A Permissionless Foundation for Music

Visual NFTs proved the demand for digital ownership, but music is a far larger market as the most widely consumed art. Over 500 million users subscribe to music services and virtually everyone listens to music in some form. The Game Boy popularized the use of handheld technology with the sale of 120 million units and was later succeeded by the Blackberry and iPhone. Similarly, music, art, and gaming will drive the adoption of crypto.

Artists have been disenfranchised by streaming — it’s estimated that Spotify pays $0.003 per stream meaning that an artist whose music is streamed a million times will receive only $3,000. Streaming is the touch point for the artist-fan relationship but is a price-controlled and inefficient market. Allowing artists to price their music similar to how they already price limited-edition merchandise and concert tickets could dramatically improve the sustainability of creators

The music industry is ripe for disruption.

Why NFTs can Help

NFTs are digital signatures. These digital signatures are secured by an underlying public blockchain like Ethereum or Solana, guaranteeing that ownership cannot be taken away and importantly, providing an open foundation from which to build. Nobody has to ask for permission.

As a result of this open model, artists can own the creative process, the fan relationship, and the economic model. On the other hand, fans can openly collect, trade, and even build curation businesses for music NFTs and earn a cut of sales, without altering the artist’s earnings. It’s a drastically different approach to what has traditionally been an industry with multiple layers of middlemen that extract value from those who create and amplify the reach of music.

There are some attempts to bridge traditional record label models into web 3.0 but it’s a difficult task with limited upside — it’s notoriously challenging to connect real-world assets with an immutable public blockchain. What’s important and interesting about crypto is the optionality provided at the lowest levels of the tech stack.

Importantly, an open foundation allows artists, curators, and fans to create their own context and platforms around the work that is created, shared, or enjoyed.

Enabling this experience

Let’s look at the industry through the lens of publishing, monetization, and distribution. These components need to be open source and decentralized so that applications can build on top without permission.

• Publishing: creating the “record” of the music — storing the metadata, mp3 file, or maybe high fidelity files for owners of the music NFT. Ideally, this record can be accessed in a way that maintains decentralization and allows third parties to easily interact. In short, this is the foundation for consumption and distribution. In the past, this might have meant publishing sheet music, a vinyl record, a CD, or setting up distribution agreements. Now it’s a collection of autonomous applications.

• Monetization: creating a digital contract that details the economic rights of all stakeholders. Instead of multiple levels of middlemen and paperwork, the artist can detail how royalties will be split, how many copies will be released, splits on secondary sales, and even the cut distributors receive when purchases occur through their sites. On-chain rights management allows for the resurgence of remixes and mixtapes, as stakeholders of original work can automatically earn on derivatives of their work. The current fragmented model for rights management means there is a mountain of music that is constantly pulled from Spotify, Youtube, and other popular providers, representing a significant amount of economic value missed by artists.

• Distribution: getting the music into the fans’ ears. Mass consumption of music may still resemble current streaming models because frankly, it’s a great user experience that requires little commitment from fans. But the open foundation of NFTs will allow fans to have a deeper relationship with the music and the artist. An artist can gift fans who hold an NFT a release to their new single or tickets to their next concert. Or maybe owning the music NFT gives the fan access to a distinct music file. New models and behaviors will emerge as a result of this open foundation.

Possible Implications

Bloggers become distributors.

DAOs crowdfund for artists’ work and replace the capital risk record labels take.

Streaming services sit at the top of the funnel for purchases.

The subscription model dies.

Bands can be global and headless.

Thousands or millions of micro curation services emerge, pioneered by devoted teenagers.

The form of music and the cadence at which artists release, changes as traditional single/EP/Album models are no longer required.

Traditional copyright is replaced by smart contract logic.

Live music becomes more popular as fan engagement increases.

Conclusion

This new model will spark artist creativity and fan loyalty. It’s impossible to predict all the ways artists and fans will experiment. Visual art proved the NFT model, and given its reach, music is likely to be far more popular and impactful. Importantly, the foundation for this paradigm needs to be permissionless and decentralized to eliminate platform risk and allow for spontaneous experimentation. We’re extremely excited to see this space take off.

Try it for yourself. Buy releases on Nina, Sound, or Catalog. Or browse these releases through an aggregation tool like FutureTape.

Cheers,

Phil Bonello

Thanks to Mike Pollard, John Pollard, Francisco Oliva-Velez Cancel, and Andres Garcia for their help and feedback.