Rebbeca St Vincent delves into the mysterious world of blockchain technology and NFTs
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If you are anything like me (a person who generally zones out anytime anything remotely related to complex technologies are brought up in conversation) then you’ve probably heard about crypto-currencies like Bitcoin, attempted to understand them, failed, and gone back into the realms of blissful ignorance. In fact I deliberately pursued a career in the music industry in the hopes that I would never really have to think about things like blockchain, NFTs and the stock market. Leave that stuff to the tech geniuses and Reddit fanatics right? I’m just here to make playlists and have a good time.
Well, I was wrong. Turns out that blockchains (the technology behind Bitcoin) might actually end up being more connected to the music industry and even the simple act of ‘making playlists’ in more ways than I ever could have imagined. I’m only on month 3 of my first proper music industry job, and I am already realising that I may need to have a re-think of my originally dismissive attitude, as it appears that this technology has the potential to play a huge part in shaping the music industry in the not so distant future. Blockchain and NFTs have already exploded in the world of fine art and paintings, and are likely to do the same in the music industry. This past month in particular has seen the industry sit up and take note of this emerging technology, as people are beginning to realise that this is actually something we should all be paying attention to. In this article, I intend to examine some of the ways that blockchain is predicted to impact the wider music industry, as well as the repercussions it may bring to up and coming, smaller artists.
So what is blockchain and how can it benefit the music industry?
In simple terms blockchain technology allows users to digitally record information; information that can then be transferred, but not changed or erased. It can be used to create and exchange currencies (e.g. Bitcoin), but importantly it can also be used to create NFTs, or non-fungible token’s. These ‘tokens’ basically act as unique ‘certificates’ that can grant the owner with ownership over digital pieces of art, that can be exchanged or sold to buyers for money. These NFTs could include scarce products such as visual art, limited-edition merchandise, personalised digital content, or exclusive recordings. The owners of these NFTs can then only sell them to other users, and never copy them as these ‘blocks’ are ultra-secure. This stands out in contrast to the current internet, where users have easily been able to copy and pirate media, depreciating its value. However, with blockchain, buyers of NFT art are purchasing scarce, original pieces that have value added by the safety of blockchain, ensuring that they are either the sole owner, or one of a limited few. This safety and scarcity is a key factor in the desirability of NFTs for many.
By creating scarcity, these products become desirable to an artist’s fans and therefore increase in value
Users would also now be able to officially ‘own’ media again, instead of just ‘renting’ or ‘borrowing’ media from sites like Spotify or iTunes. Blockchain would allow users to secure ownership over digital copies of art, and these copies would actually be worth something again. So why not just buy a copy of a CD if you want to ‘own’ media? Well, the way that many are currently envisioning NFTs in the music industry would be focused around the concept of scarcity. Artists would probably still release their usual albums on platforms like Spotify for casual listeners to enjoy and stream. However, they would utilise NFTs to trade rare, personalised and unique content, such as a song that only 100 people are allowed to purchase, or a behind the scenes video with only 15 tokens. By creating scarcity, these products become desirable to an artist’s fans and therefore increase in value.
For artists in the music industry, another perk of using this technology would be that blockchain exchanges take place solely between the seller and the purchaser. Artists can keep all of the money from a blockchain auction because these exchanges don’t involve a record label, and therefore they do not have to split the profits. This transaction essentially cuts out all of the middlemen. The last report into the music industry’s revenue splits released in 2018 argued that artists only made 12% of the $43 billion generated by the US music industry. Although this percentage has likely risen since this time, this figure still demonstrates the sheer number of middlemen present in the industry, and why NFTs might appear an appealing prospect to artists.
