine what it would be like when I can get a Super fan pass NFT, that shows up in my digital wallet, that gives me access to vip or behind the scenes or early content as a benefit of holding, and I can show off how big of a fan I am to my friends, all the while knowing i’m supporting the creators I love! Most artists have a core of 20-100 devout mega-fans, hungry for any new release from their favorite artist, that are frankly, being under-monetized. They often do buy hundreds of dollars worth of merch, or VIP backstage passes, but the merch is often made or distributed by third parties, which take a huge cut, leaving the creators with little. Same with the VIP passes, which, for the super fan, often ends up saved as a memento, but it’s hard to share with people and make a conversation about it unless you carry it with you all the time, where it can get damaged. NFT’s allow creators to more fully be supported by (monetize) their fanbase, and allow fans new ways to support them and share their love for their favorite artists.
Similar to the NFTs as Access Passes, that I described earlier, is NFT ticketing. The idea is to replace the paper or digital tickets you normally get for an event with an NFT ticket on the blockchain. This introduces some interesting benefits, like the fact that NFT tickets can’t be forged, and you can program them to control or eliminate scalping. You can even program it to where the creator gets some or all of the increased retail value from the scalpers! NFT tickets also have the somewhat minor but not insignificant benefit of letting people collect, show off and even trade or sell old concert tickets, which may seem unimportant, but is important to our lives as social creatures. This year, popular music festival Coachella, made the biggest foray into NFT ticketing yet, when they announced the release of their first line of Digital Collectable NFTs, which function as a lifetime pass! and allow holders to unlock unique on-site experiences, physical items, and digital collectibles. We’re barely scratching the surface of what can be done, on this front, but Coachella made a powerful statement of what was possible, encouraging their peers to think boldly about this new technology.
Another possibility is for fans to be able to influence, or even take an ownership stake in a project, for example, a musician could put out a fan pass NFT like I described earlier, with the added benefit of giving fans a sneak peak into new projects while they are being made. an artist could solicit feedback from their fans on the creative process, and even let fans vote on their decisions. it could also be possible for fans to buy fractional ownership in a song, entitling them to a share of the royalties. much work needs to be done exploring the feasibility of this kind of application, and this definitely wouldn’t be for everyone, but it is just a glimpse of the myriad of ways these new tools can enable experimentation in the space.
NFT’s are taking the music world by storm, with famous artists like Kings of Leon, The Wu-Tang Clan, Nas, Steve Aoki, Grimes, 3LAU, Imogen Heap, Shawn Mendes, The Weeknd, Snoop Dogg, Ozzy Osbourne, Synyster Gates, RAC, Disclosure, Verite, Tory Lanez, Mike Shinoda, Ozuna, Quavo, Lil Baby, and 2 Chainz all rushing to release NFT projects and be on the frontier of their industry. While companies and services like Opulous, and Royal.io, services created by artists for artists to help them gain royalties on their music NFTs, as well as distribution platforms like Water & Music, Sound.XYZ, Audius, and Catalog rush to provide them with the infrastructure they need to distribute the art they love making, in a way that truly allows artists to be paid what they are worth for the first time.
even up and coming independent artists are making waves, with LA-based Rapper LATASHÁ, who has been empowered by NFTs after leaving the restricting confines of her label.
“I was pretty much treated like a slave. They were like You need to write so much music for us, and they only gave me like $8,000 for it. They pretty much told me that my sweat equity didn’t equate to what they were offering me. And it broke me apart.”
In 2021, she launched her first NFT, a music video, on Zora.co to wild success, making her the first female rapper on the blockchain.
“I put my first music video up [as an NFT] in February 2021,” she says, and “it sold in like three minutes. And it was, like, $1,000. And I freaked out.”
Later she went on to sell another project “Culture”, for over $3000, and “Glow Up” sold for 10.3 Ether, roughly equivalent to $23,000 at the time of writing.
“In one summer, I made pretty much what a label would have offered me for a record deal. Without giving my copyright away, without giving anything away pretty much. And that was crazy.”
Stories like Latashás aren’t unique, and will continue to surface so long as artists are determined to find a better way to be compensated fairly for their work, and Web 3 is enabling that transformation all over the world, for those pioneers who have eyes to see it. Could a peer-to-peer networking technology, formerly thought to spell the beginning of the end of artists’ ability to make a living in the music industry, become one of their greatest allies in their fight for empowerment and independence?
I truly believe so.
Stay tuned for the next part in the series, where i’ll be covering Web 3’s impact on Gaming. You won’t want to miss it.
Thanks for reading.
I think Cobain could've survived had he had this!