NFTs may be a flash in the pan, but sometimes those flashes illuminate a truly new and interesting opportunity to change or totally disrupt an existing model. Most of the press around NFTs revolve around artwork and images like those from Bored Ape Yacht Club, but NFTs are becoming a tool the music industry will lean into more heavily in 2022, as well.
NFTs are non-fungible tokens that enable a stored record of a transaction on a blockchain. The music industry can leverage NFTs by allowing artists to sell and profit from the exchange of their music by decentralizing the exchange and selling directly to fans.
Record labels are used to disruption over the last 20 years, but this has the potential to be industry-altering because it enables artists to launch, manage and profit from initial sales as well as resales and redistribution.
It's not 100% for artists to sell directly. The most widely referred to example of this is when Radiohead decided to sell their album “In Rainbows” (my favorite Radiohead album) on a “pay what you like” model on its website in 2008.
Around that time, artists had been testing new ways to get their music to fans by circumventing the traditional album rollout. They began exploring streaming services and new ways to launch their music. These streaming sites are good because artists get paid for spins or plays of their song -- but the ability to sell a full piece of work, like an album, was still missing.
Recently though, bands like Our Lady Peace have decided to go direct and leverage NFTs on sites like S!ng. Our Lady Peace is not exactly tearing up the charts, but it is a band with name recognition delivering some new attention to a model that has potential.
The challenge I see with NFT music is how and where to listen to it. In the ‘90s, MP3s were the first digital model to gain widespread adoption, but you needed specific hardware to listen to them.
Likewise, NFT music can’t be stored and played on just any device. It has to be played in an NFT music-enabled app -- easier because it is an app-based model, but it is still a model that most people will not fully grasp. With services Spotify and Apple Music, consumers have become accustomed to all their music being in one place.
In the ‘90s this was confusing too because consumers had to go to iTunes for some of their music, Rhapsody for others and even sites like MySpace for the rest. These days the model is easier. So can NFT music platforms actually completely disrupt the model?
So there’s the listenability issue. The other issue is supply and demand. Our Lady Peace looks to have a finite number of “editions” available for their record, and the price is as high as $15,000. I am not sure who is paying $15,000 to listen to the new Our Lady Peace record, and they are the most notable artist on S!ng.
For NFTs to work properly for artists, supply has to be higher and demand has to be in balance. Artists want to make money from their music, sure, but they also want their music to be heard.
Maybe the model is for select editions to be sold in advance -- including bonus material and multimedia artwork -- then followed by a standard version of the album made available on streaming services and for physical purchase. In a hybrid digital and physical world, NFTs will have a place -- but not as the only path to getting music in the hands of the listener.
These cross-channel disruptive models do provide more avenues for musicians to make money from their music. Back when Radiohead did its "In Rainbows release," it was rumored to make $3 million from selling direct. That precedes subsequent sales and streaming over the last 14 years.
If NFTs are leveraged in the same manner, this could completely upend the music business and make up for lost touring income due to the pandemic. It’s going to be an interesting year!