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NFTs: the science fiction revolution of the music industry

Since 1877, with the invention of sound recording, the music industry and technology have been intrinsically intertwined. It is becoming increasingly rare to hear musical sound that has not been shaped by technology: from the design and construction of musical instruments to the recording and broadcast of music, technological advancements have shaped how music is made, performed, preserved, distributed, and consumed. For more than two decades, we have been told that the internet was going to save music. It would directly connect artists to their fans, create meaningful communities around art and allow musicians to make a living with a few clicks. However, this has not always been the case.

This year, non-fungible tokens (NFTs) took the world of music by storm. From the pioneers Kings of Leon, who first released their albumWhen You See Yourself in the form of a non-fungible token, many other artists have been bewitched by this technology. Grimes sold almost $6m in NFTs in just 20 minutes; Steve Aoki sold a collection for about $4.25m. These results have quickly sparked many participants in the music industry, leaving a glimpse of hope in everyone’s eyes. But how does this promising technology actually work?

Non-fungible means unique. NFTs are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time and they're secured by the blockchain, which means that no one can modify the record of ownership or copy/paste a new NFT into existence. In other words, the token acts as a digital certificate of ownership for whatever the creator, in this case a musician, decides to put up for sale. This can be anything from concert tickets, limited-edition experiences, digital content, merchandise, and music. Fans participate in auctions for these tokens, and the highest bidders receive the content in their digital wallets in a secure transaction, while the artist collects the revenues without having to split them with anyone else.

This last aspect is key in an industry with an increasingly unfair distribution of revenues. Earnings are usually divided as 50/50—with 50% going to the performer and the rest shared among agents, lawyers and distributors. In the case of streaming, the distribution is even more unfair, with artists pointing out that songwriters earn 50% of radio revenues, but only 15% in streaming. In this hopeless scenario, artists have always earned most of their incomes in touring. However, the elimination of live performances with the pandemic turned the music industry upside down and artists have been looking for ways to increase their revenues, as well as to connect and create for their audiences. With live music continuing to face an uncertain future, the potential of NFTs to supplement income holds huge appeal.

The absence of middlemen in NFTs is such that when fans buy an album, stream a song, purchase merchandise or concert tickets, the money flows directly from the buyer to the seller of the good, without intermediaries. Linkin Park co-founder Mike Shinoda reflected this in a series of tweets after receiving a $10,000 bid for one of his NFTs. "Even if I upload the full version of the contained song to DSPs worldwide," he tweeted "I would never get even close to $10,000, after fees by DSPs, label, marketing".

Another advantage for which NFTs stand out is their convenience. Fans just need to create a digital wallet to have the chance to receive the content and then participate in an auction for a chance to win. This makes winning content as easy as online shopping. Although each NFT sold is one of a kind, its content can also be shared, copied, and sold separately to anyone further down the line. The higher the number of participants, the lower the value, with the price of the original copy usually the highest.

Lil Pump is the latest example of an artist exploring selling shares of his music royalties as an NFT. On November 4, indeed, the American singer offered fans the chance to invest in his single Mona Lisa (feat. Soulja Boy), produced by Jimmy Duval. After just two hours of being made publicly available, the track reached its maximum funding goal, selling out at $500,000 to 927 investors.

The auction was open to all investors who could spend $100, $1k, $5k, or $10k on, respectively, bronze, silver, gold, or platinum-level NFT artworks from Opulous, all built on the Algorand chain.

Grimes, the princess of high-tech and medieval futurism

Among the artists making fortunes in the NFT gold rush, with her sale of $6 million worth of digital artworks, Grimes certainly stands out. Elon Musk’s wife has, indeed, pulled in a fortune selling 10 digital art pieces, including both unique pieces put up for auction and collectibles offered at a set price. The highest-selling piece was a one-of-a-kind video called Death of the Old that involves flying cherubs, a cross, a sword, and glowing light that is set to an original song by Grimes. The winning bidder took it for nearly $389,000.

The collection also included two short videos that sold hundreds of copies for $7,500 each.

We always heard that the internet was going to change music by empowering artists and increasing their possibilities, however, evidence has shown that this has not always been the case. The present might be the turning point.

Although NFTs are not the only solution, they may finally offer a way forward and away from the existing industrial business model. Maybe the next step will become clear as artists experiment with other new business models, other new ways of connecting to audiences, other methods that challenge the old order and fulfill the promises made to us for 20 years.

The music industry of the past may not have been built for us. But the music platforms of the future could be.

Carlotta Rosselli

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