Will NFT Overturn the Music Industry?

[TL;DR]

- NFT is a crypto digital asset issued on the blockchain. It can bind authentic rights with some commodities in the real world. Therefore, NFT music can be understood as crypto music.

- The dilemma of the current traditional music: the "play volume" economy, the "monopoly as king" economy, and the "pyramid" economy.

- Music NFT is still at an extremely early stage. We need to make friends with time to solve problems such as laws, royalties, costs and scenarios.

- NFT should not be simply considered a money-making tool that rides the wave of the concept’s popularity. By issuing NFT, musicians can bind authentic rights and establish a deeper "binding" relationship with their fans.

What Is NFT Music

It is a crypto ownership certificate of unique audio and music works that can be purchased or sold. NFT provides authoritative proof of ownership through blockchain technology and has authenticity authentication that can be validated at any time. Digital files (music, visual arts, sports, etc.) as the ownership of virtual goods can be traded like physical assets.

The process of music being NFT can be simply described as: uploading (registering) musicians' works and related information to the blockchain, storing them through digital crypto technology, collecting and generating smart contracts, generating unique NFT, and realizing trusted copyright. The relevant data information is tamper-resistant, unique and permanent, and is a unique digital asset, that is, NFT music (or music NFT).

Like cryptocurrencies, NFT music is also stored in distributed ledgers, making it difficult to forge. Based on NFT, artists can fully own the ownership of their music works without sharing the profits with music companies, lawyers and other intermediary institutions, which is the embodiment of the core value of NFT music.

Therefore, the release of NFT music can well become one of the new channels for musicians' return. The release of single songs or albums in the form of NFT can not only pay the cost of making and marketing albums, but also bring excess profits to musicians.

The Dilemma of Current Traditional Music

"Play Volume" Economy

Since the end of the 19th century, there has been a huge gap between the major record companies that are rolling in money and the musicians who complain that they have been "exploited". This centenary dilemma has not been solved since the initial music score, the later vinyl records, and the Internet Web2.0 era.

"Monopoly as King" Economy

The record company controls the copyright, and the Internet company controls the data traffic distribution. Even those top KOL musicians do not have the right to price their own music; After music became a mass consumer goods and copyright business, the music that was forced to be "free" also lost its scarcity.

What the top KOL musicians want is "their own data traffic". For those who really love their music, the musicians should regain the "control" of their fans. The "fan-power" mode naturally coincides with blockchain technology and NFT, which is one of the reasons why the top KOL musicians are scrambling to seize the position to release NFT music.

It is an indisputable fact that 90% of the return of the music industry is occupied by the top 1% of artists. In the highly monopolized market, it is particularly difficult for emerging artists to gain a foothold in the market.

For those second and third-tier and emerging musicians, the lack of their own resources, professional level and other aspects has seriously restricted the effect of communication and monetization, making this group not get enough income from the dividend of the times.

"Pyramid" Economy

According to the Report on the Survival Status of Independent Musicians in China, 68% of the musicians earn an average monthly income of less than RMB1,000 in music, while less than 5% of the musicians earn more than RMB10,000 in music. Not optimistic income also directly led to 84.3% of people doing music part-time.

What musicians need is more "platforms for value discovery", rather than passive selection of centralized platforms. When Spotifiy's music broadcasts can only receive 3 cents a time, 650,000 times a month can create an hourly salary of $15; When the world of Web2.0 even needs to queue up for 8 months to produce vinyl, Web3.0 and NFT naturally become the best "self-rescue plan" for new musicians.

Current Situation

Presently, music NFT has not received any legal support, and the relationship between the provisions of royalty sharing and the legal provisions of existing patent rights is not clear. Unlike most crypto products, which are written on smart contracts, there are obvious rules to follow, most of the rules for royalty sharing are not specified. Currently, different Web3 music platforms have their own understanding of royalty sharing. Due to the multi-party cooperation process in music production, the royalty sharing involved is very complicated.

Legally, how to integrate patent ownership and royalty sharing stipulated by NFT is also a big issue, especially for art works that have been distributed in web2. For example, Damon Dash, a partner of Jay-Z, wanted to sell Jay Z's works——Reasonable Doubt, but he was told that he only owned 1 / 3 of the copyright and was sued in court. The same thing happened to the great director Quentin Tarantino. He was sued by the film company Miramax because he wanted to sell the NFT of his screenplay "Vulgar Novel".

The rarity and playing methods of music NFT are greatly limited. Presently, different NFTs are characterized by different mixes, and there is no way to have more visual characteristics, which limits the spread of music NFT in social scenes to a certain extent.

Unlike avatar-type NFTs, that can be displayed on web2 social platforms to quickly attract more non crypto-native audiences, Music NFT shows limited scenes. Besides the fan economy, it is difficult to attract non crypto-native audiences.

The minting cost of music NFT is so high that most creators can't afford $100 to make a record. The deployment cost of custom smart contracts is high, and it requires an understanding of technology to start. The purchase of music NFTs requires a certain fee, which is unfavorable to most real fans.

Moreover, currently, the social value and financial value brought by music NFT have yet to be explored, in 2021, the market value of music NFT is only $1.243 billion, compared with the market value of avatar-type NFT has exceeded $10 billion, which is far from reaching the same level as their visual peers.

In the face of the changes in the consumption environment from "people looking for music" to "music looking for people", music NFT is still in an extremely early stage. They have only existed for more than a year. We need to make friends with time to solve these problems.

Outlook

The good era means that there are more sources and channels of music revenue, and physical sales are also growing. New scenes of music consumption are emerging. With the arrival of blockchain and NFT's Web3.0 era, there will be more channels and implementing scenes for music monetization in the future, and the overall trend will be better.

The "bad" era means that the tools for music creation are becoming more and more popular, and the threshold for music creation is lowered. As a result, the number of musicians continues to grow, and a new song is born every 27 seconds on average. Therefore, the average share income of streaming media is declining, and it can be said that it is another era for involution among musicians.

Therefore, exploring diversified revenue channels becomes the key point.

On May 31, 2022, Canada launched the world's first music NFT player. Musicians release new songs in the form of NFT. All songs will not be illegally copied and downloaded, and musicians can decide the distribution of NFT at their own discretion.

With the rise of post-90s and post-00s musicians, Generation-Z musicians are leading the trend of NFT music. Whether music works are released in the form of NFT or virtual performances, the emergence of music NFT will probably give birth to a stronger and more viscous fan economy.

Imagine that you can easily find friends who like a certain music genre and music singers; You not only have the same interests, but also have strong interest binding. You can also obtain real economic benefits while ranking for idols. It's hard to say that this is not an excellent social scene and social App accelerator.

It is also an important reason why Netease Cloud Music still occupies a stable market share even though the number of music is completely inferior to QQ Music. Similar stories have actually been staged in Web3. Top NFT projects such as BAYC gradually build their own communities (YouTube channels, radio and Clubhouse interface, etc.), attracting more and more people to join the community.

Building the world of music NFT can not only re-establish new benign industry rules, but also form an incubator of deep social scenes. Indeed, the future is foreseeable.

Conclusion

By issuing NFT, musicians can bind authentic rights and establish a deeper "binding" relationship with their fans. From song creation, recording to the release of works, they can move towards the long-term path of "creativity, investment, collection and common growth".

The success of a few people is not prosperity. The success of most people is the real prosperity. After the integration of traditional music with NFT and other blockchain technologies, it is believed that the future development of music will also usher in a new revolution.

Author: Gate.io Observer: Byron B. Translator: Joy Z.

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