- NFTs are influencing the music industry is through the provision of crypto-backed record labels.
- One of these companies is StarCoin, the first crypto-backed record label in the world.
- StarCoin allows for a 50/50 split between artists and a record label.
- It gets its funds for artists through taxes generated on its NFT marketplace.
NFTs — non-fungible tokens of digital content linked to the blockchain are shaking up the music industry. NFTs can be in many forms as long as they are digital. One of the appeals of NFTs is that the token that it is attached to, serves as a certificate of authenticity proving that you own it. Once you own an NFT, you are the sole owner and it cannot be duplicated. Since NFTs are on the blockchain which can be publicly verified, it is easy to detect if two files on the blockchain are identical and identify which NFTs are inauthentic. An authentic digital NFT work itself can still be shared or duplicated, but ownership of the NFT which is tied to a token is unique and reserved exclusively for its owner.
This novel technology is already influencing the music industry in several ways. Here’s how:
Providing Artists With Additional Income Streams
NFTs are providing artists with additional sources of income and in some cases, significant income streams. Wide-ranging musicians, such as Grimes, Steve Aoki, Kings of Leon, and Ozuna have made millions of dollars through NFTs. While NFTs are new to the scene, some of the world’s most creative and innovative artists have jumped on the opportunity to diversify their income streams from them. This partly stems from existing flaws in the music industry, which often benefits streaming platforms and record labels more than artists. Alesso — a world-renowned Swedish DJ has said that if you release a song on a streaming platform like Spotify or iTunes, “if it’s not a worldwide hit, you don’t gain any real money out of it”, adding that cryptocurrency “could save a lot of people’s careers, making money from their own art”. He’s right. On average, artists make $.0006 per stream on traditional streaming platforms. That means they’ll only make $600 through a song that has 1 million streams. Seems unfair right?
It’s no surprise that artists are finding creative ways to make income through NFTs. Many artists release exclusive videos, songs, albums, concert tickets, fan club memberships, and digital art in NFT form, that fans can purchase through cryptocurrencies like Bitcoin and Ethereum. One of the main benefits of this is that the artist could decide whether to make the NFT ultra-exclusive by only selling one copy, or by selling dozens or hundreds of copies. One NFT digital art by Steve Aoki sold for $888,888.88. An artist that wanted to make that much through a song on a streaming platform would need 1.48 billion streams.
Allowing Fans to Better Connect With Celebrities
NFTs are allowing artists and fans to connect like never before. Post Malone in March announced that he would sell an NFT which would allow the holder to play beer pong against him. NFTs do not have to be digitally collectible. They can also be the key to unlocking exclusive experiences with artists. Some companies, like Fyooz, are dedicated to creating experiences between fans and celebrities through artists. Other companies, like Dropper, allow fans to compete for celebrities’ NFT collectibles, with top fans being able to unlock experiences with celebrities. One of the main reasons that the use of NFTs to enable fan-celebrity experiences is so appealing for celebrities is that the blockchain technology underpinning NFTs means that celebrities could accrue 100% of the revenue generated from selling these experiences. There is not necessarily any need for a third party that could take a portion of these funds.
Altering Record-signing for the Better
Another key way that the NFTs are influencing the music industry is through the provision of crypto-backed record labels, which allow artists to generate much more revenue from their album sales than a traditional record label setup would allow. One of these companies is StarCoin, which is the first crypto-backed record label in the world. StarCoin allows for a 50/50 split between an artist and a record label. In today’s music industry, artists typically only accrue 10-20% of the profit generated from their album sales, with a 20/80 or 10/90 split favouring the record label being the most common setup. Traditionally, when a record label signs an artist, it gives an artist a loan or “advance” to create an album. Artists don’t generate any personal profit from their album sales until they’ve paid back the loan. But StarCoin does not make any artist indebted, with money being generated through taxes on its NFT marketplace, as the source of funds for the artist to create their label. NFTs are undoubtedly changing the music industry and definitely for the better, for both celebrities and fans alike.