The first revolution to be televised was the falling of the Berlin Wall, however, the next one won’t be televised, it will be minted. Since the beginning of this year, we are witnessing the meteoric rise (and sometimes fall) of nonfungible tokens, or NFTs, in mainstream media and popular culture. We all read the news and hear about them, but is the hype real?.
Top-notch businessmen and media experts, such as Mark Cuban and Gary Vaynerchuck are continuously and strongly advocating for the NFT use and the role the smart contracts will play in the near future, while each week new NFT exchanges and drops continue to roll out as flees. Jay-Z’s Twitter profile picture is an NFT CryptoPunk.
With or without the buzz, one of the most powerful and overlooked impacts of NFTs has been in the music industry. NFTs have the power to change the game for independent artists by providing them a new way to earn their income at the same time they are connecting with their fans, and this kind of change has been a long wait.
There are many aspects of NFTs that make them extremely interesting for musicians. The first one is financial: NFTs have been selling lately at extremely high prices. Superstar artists, like Mike Shinoda (Linking Park), Grimes, and musician and producer Justin Blau, have sold NFTs for millions of dollars. Even lesser-known artists, such as Ozuna and Steve Aoki, have made hundreds of thousands of U.S. dollars selling NFTs. The artist Young and Sick had only 27,000 followers on Instagram when he sold an NFT for $865,000.
These numbers are incredible, especially when you compare them with the payout royalties they generate for streaming platforms. Streaming platforms have been the main revenue source for most of the musicians in the digital age and became even more relevant during the COVID-19 pandemic last year when the live show became inaccessible. The payout rates of these streaming platforms, however, are very low. This has been a hot topic since their creation. Spotify pays out on average around $0.003 to $0.005 per stream meaning this is around $3,000 to $5,000 for 1 million streams, but 1 million is a large number for an independent and relatively unknown artist.
In 2020, there were only 13,400 artists that made more than $50,000 (the average wage for United States workers) of yearly revenue on Spotify. With these numbers, you can see how NFTs start to look like a real opportunity for selling a song or a collectible and you can make much more with one sale than you could do in your entire career from a streaming platform. NFTs can also provide recurring revenue: They also can be coded so that the original creator receives anywhere from 2.5% to 10% of a sale every time the token is resold.
NFTs for musicians
For musicians, the other value of NFTs is their “unlockables” feature when, creators can include additional perks within the contract of an NFT, i.e.: a one-on-one video call with a fan to shoutouts or physical products, or even giving away partial ownership of a song. This last case is unique, as now artists can treat songs as equity investments — they can create an NFT and give away 30% ownership of a song. This allows those contributing money a chance to get an actual return on their initial investment, while the artist gets money in his pocket. This is like a more rewarding next-gen version of a crowdfunding site.