You’ve probably noticed that the music industry has added an acronym to the list that includes MP3, CD and LP, but NFTs are more than just another format. This product has the potential to revitalize the industry by putting more control back in the hands of artists while providing greater engagement with fans.
What Are NFTs?
NFTs, or non-fungible tokens, represent pieces of digital content that are connected to the blockchain, a digital database that also underlies cryptocurrencies such as bitcoin. While cryptocurrencies are fungible assets, exchanged like traditional currency, each NFT is assigned a unique code so that no two are exactly the same.
Although the first NFTs date back to 2014, this form has recently exploded in popularity since becoming incorporated in the art and sports worlds to market paintings, videos, collectibles and even designer sneakers.
- A LeBron James highlight video clip sold for more than $200,000.
- “Cryptopunks,” a series of portraits created by Matt Hall and John Watkinson, has reached selling prices of more than $11 million each.
- Mike Winkleman, a digital artist who goes by the name of Beeple, created a massive collage called “Everydays: The First 5,000 Days.” In the first NFT sale to be conducted by legendary auction house Christie’s, the piece sold for a record-setting $69 million.
Why NFTs Are Different
The unique identification code embedded in each NFT is the real game-changer. While an artist retains rights to the work, the NFT’s singular quality allows the purchaser to have actual ownership. Unlike vinyl records, CDs and MP3s, NFTs cannot be exchanged for or replaced by another copy.
Thanks to the unique identifier, the database can track and record any transactions involving each NFT. Whether they’re transferred or sold, there’s immediate and accurate documentation that includes the names of the parties and the price history.
Benefits of NFTs for Musicians
So what does this mean for you as a musician, especially if you’re just starting out? Perhaps the biggest disruption is in the way artists monetize their product.
Spotify and other streaming services pay only a fraction of a penny per stream, which means volume is the only way to see a decent return. According to a rather disheartening statistic, 90 percent of all streaming income is paid to the top one percent of artists.
On the other hand, sales of NFTs are not constrained by the algorithms of large corporations. There’s more of a direct correlation between the price paid for the NFT and the value it has to the consumer. Without a doubt, NFTs have a greater cachet due to the connection it creates between fan and artist.
NFTs also offer a better solution to the problematic issue of royalties. Physical and digital copies of songs can be sold, swapped and passed from one person to another without renumeration to the artist. Since NFT movement creates a digital trail, a musician can more easily capture royalties.
Top NFT Moments in the Music Industry
- Last March, Kings of Leon became the first band to release an album as a NFT. Within a week, When You See Yourself generated more than $2 million in sales.
- During the same month, Grimes released WarNymph Collection, Vol. 1. The suite of exclusive pieces of artwork and original songs earned $5.8 million.
- Shawn Mendes partnered with tech company Genies to release a NFT collection of digital “wearables,” including a necklace, vest, earrings, and guitar.
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