NFTs Are Poised to Define the Future of Music

After the NFT explosion which largely set the mainstream narrative for blockchain in 2021, many supporters of crypto now believe that 2022 could be the year which NFT music could finally take off. Such news should be seen rather positively, as musicians who haven’t climbed to the top of the Billboard charts often struggle to survive only on the income brought in by their music. In a world where streaming intermediaries (e.g. YouTube, Spotify, and others) own the connection between a fan and a piece of music, artists all over the world are at the mercy of these intermediaries in terms of compensation, visibility, and allowable content.

For those who are outside of the music industry, it may be surprising to learn how minuscule the compensation can be for artists who have their work on popular streaming platforms.

Just how bad is it? $0.0043 cents. That was the 2020 Spotify rate for an artist each time their song was streamed. YouTube? It’s even worse, with the average pay per view hovering at $0.0005 cents (that’s 1/20th of one penny). At significantly less than one cent per stream, it should be no surprise that an average creator is not able to fully support themselves off of their music. In fact, with the world’s average salary hovering around $790 USD per month, an artist would have to have over 183,000 Spotify streams, or over 1.5 million views of their YouTube video each month. And let’s face it, with many musicians coming from the western world, a monthly intake of $790 just isn’t going to cut it. Such high numbers on these platforms to reach a global minimum threshold is hardly reasonable for the average creator and aspiring performer.

How Music NFTs Are Changing the Game

As a decentralized Web3 technology, by default, NFTs remove the middleman that serves as the intermediary between artist and fan in the Web2 world. As seen with the example above, these intermediaries compensate little, and take enormous cuts of the revenue pie when it comes to monetizing the content put out by artists.

With NFTs, musicians can simply tokenize their music on the blockchain, and sell their content directly to their fanbase. No centralized intermediaries, no middle-man cut, just a direct musician to fan relationship.

However, the scope of NFTs goes beyond just a simple transaction between artist and fan. More than just a file which gets transferred between one party to another in the digital realm, the underlying technology that is built into an NFT allows for business and fan opportunities which are just not possible to do in the Web2 world.

What are these opportunities? For starters, with NFTs, music creators can:

• Distribute music directly to fans, instantly and without an intermediary party
• Reward existing NFT music holders with special airdrops into fan wallets (made possible as the artists will know at any time the wallets which are holding their NFTs)
• Leverage the information of knowing which wallets are holding their NFTs by gating access to exclusive content — wherein fans will have to authenticate their access via the NFT needed
• Use NFTs in a multi-functional way, which includes bringing the NFT use case into the real-world (e.g. by leveraging an NFT as an admission ticket to a live concert venue)
• Make updates to NFTs to inform their holders as necessary (e.g. as a ticket, update the venue hall if logistics change, or even change the NFT itself to reward holders for a specific reason)
• Create a means for fans to support up and coming artists, and for those fans to also reap financial rewards through revenue sharing that could be programmed into the NFT
• Reward NFT holders through collaborations with other artists (e.g. NFT holders may be able to attend a live concert of another artist for free, as the artists are supporting each other)

The above list is not exhaustive, and more than likely contains other means in which musicians can leverage NFTs and ultimately change the way they live and work forever.

Here’s How it Could Work

To see how the above could really work, it may help to provide an example of an up-and-coming rock band, which we call “The Bandits”.

The Bandits are a rising rock band in Los Angeles. They’ve played a few shows around town, and are building a solid fan base. During the past year, one of the band members has learned about NFTs, and how musicians like them can leverage them to create a direct relationship with their fanbase. This is appealing for the band, as it allows for them to transact directly with their growing number of fans, without an intermediary taking a cut of their already low earnings.

To help their financial situation, The Bandits decide to drop their genesis set of NFTs, which serves as a lifetime free ticket to any show they play, plus rewards remaining NFT holders with 2% of distributed earnings, each time a genesis NFT is sold in the secondary market. Their 1,000 initial set is sold out in less than 24 hours. The Bandits have bought a few for themselves, but have also generated enough from the mint to keep them going as a band for the next year.

Nine months later, the popularity of the band has exploded. They are now playing throughout the country, are approaching 100,000 fans, and are selling out small music venues in each city they go in. Much of the rise in their popularity has been due to their initial genesis NFT holders, who, with their NFT, have felt like they are part of a community with the band. As a community, the NFT holders have shared the band’s music through various social media channels, and brought more and more fans into The Bandit’s ecosystem.

As a reward for these genesis NFT holders, The Bandits have already dropped three unreleased tracks to the NFT community — giving them a behind the scenes look at some of the tracks which hadn’t made it to the stage yet. Further, The Bandits want to support another upcoming rock band, named “The Suits”, and have arranged such that genesis NFT holders can attend one of “The Suits” concerts for free.

Over time, as the fan base grows, The Bandits release different NFTs, to serve as tickets to upcoming concerts, for special occasions (e.g. holiday bonuses, etc..), and more. The underlying community which The Bandits have built with their NFTs is ever increasing, and their sales — in terms of music, concert tickets, merch, and more, have never been higher — with the band taking a cut that doesn’t include any centralized intermediary parties.

For the Rest of the Fans — Music NFT Renting

By the time that The Bandits have begun touring internationally, prices for their NFTs have reached prices which are no longer within reach for some of their newer fans. Yet, there is content released by the band which some of these new fans do want to watch/listen, but are unable to by lieu of not holding the correct NFT.

In order to ensure that only their NFT holders have access to their exclusive content, The Bandits have made it a point to not release any of that content online for free. However, knowing that there are fans out there who may want to check it out but may not have the financial means to own an NFT, The Bandits have provided their holders the option to stake their NFTs, so that they can be rented to others.

Such solutions, known as NFT renting, are available. In particular, IQ Protocol, a digital asset renting solution which supports both fungible token and NFT renting, provides one such solution. By leveraging NFT renting, The Bandit NFT holders who wish to hold on to their NFTs, but also earn some passive income on the side, can stake their NFTs and make them available for borrowing.

Fans who might want to rent the genesis NFT, which would allow them access to read and watch exclusive content, and more, would be able to do so for a limited period of time, confined by the rental terms of the agreement. Using IQ, which would issue a wrapped, expirable version of the original NFT — NFT holders would never have to worry about the safety of their token. In this arrangement, while the renter has access to all of the rights associated with the token, the version rented is not the original — and this wrapped token will eventually expire and return the token rights back to the original token.

With NFT renting, The Bandits can ensure that the integrity of their token remains intact, while also providing a means for other fans to check out exclusive content that isn’t freely available online. In this way, NFT renting ensures that while the issued NFTs are exclusive, they are not so exclusive that all non-NFT holders are shut out of the ecosystem, and limiting the potential of their brand.

The Future of Music, NFTs, and NFT Renting

Blockchain, crypto, and NFT adoption have reached new heights after the whirlwind year of 2021. With the obvious benefits offered through musicians issuing their own NFTs, it is difficult to imagine how the music community does not leverage this technology sooner rather than later.

NFTs open up an entirely new economy — one which directly benefits the creator, and also allows for a better and more meaningful fan experience. From direct rewards to in-person uses, NFTs create opportunities which just are not possible in the Web2 music distribution and fan model. Supplemented by the possibilities which NFT renting enables, as well as how NFT renting could possibly bring even more fans and more avid supporters into a musician’s ecosystem, and one realizes just how much potential there is with NFTs in just this industry alone.