A music NFT is a distinct digital asset that is issued on a blockchain and is linked to an individual song, EP, album, or video clip.
Non-fungible tokens (NFTs) have been making waves in the art world, with generative art collections becoming increasingly popular among Web3 enthusiasts and in the traditional art world. However, NFTs as immutable records of ownership for digital items have many more use cases.
While the music industry’s global revenue is expected to surpass $65B in 2023, these earnings predominantly flow into a few large platforms and major record labels. As a result, many artists have started exploring the use of NFTs as a new way of distributing and monetizing music.
Music NFTs have the potential to revolutionize the way artists create, distribute, and earn income from their music. In contrast to the current model, where artists have to rely on record contracts, brand deals, and extensive touring to advance their careers, music NFTs present artists with the opportunity to generate income solely based on their primary focus—creating music.
In this post, we’ll look at what music NFTs are and how they work and examine how this technology can transform the music industry through improved economics and more immediate fan-artist relationships.
What Is a Music NFT?
First, a quick primer on NFTs. An NFT is a token on a blockchain that is unique. Each NFT has a unique token ID and contract address that sets it apart from other NFTs. While an NFT can be linked to any media, what’s typically associated as the “content” of an NFT is stored in its metadata, which can point to images, videos, music, or other forms of media.
In a nutshell, a music NFT is a distinct digital asset that is issued on a blockchain and is linked to an individual song, EP, album, or video clip. Artists can create unique digital assets as NFTs that represent their music, concert tickets, exclusive merchandise, or virtual experiences, which people can then own, use, or trade. Purchasing a music NFT can be seen as a way of supporting an artist—akin to buying their music directly—while still allowing others to enjoy their work.
Music NFTs enable artists to forge a more direct relationship with their collector community. By helping to circumvent larger platforms, music NFTs give artists the chance to build a more direct connection with their fan base, who can also benefit from new ways of interaction and ownership.
Some music NFTs are generated entirely by an on-chain algorithm with no external dependencies. Generative music posted on-chain empowers artists to create a permanent imprint on an immutable ledger and preserve their creation for future generations exactly as originally intended.
How Do Music NFTs Work?
In essence, music NFTs help shift the ownership of music from companies to individuals. While record labels continue to play an important role in the music industry and can serve several business functions for artists, music NFTs allow artists the option to maintain full ownership of their creations.
Some music NFTs include revenue and royalty-sharing features that can provide a source of income for artists without them having to rely solely on earnings from streaming services, building a large following, or engaging in excessive marketing. Instead, they can rely on a smaller group of highly dedicated fans.
As such, music NFTs can help emerging artists who may not have access to traditional funding or distribution channels. With the rise of Web3 platforms and marketplaces, musicians can independently create and sell their NFTs, giving them greater control over their careers and revenue streams.
Another important benefit is the ability to create token-gated communities that enable fans to participate in exclusive events and promotions, opening up secondary markets for fandom that alter the dynamics of being a fan and enable more integrated fan communities.
How Will Music NFTs Impact the Music Industry?
\$0.004 Per Stream Vs. \$40 Per Mint
Since the onset of streaming, opportunities for musicians to earn an income have significantly decreased. NFTs turn pieces of music into a commodity, like a piece of art that can be bought and sold, similar to the earlier days of the music industry with vinyl records, cassette tapes, CDs, and MP3s.
Currently, many artists find it difficult to see significant returns on streaming platforms. According to some estimates, one stream on Spotify amounts to about \$0.004 paid to the artist, meaning that one million streams net roughly \$4000. Getting that many streams isn’t realistic for most independent artists. It’s important to note that the issue here isn’t necessarily with individual companies but more with the underlying economic model. Offering the ability to stream a large portion of the music library of human history for the equivalent of ~$10 a month creates thin margins both for the platforms and the creators, and is likely leading to a race to the bottom.
Let’s say an artist whose music had been streamed one million times decided to release a music NFT collection with a mint price of \$40. If one hundred people bought one NFT each, the artist’s earnings would be the same as in the streaming example above (\$4000). This illustrates the new economic paradigm that music NFTs enable—on one side, one million people interact passively with the music through streaming, while on the other side, one hundred people interact actively with the music through NFTs, and the result is the same.
Turning Curation Into Investment
Artists have historically relied on record labels (ultimately a for-profit business) for investment. However, record deals can lock artists into a set path early on in their career that may not align with their later goals.
Before music NFTs, crowdfunding was one of the ways that independent artists could raise money, but it isn’t necessarily sustainable, and the fans’ incentive to participate usually stems from a passion for the artist. Music NFTs, on the other hand, offer a new way for fans to support artists with the potential of a financial return, changing the nature of the relationship between artist and fan.
Music NFTs allow fans to become early investors in an up-and-coming artist and help steward their success. Finding an artist early who may be underappreciated can lead to success both for the artist and their fans. Fans can take early exposure to the artist and form a more intimate relationship with them, similar to buying a stake in an early-stage startup. Fans (early investors) have a vested interest in the artist (founder) succeeding, while artists are more open to interacting and sourcing opinions and ideas from their community.
