After having shaken up the world of art, video games, sports, and even luxury, Non-Fungible Tokens (NFT) have been taking over the music world for several months now. From Gorillaz and The Weeknd, more and more artists are surfing the #NFT trend. Why is there such a craze around NFTs? And besides, what is an NFT for? How are NFTs used in the music industry? And will they really revolutionize the industry? This is what this article is all about, find out why below!
What are NFTs?
Before we go any further, let's take a look at what an NFT is. First used in 2015, the acronym NFT literally stands for "Non-Fungible tokens". It is a form of cryptocurrency that allows the buying or selling of any digital goods, from a work of art to an image, a video, a tweet, etc.
This virtual token is said to be “non-fungible” because it is unique and cannot be reproduced thanks to the “Blockchain” technology it uses, which will secure and track each of the transactions. This means that when you buy an NFT, you are the exclusive owner of that digital asset. Therefore it is the uniqueness of each NFT that has created so much excitement around NFTs.
How big is this new phenomenon?
Since January 2021, the NFT market has been booming. According to the latest report released by DappRadar, NFT sales exceeded $ 10 billion in the third quarter of 2021. This is eight times more than the previous quarter’s registered sales. NFTs also generated over $ 23 billion in trade volume over the entire year, a historical record.
What about the music industry?
According to a study by American journalist Cherie Hu, there has been an explosion in NFT sales in music since February 2021. These sales are estimated at over $ 60 million between June 2020 and April 2021, of which 55 million sales were made between February and April 2021. Sales are mainly represented by electronic music (80% of sales), followed at a distance by hip-hop (8.6%) and rock (6.7%).
How are NFTs being used in the music industry?
In recent months, more and more artists have been riding the NFT trend. You can also read the article The NFT Wave: Who’s Done It? For more in-depth details regarding which artists have already used NFTs. Sale of an album, music video, or even a collector's item, here are some concrete examples of artists using NFTs:
DJ and producer of house and electro, he is the first artist to create an album in the form of NFT. In February 2021, he auctioned his album in 33 unique NFTs which included exclusives such as the creation of a personalized title for the buyer, a limited edition vinyl, or access to unreleased tracks. The sale grossed him $ 11.7 million, making 3LAU the most enriched artist through NFTs.
Kings of Leon
In March 2021, the American rock group decided to use blockchain in addition to streaming platforms for the distribution of their album. The NFT version offers bonuses with limited edition vinyl and animated cover art. The second type of NFT called "gold ticket" offers VIP benefits: front row concert seat for life, backstage access, and private driver.
— Kings Of Leon (@KingsOfLeon) March 15, 2021
He is the first rapper to sell his album solely as an NFT. In August 2021, he decided to sell 1 million copies for $1. The million albums sold in 57 seconds, a record for the artist.
Or maybe I should start buying on @LooksRareNFT 👀
— Tory Lanez (@torylanez) January 12, 2022
What are the advantages of using NFTs in music?
If NFTs are on the rise, it is because they offer unprecedented opportunities for the music industry:
A new source of income for artists
NFTs help increase the redistribution of royalties. On average, an artist only gets 12% of the royalties linked to the sales and streaming of his music. In addition, streaming platforms are widely criticized for the ridiculous amounts they redistribute to their artists. With Spotify, 90% of artists receive less than 1,000 euros per year.
NFTs would therefore be a means of reducing costly intermediaries and allowing increased remuneration for artists. #Blockchain can be used as a new medium for sale where the artists set their own prices and are paid directly by their fans.
Take back control of your music
The music industry is accused of its lack of transparency on the redistribution of royalties. According to a study from Berklee College of Music, "Artists often have a hard time understanding the payments and accounts they receive." In addition, problems such as slow and tedious copyright payments are common.
NFTs would make this ecosystem more fluid by making it faster and more transparent. With blockchain technology, payments would be automated in real-time for all musicians who have contributed to a piece of music. NFTs allow artists to regain more independence controlling all aspects of their music: sales and streaming prices, royalty rates, copyright, etc.
Boost fan engagement
NFTs act as a crowdfunding mode allowing fans to bet on a project or support their favorite musicians. If a fan invests in a project and the project turns out successful, or the artist's popularity increases, the NFT will increase in value. He can then resell his NFT for profit.
This system is also beneficial for the artist. By investing in a project, the fan will have every interest in promoting the musician so that the value of the NFT increases. The fans then turn into real ambassadors. It is also a great opportunity for young artists looking for funding to develop their projects. NFTs are emerging as a way to democratize the music industry and make it more accessible to emerging artists.
Rethinking the fan experience
Beyond the financial aspect, NFTs are changing the way artists interact with their fans. NFTs offer new digital experiences and more proximity between artists and fans. Josh Katz, CEO of YellowHeart, accompanies artists to create "NFTs that act as keys to unlock and grant access to not just content like new and exclusive album artwork, videos and bonus music tracks, but also to real-world events and opportunities.”
We can then imagine an infinite possibility of innovative experiences: the creation of closed fan clubs, online question-answer sessions, studio meetings, the early distribution of music, or even the free distribution of NFTs for loyal listeners. And maybe in a few years, the possibility will arise of combining NFTs, artificial intelligence, and augmented reality!
NFTs also come with their share of cyber threats and fraud, so make sure to read the article Artists! Watch Out For Frauds, Counterfeits & Cyber Threats In NFTs to know exactly how to secure your NFT experience.
Whatever the industry, the craze around NFTs and blockchain is real. Since mid-2021, more and more artists are interested in the sale of their music through NFTs.
It's hard to say that NFTs will revolutionize the music industry yet, but they can surely be seen as a major innovation offering a plethora of possibilities for artists and fans alike.
The NFT market is young, volatile, and in constant evolution, and NFTs are still an experimental technology. NFTs can only transform the music industry once these technologies are tamed by artists and fans alike on a global scale, and that might very well happen much sooner than anyone could imagine.
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