Although many people associate non-fungible tokens (NFTs) with digital pictures sold as blockchain-based assets, there are many other applicable categories. One fast-growing ecosystem in the NFT industry is music NFTs.
On the surface, music NFTs may appear like the blockchain alternative to buying tracks on iTunes. However, when you buy a track on iTunes, you only buy the right to listen to that music. There’s no asset ownership on iTunes – only a license to listen to what you’ve just paid for. In contrast, music NFTs let anyone listen to tracks but also confer ownership over that file through an NFT.
Music NFTs might sound counterintuitive: Why buy the music you can already listen to? The answer to that question is the same as buying JPEGs anyone can right-click and save. Markets, or people, find value in ownership of provably unique and original assets.
For some, that value could come from a closer relationship with the artist they like. For others, it could be financial exposure to an artist who they believe will thrive. If the artist becomes successful, the value of the music NFT they’ve invested in could rise.
Music NFTs can generate lucrative revenue for some artists. One music NFT supporter @Cooopahtroopa estimated that Bajan rapper Haleek Maul made $226,800 in music NFT sales on Catalog, while his annualized Spotify earnings are just $178. When asked about the figures in the tweet, Maul confirmed to CoinDesk that he's made 81 ETH from five Catalog sales, which at the time was worth more than $250,000.
There is a wide range of potential use cases for music NFTs. They can be used to grant access to discounted concert tickets, special areas at concerts or meetups with the artist. It all depends on how the artist wants to structure the NFTs they issue. After all, as Wired editor Kevin Kelly has long argued, all artists need are 1,000 true fans who will support them – and NFTs help capture that idea for an increasingly digital world.
Unless specified, music NFTs give buyers no royalty or copyright claims – just as jpeg NFTs don’t either by default. But there’s also a growing subsector of royalty-oriented music NFTs that we cover below.
Music NFT marketplaces
Although the largest NFT marketplace OpenSea has a dedicated catalogue for music NFTs, most artists prefer to launch on music-specific marketplaces.
Catalog is the primary marketplace for single-edition music NFTs, a category known as 1/1 in the NFT world. It’s built on the Zora protocol, which also powers the OpenSea competitor marketplace by the same name. As of February 2021, artists have sold $2 million worth of music NFTs on Catalog.
Some artists prefer to release limited editions, e.g. 10 NFTs tied to one track, as opposed to 1/1s. For this, a popular option is Sound.xyz, which runs almost daily drops where collectors or traders can mint editions of a music NFT. These freshly-minted NFTs can be resold immediately on secondary marketplaces like OpenSea or Rarible.
Other platforms that also let artists mint 1/1s include Foundation, Arpeggi and FormFunction.
Platforms specialize in different music genres. Groovetime caters to dance music NFTs, and HEAT is another platform that’s yet to launch. Beat Foundry enables minting generative music, a genre involving collaborations between humans and computers.
Music NFT DAOs
DAOs, or decentralized autonomous organizations, are like crypto-based investment co-ops.
Some DAOs offer grants for NFT artists. MusicFund distributes membership via NFTs, and holders vote each month to donate ETH to three musicians through the community fund. The top three artists receive 0.6 ETH, 0.25 ETH, and 0.15 ETH, respectively. In addition to receiving funds, the artists also gain recognition. Bel, who won MusicFund’s second round of grants, went on to release singles on Catalog. (Although it’s not a DAO, another music grant-maker in crypto is Audius, which runs Audio Grants.)
Other DAOs are investment oriented. Noise DAO began with 65 initial members who have pooled together 1,720 ETH so far, with the mission of incubating NFT artists and investing in music NFTs.
In addition to investments, some like to keep it fun – Friend with Benefits threw an oversubscribed party during NFT.NYC in June 2021 that included DJ sets by Caroline Polachek, Doss, Pussy Riot, Channel Tres and others.
Normally, music NFTs only certify on-chain ownership of a token tied to a music file. They don’t confer any more rights beyond that – no royalties, most importantly.
But there are platforms seeking to change that.
Royal helps artists mint royalty-bearing NFTs, which they call Limited Digital Assets, or LDAs. LDAs facilitate sharing the revenue from streaming royalties with fans who hold NFTs. In October 2021, 3LAU minted the platform’s first LDA for his song Worst Case and associated artworks. NFT holders receive 50% in the streaming royalty rights.
Opulous is another platform that’s trying to integrate royalties into music NFTs. It lets token holders retain a share in the music copyright through an agreement established with the artist.
Music NFT videos
Perhaps because it’s a more capital-intensive venture than other aspects of music NFTs, there aren’t many music video NFT projects.
If successful, music NFT videos could change the ad-based Web 2 model that relies on the quantity of views. It’s the 1,000 true fans theory all over again.
Read More: 5 Ways to Earn Passive Income From NFTs