Non-fungible tokens, or NFTs, are currently one of the most talked-about segments of the blockchain and cryptocurrency space. Over recent months, NFTs have been making global headlines as industries including art, fashion, sports, luxury goods, and more, discover the sources of previously untapped value that they can generate. NFTs for music are no exception.
After a year where pandemic-induced restrictions have crippled many artists, NFTs offer a brand-new way for musicians to reach out to fans, and many are embracing the opportunity. For example, in February, Mike Shinoda collaborated with rapper iann dior and singer UPSAHL to release 10 exclusive NFT-based clips of his single “Happy Endings.”
Kings of Leon released their latest album, “When You See Yourself,” as an NFT, becoming the first band ever to do so. 3lau reissued his 2018 album “Ultraviolet” as an NFT, and Shawn Mendes worked with Genies to drop a collection of NFT-based digital wearables, including a one-of-a-kind guitar. These are far from the only examples, but they demonstrate how artists use NFTs in music for revenue generation.
What is an NFT?
For the benefit of the uninitiated, an NFT is a blockchain-based token, similar to a cryptocurrency. However, unlike cryptocurrencies, they’re non-fungible, meaning that one is not identical to another and cannot be interchanged on an equal basis. Whereas cryptocurrencies are comparable to money (you can change one BTC for another BTC, just like one dollar for another dollar) NFTs are more comparable to an asset like real estate.
Nevertheless, NFTs come with all the same benefits as any asset issued on a blockchain. They benefit from the security of decentralisation, and cannot be altered, replicated, or forged. Their entire transaction history is also visible on the blockchain and is similarly immutable. Trading an NFT doesn’t rely on any intermediaries and users can hold them in their own personal wallets.
NFTs can be minted as a unique, one-of-a-kind asset or created as a limited-edition collection. This gives them built-in scarcity, which helps to drive their value. But, NFTs have other properties that can help to solve long-standing problems in the music industry. For example, it’s possible to program an NFT in such a way that revenues are allocated automatically, reducing the risk of copyright theft or lost royalties.
Therefore, there are several NFT and blockchain use cases in music, media and entertainment offering a range of benefits to everyone from artists to event organisers, and we’ll take a look at the main ones below.
NFT Digital Collectibles for Music
Digital collectibles are by far the biggest and best-used use case for NFTs in the music industry right now, and it’s hardly surprising. In the days of vinyl and CDs, it was fairly common for artists to release limited-edition versions of albums or songs, perhaps featuring a few obscure B-sides or exclusive album artwork. Fans were eager to spend more to get their hands on these goods, but the era of digital music and streaming all but killed off the entire idea.
NFT-based music and other collectibles are reintroducing the concept of the limited release for the digital generation. NFT tokens on the blockchain offer artists and fans the opportunity to prove that a particular release/asset is scarce or unique. And fans are rushing to embrace the opportunity to once again participate in markets for rare editions. For instance, the 3lau release referenced above fetched a startling $11.6 million for 33 NFTs.
Musicians are also branching out into NFT album artwork releases, with Grimes among one of the biggest. The Canadian artist recently put out a collection of NFT-based art, which sold for a total of $6 million.
These impressive figures demonstrate the appetite for NFTs among fans. But just because the big names make the headlines doesn’t mean NFTs are the exclusive preserve of established and well-known artists. Anyone can use NFTs to produce exclusive content, helping to broaden even lesser known artists’ appeal, help them reach more fans, and unlock profitable revenue streams.
They can also help to inspire loyalty by allowing artists to get closer to fans and giving them the opportunity to own something that’s provably scarce. In a time when restrictions imposed by the pandemic have left artists without their usual stable revenue streams, NFT digital collectibles open up profitable new ways of monetising music and merchandise.
NFTs for Music Copyrighting and Royalty Attribution
When music is issued as an NFT, the fact that it resides on a blockchain makes it tamper-proof, meaning that it cannot be edited, duplicated, or destroyed, helping to fight piracy across the industry.
Moreover, NFTs can be coded as a series of smart contracts that could automatically attribute royalties to parties according to licensing agreements or other contractual obligations. So, it’s possible that when an NFT is sold, the blockchain will automatically assign royalties to the songwriter and whoever may own the rights to the recording.
This functionality solves a longstanding problem in the music industry – that of royalty attribution and the fact that there are so many intermediaries involved in the financial flows. Using a blockchain, with its peer-to-peer functionality, can help to simplify the payment process through disintermediation.
NFTs and Music Events
With the shift to digital, live-streamed events have become far more commonplace over recent years. However, it’s difficult to monetise in the current format. NFTs could provide a solution in the form of a digital ticket to a virtual music event, offering fans the opportunity to see their favorite acts perform live. Blockchain-based digital tickets offer significant potential to eliminate ticket fraud and the challenge of tickets being bought in bulk and sold on secondary markets, often black markets, by touts.
Production studios or labels could stage the digital equivalent of a music festival on almost any scale, using the ability to mint as many or as few NFT-based tickets as they wish. As such, fans would be likely to pay more to attend exclusive, small-scale concerts.
At the other end of the scale, hosting a digital Glastonbury-type event would attract many people competing to get their hands on a ticket.
Fan Tokens and Loyalty Programs
NFT tokens can also be issued as part of a fan loyalty program, opening up yet another new revenue stream for artists and music industry participants. Loyal fans could be rewarded for supporting the artist, for example, by attending virtual gigs or engaging on social media.
Streaming platforms such as YouTube and Twitch have already provided artists new ways to connect and get closer to their fans. NFT fan tokens provide a new way to develop this relationship. For instance, artists could give away loyalty tokens with exclusive digital merchandise only available as part of the loyalty program.
How Protokol Can Help
Protokol’s non-fungible tokens for music are a flexible solution that help artists, event organisers, record companies, and organisations across the music industry utilise NFT technology to expand their reach, increase fan engagement, and unlock new opportunities to monetise music, merchandise, and events.
From NFT digital collectibles, to fan tokens, we build custom solutions according to your exact needs, ensuring we deliver a real, tangible ROI. Plus, with flexible payment options and revenue share models specifically created to support those industries hit hardest by the pandemic, Protokol are lowering the barriers to entry for everyone from independent artists to established record companies; providing an opportunity for even those hit hardest by recent events, to unlock critical new revenue streams.
To learn more about Protokol’s NFT and fan engagement solutions for the music industry, or to better understand how we can help you engage and monetise your fanbase digitally, book a free consultation with our experts at protokol.com/contact