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Nft music label meaning

nft music label meaning

We’ve seen this trend before. In 2018, the Securities and Exchange Commission fined DJ Khaled because he promoted an unregistered security in the form of cryptocurrency — essentially, retail consumers viewed the asset like stocks. These days, musicians like Soulja Boy and DJ Alesso have pivoted to issuing NFTs instead.

The hype is so blown up that celebrities like Paris Hiltontweet about NFTs and talk about them on Clubhouse. (Hilton was also reprimanded by the SEC for selling tokens in 2017.) In contrast, NFTs aren’t inherently seen as regulated securities because NFTs are art.

For musicians who have a tech-savvy audience or want to attract crypto-savvy fans, NFTs offer a new revenue stream. They are not dependent on streaming platforms, record sales, concert tickets, or third-party merch sellers — so the artist keeps the cash. They can also help artists connect with fans during the pandemic’s touring hiatus. For example, rapper Post Malone and his manager Dre London used NFTs like coupons, which fans redeemed to play virtual games with Post Malone.

Flash forward to February 2021, when DJ and music producer 3LAU made $11.6 million selling music NFTs in just 24 hours. He didn’t hold the record long. On February 27, Elon Musk’s partner Grimes made $5.8 million in 20 minutes selling NFTs.

Five ways music NFTs could empower artists

Now let’s take a look at some of the primary benefits that musicians and artists can expect from music NFTs, compared to more traditional routes of music publishing.

No need to surrender rights to your music

Typically, when participating in the traditional music industry, musicians are required to surrender the rights of their work to studios, record labels, and sometimes even streaming services. This can become a thing of the past through NFTs and NFT music platforms such as Catalog.

Cutting out the middleman

There are countless examples of how middlemen have destroyed bands and made the lives of musicians a misery. By controlling their creative output or taking profits for themselves, these middlemen interfere in ways that damage a musician’s career. Thankfully, NFTs allow musicians to regain full control over their work by gaining a direct line into their fanbase. Not only does this give them ownership of their work, but it also means they have the potential to earn more profit.

NFT royalties

NFT royalties are a condition that is entered into the metadata of an NFT when it is minted. In general, NFT royalties mean that the original creator, in this case, the musician, will receive a certain percentage of any future sales of the digital asset. Currently, the industry average for NFT royalties seems to be somewhere in the range of 5-10%. Once again, this gives the musician a chance to earn even more money from their work, and the best part is that it is completely autonomous.

The chance to make unique content and experiences

With NFTs, the world is your oyster. You can make a single and create just one version of it, or 10,000 of the exact same track. You could also sell entire albums, discographies, or even album artwork as NFTs in order to create new and more personalized experiences with your fan base. In addition to this, things such as merchandise and concert tickets, both virtual or physical, can be brought on-chain.

Directly build an active fan base (and monetize it)

Musical NFTs enable musicians to build a fanbase by creating a space where fans may access the specific NFTs related to the artist’s work. For example, events involving NFT drops allow musicians to reach previously inaccessible audiences (and monetize them).

Impact of NFTs on the music industry

By selling music and related assets through the blockchain, the artist is able to create a direct relationship between themselves and the fan base without having to rely on the traditional methods, such as through a record label or even a music-streaming service.

Depending on how the process is handled, the artist – or creator – can find themselves ending up with a bigger profit, rather than the money ending up in the hands of a company.

Yet, there is a cost involved in creating music NFTs, as there is still a price for Ethereum gas fees, which are the cost to compute and record a transaction on the blockchain, and NFT marketplace fees for listing and selling work.

A few real world examples of Music + NFT tech

Prominent musicians have already been using the NFT tech to experiment in various new ways to monetize their creativity. Let’s have a look at a few scenarios that have already played out.

1. Steve Aoki

Steve Aoki has long been one of the most prominent creators in the EDM (electronic dance music) world. He is a multi-talented individual to the core with him being involved in the development of his own comic books. He is also a fashion designer. The man is truly from the age of the renaissance.

Aoki has been following NFTs since things started to get interesting back in summer 2020. He collaborated with artist Antoni Tudisco to create a collection of audio-visual NFTs.

Their project is called ‘Dream Catcher’ and it comprises short surreal animations with accompanying soundscapes. The duo launched their project on the Nifty Gateway marketplace. This made him over $3.4 million.

For more info visit the official ‘Dream Catcher’ page of Nifty Gateway.