Currently, Spotify is believed to pay between £0.002 and £0.0038 per stream, while Apple music pays about £0.0059
This also means that both artists and users don’t have to be solely reliant on third party apps. The current system involves artists uploading their content to applications such as Spotify or Mixcloud, relying on these parties to safely store their data and distribute royalties. Currently, Spotify is believed to pay between £0.002 and £0.0038 per stream, while Apple Music pays about £0.0059. These are tiny amounts leading to tiny total streaming revenues, especially for smaller artists. Although NFTs would be unlikely to fully replace streaming sites, it potentially would be able to offer artists another valuable source of income, helping put them back in control of their own music.
This March has already seen artists such as Grimes sell a collection of digital artworks for nearly $6 million and Kings of Leon become the first rock artists to release an NFT digital album, generating $2 million in sales (of which they donated a large proportion of to charity). Calvin Harris, who also currently has NFT artwork for sale has claimed that he believes this technology will “revolutionise the music industry” due to “the fact that smaller artists can have ownership over their music and literally just make what they want and then let the people decide”. But let’s pause on that thought for a moment. So far we’ve discussed the positive impact NFTs are predicted to have on the music industry as a whole, and how larger artists have already begun to find financial success with the technology. But these are artists with already large platforms, and already dedicated fan bases who would be willing to pay extra for rare and exclusive content. What about smaller artists? Is this really going to be as “revolutionary” for them as Mr Harris has claimed?
How will this impact smaller artists?
So sure maybe this technology can pull in the big bucks for already giant celebrities, but these individuals only make up a tiny percentage of the music industry. There are legitimate fears, that despite all this excitement and promise, this technology will only further create disparities within the music industry, and on a wider scale, further increase the gap between the rich and poor in society (and that’s if it even properly takes off at all, but I will get on to that in a second). In today’s current music market, 90% of streams go to the top 1% of artists and there is a chance that NFTs may simply act as another platform for already established artists to grow, leaving those who are up and coming falling further behind. Unfortunately it is unlikely anyone is going to want to pay thousands of pounds for work from an underground DJ or an unknown musician.
A recent DJ Mag article suggested that smaller artists would therefore have to be more ‘creative’
in their approaches to generating income, using an example of Candian DJ Jacques Green who sold the publishing rights to one of his tracks through blockchain, meaning that the winner of the auction now owns a percentage of his song. And it seems he’s not the only one getting ‘creative’ selling copyrights. Bluebox is a site launched by Ditto Music that uses blockchain to record full or fractional ownership of recorded
music and/or publishing copyrights, and subsequently splits royalty payments. This allows buyers of these NFTs to actually own shares of music, and potentially reap the rewards of this investment later down the line in the form of royalties. To me this feels a lot like reverting back to everything these transactions were trying to escape (e.g. record labels taking profits from a song) but perhaps the artist would have greater control over the percentages they sell.
Whether all this buying and selling of these NFT tokens is something that will be dominated by rich traders however remains to be seen, although right now it certainly seems likely
In a recent Vice interview with Shara Senderoff, (the president of Raised in Space, a music and tech investment group), something interesting was revealed about the nature of many recent NFT transactions. Senderoff argued that some of the people currently buying artists’ NFTs are likely to be traders rather than fans- people who view NFT tokens as more of an asset and something that they can later sell for a profit. She stated that “these are collectors that have been in the crypto NFT space before this recent boom. If you really dig into what’s behind these numbers, it’s the same group of 30 people”. The article goes on to suggest that this is further evidence of a widening gap between the rich and the poor, as it is those who are already wealthy in the NFT space that are going to continue making further profits. Whilst it is understandable why Vice and Senderoff are critical of the current situation, the concept of users buying and selling artists NFT tokens like traders trading stocks on the stock market is certainly an interesting one, and one that may not necessarily be a bad thing for smaller artists. In theory, it could motivate music fanatics or those interested in the industry to buy assets from up and coming artists in the hopes that one day these artists will blow up and their token could be sold for a profit.
Whether all this buying and selling of these NFT tokens is something that will be dominated by rich traders however remains to be seen, although right now it certainly seems likely. But this idea of collaboration between artists and buyers is certainly an area for further exploration. Maybe it could prove fruitful to rising artists, and those who are successfully able to predict growing talents.
