The revolution will not be broadcast; rather, it will be minted. We saw the spectacular rise (and fall) of nonfungible tokens, or NFTs, in mainstream media and popular culture earlier this year. We’d all heard of them, but was the hoopla justified? Top businesspeople and media moguls such as Mark Cuban and Gary Vee continue to aggressively support NFT use and the role smart contracts will play in the near future, while new NFT exchanges and drops are launched every week. Jay-Twitter Z’s avatar is an NFT CryptoPunk.
Without the fanfare, one of the most dramatic and underappreciated effects of NFTs is on the music business. NFTs have the potential to change the game for independent artists by providing a new way to earn money (while also engaging with fans), and this type of shift has long been overdue.
Musicians and their instruments
NFTs have a few features that make them desirable to artists. The first is a financial one: NFTs have been selling at exorbitant prices. NFTs have been sold for millions of dollars by superstar artists such as Kings of Leon and Steve Aoki. Even lesser-known artists, such as Vérité and Zack Fox, have sold NFTs for tens of thousands of dollars. When he sold an NFT for $865,000, the artist Young and Sick had only 27,000 Instagram followers.
These figures are astounding, especially when compared to the compensation rates of streaming providers. Streaming platforms have been one of the most important cash sources for musicians in the digital age, and this was especially true during the COVID-19 pandemic last year when live event money dried up. However, the payment rates of these sites are still not very high. Since their inception, this has been a hot topic. Spotify pays out between $0.003 and $0.005 per stream on average. That works out to about $3,000 to $5,000 for one million streams, but one million is a big number for an independent artist.
Only 13,400 artists collected more than $50,000 (the median income for US workers) in yearly revenue on Spotify in 2020. With these figures, you can see how NFTs begin to appear like a real prospect – sell a song or a collectible, and you can make more in one sale than you might in your whole career on a streaming platform. NFTs can also provide recurring revenue: they can be programmed so that the original developer receives anywhere from 2.5 percent to 10% of the sale each time the token is resold. That is extremely ingenious.
Another benefit of NFTs for musicians is their “unlockables” feature, which allows creators to put additional rewards within the contract of an NFT. These can range from a one-on-one video conference with a fan to shoutouts, actual merchandise, or even giving away a portion of the ownership of a song. This last scenario is unique in that artists can now regard songs as equity investments by forming an NFT and giving away 30% ownership of a song. This allows individuals who contribute money to see a real return on their investment, while the artist gets money in their pocket. This is similar to a more lucrative version of a crowdsourcing platform.
NFTs and bitcoin are becoming increasingly popular in India, where I live. Currently, over 15 million people in India own over $6.6 billion in cryptocurrencies. Visual artists in India have begun to sell 2D and 3D art pieces in the NFT metaverse. In May, a South Indian musician sold an NFT of a demo for $200,000 (15 million rupees) – that’s insane. In the NFT space, there is still much to be discovered, but the promise is there. The great value and unique rewards system that NFTs provide is a revolutionary opportunity for musicians that I strongly advise you to investigate.