Spotify and Apple Music are said to have taken a 75% cut from musicians’ earnings, in addition to the cut paid to labels.
As popular music streaming services such as Spotify reduce musicians’ earnings, new technologies such as nonfungible tokens (NFT) are expected to help artists reclaim their fair share, according to Saxo Bank.
According to one of Saxo Bank’s “Outrageous Predictions 2022: Revolution,” NFT-based streaming platforms will benefit music creators by allowing them to distribute music directly to listeners without centralized intermediaries charging a fee.
According to Mads Eberhardt, a cryptocurrency analyst at Saxo Bank, mainstream music streaming platforms such as Spotify and Apple Music take a significant cut, which, when combined with the cut paid to labels, amounts to 75 percent or more of total revenue.
“These models do not direct individual subscribers’ fees to the actual music that an individual subscriber listens to,” Eberhardt explained, adding:
“The use case for NFTs could be especially compelling in the next step for the technology for content creators in the music industry, as musicians feel unfairly treated by the revenue sharing models of current streaming platforms like Spotify and Apple Music.”
According to the analyst, NFT-based music streaming projects, such as Audius, a blockchain music platform backed by Katy Perry, The Chainsmokers, and Jason Derulo, are expected to launch in 2022. The Audius platform, built on blockchain technology, is a decentralized music-sharing and streaming protocol that aims to eliminate intermediaries in the music industry and allow fans and creators to interact directly with one another.
Traditional streaming platforms, such as Spotify, on the other hand, have a “bleak” future, according to Saxo Bank. Spotify’s stock is expected to fall 33% by 2022, according to the company. According to TradingView data, SPOT has been declining in 2021, beginning the year around $300 and falling as low as $204 in August. SPOT is currently trading at $229 at the time of writing.
Meanwhile, Spotify’s revenues have been steadily increasing over time, indicating that NFT-based music platforms have a lot of room to disrupt. Spotify’s official 2020 financial results show that the company generated 7.85 billion euros ($9.5 billion) in revenue last year, a 16 percent increase from 2019. Spotify’s financials continued to improve in 2021, with the total number of monthly active users increasing 19% year on year to 381 million in Q3 2021.
Spotify has been paying attention to the cryptocurrency industry, as previously reported, and will be looking for talent with a crypto background in late 2020. The company is also well aware of the rise of NFTs, as it mentioned them in its Spotify Wrapped 2021 report, which was released to users on Wednesday.
I will say I was not expecting to see an NFT reference in my Spotify Wrapped today but here we are pic.twitter.com/KnpwrR90Y4
— Meghan Bobrowsky (@MeghanBobrowsky) December 1, 2021