Blockchain NFTs, short for non-fungible tokens, have become a popular topic over the past couple years as several digital art collections including CryptoPunks and Bored Ape Yacht Club made international headlines when their art sold for millions of dollars on the Ethereum network. While most NFT transaction volume has been limited to digital art in the form of GIFs and JPEGs, a new form of music NFTs is emerging on blockchain networks including Ethereum and Solana.
Music NFTs are essentially digital records of music ownership recorded on the blockchain. Music NFTs are called non-fungible because each token is unique, and a music NFT can represent ownership of a song, album, or the associated artwork. Music NFTs are minted, bought and sold the same way as all other NFTs.
Independent artists often describe the current state of the music industry as unfair. Streaming music distribution is controlled by large companies such as Spotify and Apple music, and independent musicians have little negotiating power. Musicians typically receive only 5-25% of revenue associated with their product due to the many middlemen involved in transactions.
Currently the music streaming industry is estimated to be approximately 400 million users and $13 billion each year. While this may seem like a lot, many artists still struggle to make a reasonable income from their creative work. It is estimated that Apple Music and Spotify pay less than one penny per play.
Blockchain music NFTs could change this industry dynamic by enabling artists to earn royalties from music NFTs. NFT music enables musicians to retain total control over the subsequent distribution of their work. NFTs open up many ways for artists to connect with their audiences on a deeper, more meaningful level and form communities around them, as well as designate royalty rates.
Music NFTs have enabled many artists to improve their earning. @Cooopahtroopa estimated that Bajan rapper Haleek Maul made $226,800 in music NFT sales on Catalog, which is substantially larger than his annualized Spotify earnings of $178. Maul confirmed to CoinDesk that he made 81 ETH from five Catalog sales, which at the time was worth more than $250,000.
Music NFTs offer a wide range of potential use cases such as granting access to discounted concert tickets, special areas at concerts, or meetups with the artist. Wired editor Kevin Kelly has long stated that all artists need only 1,000 true fans who will support them. Music NFTs could help make this a reality by facilitating direct payments between fans and musicians.
Decentralized music services such as Audius are empowering music artists to take power over streaming. Audius is a crypto-powered music sharing and streaming protocol that gives artists more power over how their music is monetized and enable them to connect directly with fans. Audius is powered by the AUDIO token, which has a market cap of about $400 million as of June 2022.
Audius lets artists create their music and sync it with the app that connects fans directly with artists. Audius acts similar to a music co-op, using its token to balance ecosystem incentives for node operators, artists, and fans. Artists can upload their tracks for free and users can listen to them for free while everyone earns crypto tokens. There is no centralized party to intervene or take a split of the profits.
Blockchain technology is still relatively new, and music NFTs are in early innings. Over the coming years we can expect the music NFT industry to experience strong growth. Independent musicians will now have the opportunity to influence their earnings streams and distribution in a truly decentralized manner.
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