Fan Communities and Digital Identity
Music NFTs enable fans to express themselves through their on-chain activity and digital identities, providing a unique way for them to connect with the music and artists they love. These NFTs can be seen as a wrapper for cultural signaling and identity games, enabling holders to map their digital identities to the memes they care about.
By opening up secondary markets for fandom and creating token-gated communities, fans can have a more integrated relationship with artists. This decentralized approach allows fans to organize and create more opportunities for success and exposure for the artists they support, similar to the function of a record label but via a more bottom-up approach. As a result, music NFTs can transform the way artists and fans interact and collaborate, leading to more meaningful and sustainable relationships underpinned by the fundamental benefits of Web3.
Music NFTs and Web2
It’s important to recognize that music NFTs are not competing with existing platforms but rather opening up new markets, revenue streams, and business models for musicians. Although music NFTs offer many advantages over current economic models, the two systems can complement each other effectively.
Web2 platforms are likely to integrate the ability for artists to create NFTs on their platform to stay competitive in the ever-evolving landscape of musical formats and consumer habits. Meanwhile, fans can still enjoy the convenience of streaming vast music libraries for a small subscription fee.
NFTs can also have a significant impact on the $70B+ ticketing industry by providing a superior ticketing experience for events and secondary markets, as well as a more transparent marketplace experience that can help mitigate scalping.
Music NFT Marketplaces
Music NFTs can be traded on common NFT marketplaces including OpenSea, Blur, LooksRare, and X2Y2 as well as specialized Web3-native platforms such as Audius, Sound XYZ, Royal, Opulous, and Catalog.
As music NFTs are an emerging field in the growing Web3 space, it’s uncertain whether the transactional activity around them will gravitate toward specialized marketplaces or generalized NFT exchanges. It’s also worth noting that once music NFT infrastructure matures, these tokens can benefit from permissionless composability just like any other NFT and be used in NFT finance protocols to enable additional utility and unlock a more integrated music NFT technology stack.
How To Create and Sell Music NFTs
On a high level, these are the steps you’ll need to follow to create and sell a music NFT:
- Choose a platform: Select a platform that supports the creation and sale of music NFTs. Each platform has its own process for creation, so it’s important to do your research and select one that meets your needs.
- Create your NFT: Creating your NFT typically involves uploading a high-quality audio file, creating artwork, and adding metadata such as the artist/band name, title, and genre. You’ll also need to decide whether you’re launching a collection or a one-of-one edition.
- Set a mint price: The mint price of your NFT can be a fixed price or an auction-style sale. While the mint price is completely up to your own judgment, you could consider factors such as your popularity as an artist, the uniqueness of your NFT, and the overall market demand for music NFTs.
- List your NFT: After setting your price, list your NFT for sale on the platform. Once a buyer purchases your NFT, the transaction will be settled on the blockchain—the buyer will receive the NFT, and you’ll receive payment for the sale in your crypto wallet.
How Music NFTs Can Leverage Chainlink Services
While the steps outlined above will help you create a simple music NFT, Web3 offers a vast universe of additional possibilities through the power of programmable smart contracts. To unlock the full potential of music NFTs, developers can use Chainlink, a Web3 services platform that enables the creation of more sophisticated decentralized applications and digital experiences. Here are some ways in which Chainlink services can help enhance music NFTs:
- Fair NFT mint—Just like other types of NFT collections, such as gaming items or art, music NFTs can have unique traits or characteristics that can give them a higher degree of desirability or utility. Music NFT issuers can use Chainlink VRF’s verifiable randomness to help ensure that the distribution of these traits is provably random.
- Random rewards—Music NFT projects can reward community members with random rewards or upgrades based on hitting certain milestones or commemorating special events. Chainlink VRF can be used to help ensure a fair and transparent selection process for rewards and prizes.
- Dynamic music NFTs—Dynamic NFTs automatically evolve based on external conditions. However, blockchains are inherently unable to access off-chain data and computation. Music NFT issuers can use Chainlink Automation to periodically trigger music NFTs to update based on real-world data and events relayed by Chainlink Data Feeds.
- Web2 integrations—Chainlink Functions enables anyone to connect the world’s APIs to a smart contract, allowing developers to create unique interactions by linking NFTs with Web2 music services such as Spotify and Apple Music. For instance, artists could receive regular crypto payments for Spotify streams and get automatic email or text notifications for every payout.
- Generative music—Some artists use blockchains’ permanent storage capabilities to create a lasting mark of their own through generative audiovisual NFTs. Randomness often plays a critical role in generative art, and Chainlink VRF is an excellent source for provably random numbers.
The Potential of Music NFTs
Music NFTs have emerged as a new tool for musicians to monetize their work and engage with fans in new ways. With music NFTs, artists can sell exclusive content, such as never-before-heard tracks, live performances, and digital artwork, while fans can own a piece of their favorite artist’s work and participate in a community of like-minded individuals.
Music NFTs have the potential to reshape how music is discovered, distributed, and monetized. As music NFTs continue to gain traction, it’s important for the music industry to embrace this new technology and explore its potential for the benefit of artists and fans alike.