Another route NFTs could take that could maybe benefit smaller artists is through streaming sites that utilise blockchain technology. Developing platform ‘Audius’ is attempting to develop a streaming service that isn’t owned by a for-profit company, but instead by the artists. These artists would then be able to choose exactly how they want to monetize their music, such as charging $2
a month for access to their entire catalog, or $5 a month for this plus exclusive opportunities. It certainly sounds like it could be promising for smaller artists. But this technology is still in its early days, and it begs the question whether anyone would actually want to pay this amount for individual artists, when they could just pay £10 or so for access to a range of artists on streaming services like Spotify. Which brings us on to the problems…
The first main problem is will anyone actually be interested in paying considerably more money for services offered by these early blockchain platforms, when streaming sites like Spotify and Apple Music exist. Yes rich people with large disposable incomes may want to splash out and actually own a piece of media (or even a piece of a song), but will that translate to the average citizen. I’ve seen a lot of comments on current videos about NFTs and blockchains from people arguing that they don’t care about owning music, and they just want to listen for cheap. Maybe if streaming sites were forced into evolving and began charging higher fees, or were abolished all together, then these sites might really start blowing up. But it seems likely that this would cause uproar, as society has become very used to affordable music. As long as streaming sites exist in their current form, it feels hard to imagine a world where normal people would throw a lot of money at music NFTs, meaning that right now the NFT playing field is solely a place for the rich.
The volatile nature of these markets makes them a dangerous place to mess around in, especially for those who have a lot to lose
Arguably cutting off the middlemen in aspects of the music industry could also result in job losses, as record labels, streaming platforms and distributors may start to lose some aspects of their role (although they are unlikely to fully disappear). However, as mentioned above, this all might be totally irrelevant because there is certainly no guarantee that blockchains will even properly take off and be accepted by the general public. At the moment this is only something the rich are engaging with, and the general public may find that they simply aren’t interested/ don’t have the access/ don’t have the money/ don’t want to learn.
As well as this, blockchains and cryptocurrencies are presently extremely volatile markets, and whilst they might be currently in mid-boom, they could certainly crash at any moment. NFTs may be worth a lot right now, but there is no guarantee it will stay that way in the future. The volatile nature of these markets makes them a dangerous place to mess around in, especially for those who have a lot to lose. People like smaller artists and those with little disposable income. If the markets crash then many could end up losing out on a lot of money, a dangerous concept unless you can afford to do so.
Oh did I mention it’s also currently super bad for the environment due to the energy needed for creation and trading? But that’s a whole issue in itself so you might have to do your own research on that one.
Am I done discussing this yet? Almost. Unfortunately once you start falling down a blockchain rabbit hole it is extremely easy to get sucked in. In fact I’ve barely even scratched the surface of all the predicted possibilities that NFT and blockchain could bring to the music industry, and the impact these may or may not have on smaller creators. But I think we will leave it at that for now. These things may end up being completely irrelevant anyway because this might just be a bunch of hype generated by a load of stock bros who want you to get excited about their latest play thing. And even if it does take off, it feels depressingly likely that the NFT playground will once again be a place for those with large disposable incomes who have easy access to new technologies and ways of learning how to use them. It certainly doesn’t seem like the beginning of a fair music industry revolution, but instead the beginning of the same old story played out on a new ground. But perhaps I’m being too pessimistic, and actually the growth of these new technologies will put pressure on music streaming sites to come up with a system that allows for fairer payments for artists, especially those with smaller audiences. Or perhaps NFTs are the start of a new evolution of the music industry; a place of transparent transactions and a more equal distribution of wealth. Whatever your take is, I think it’s fair to say that blockchain is not going away just yet, and if that is the case then it is definitely something that artists and creatives should be keeping on their radar. Smaller artists can either run from it and pave their own path, or try and tackle it with both hands, but either way they definitely need to keep an eye on this growing beast.