2. Grimes

Grimes is a musician who experiments with various types of genres. She tends to mix various contrasting elements to create dreamy and yet somehow addictive sounds. She has long been an enthusiast of technology and it comes with no surprise that she turned out to be one of the earliest musicians to launch her own NFT project.

Her project comprised of 10 original arts, some being rare one-off pieces, while others in the collection had thousands of copies. She cashed in over $6 million from the project. The bulk of her sale came from the thousand piece collection where each item sold for $7,500.

Her project involved original songs composed by her with 3D animated shorts.

Click here to view her collection.

3. Snoop Dogg

Snoop Dogg has been an ever dominant force in the world of hip-hop. Even among the newcomers of the industry, the ‘dog-father’ is revered to be a true hip-hop icon.

Snoop Dogg launched his debut NFT drop ‘Decentralized Dogg‘ comprising a 3D collage of himself over the years. The collage is comprised of 10 different portraits of the dogfather during various stages of his life. He also dropped a brand new appropriately titled single ‘NFT’.

As of the 1st of December, the highest bid for the artwork was $760,000 or 169 Ether (ETH).

4. Other musicians with NFT projects

Aphex Twin – He was one of the earliest electronic music producers who became widely acknowledged. Aphex collaborated with a few other digital artists to create a surreal looking visual art that generated $128,000.

Kings of Leon – Rock band Kings of Leon launched an album exclusively as an NFT dropped which yielded them a whopping $2 million. They also included a series of ‘golden tickets’ to buyers of the NFTs which guaranteed fans 4 front row seats to one show of every Kings of Leon tour for life. A pretty amazing deal for hardcore fans if you ask me.

Lil Pump – The notorious rapper launched an NFT campaign where fans could invest in the project and earn a portion of the revenue generated from an original single to be released by Lil Pump. This new type of NFT-security is one of the first of its kind to be applied by a musician.

Why NFTs good for fans.

NFTs provide a free and ethical way for artists to monetize their work. Fans can enjoy music and still benefit from the artist’s success. Today, it is typical for people to pirate music freely without paying the artist anything. With NFTs, fans will be able to buy digital goods like albums, songs, and even concert tickets with tokens.

For example, if you wanted to listen to Beyoncé’s new album on Jay-Z’s streaming service Tidal (which offers NFTs), you would need to purchase tokens and use those tokens as currency within the app. By doing this, Beyoncé will receive payment every time her album is streamed or sold on Tidal.

The good news is that downloading content from an artist who has implemented NFTs is very simple: just download their music app! And because of this system, it would be difficult for someone else to download the same thing from a different source since they would have different tokens.

In addition, this model provides a way for artists who aren’t as well known yet to earn money while building a fan base—since fans are incentified to support their favourite artists by buying tokens.

Red flag #1: It’s never as easy it sounds

With a lot of modern music NFT contracts, artists seem to be trying to leverage blockchain as a tool for simplicity — particularly around more appropriately providing consideration to the original creator of a work, or more transparently splitting royalty revenue among multiple stakeholders. But when you speak to lawyers about how striving for this simplicity plays out in practice, it becomes clear it is at the expense of accurately describing the ownership and control of the IP involved. While simplification in general should be a goal, simple contracts can be very problematic, especially in a music-industry context when an artist wants to exploit a given musical work at a high level across many uses and mediums.

Let’s look at Lyrah’s NFT contract for “Taken” as an example, which was generated with the help of the CreateOS platform:

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The first sentence in the green box — “with this NFT, you get 25% of the master recording, meaning you’ll get 25% of the streaming royalties that this song makes from platforms like Spotify and Apple Music” — is wrong. If you get 25% of the master, that doesn’t equal 25% of the total streaming royalties; recall all the different copyright owners who will receive royalties for their different ownership in the song. This is a pretty flagrant error, and highlights the amount of good faith needed between parties for these simple agreements to work. For smaller, more emerging artists, whose copyrights are not yet spread between different entities, and who operate on a scale where good faith is manageable between artist and fan, it’s a much easier task than for an artist signed to a major label and who has a different publisher and a separate sync deal.

Several other examples abound of artists publicly conflating (intentionally or otherwise) different kinds of ownership or copyrights in music. Earlier in 2021, Jacques Greene sold an NFT that included the publishing rights (i.e. the copyright in the underlying composition) to the track involved. However, this was not a true transfer of ownership; rather, it was a right to receive royalties, the terms of which were agreed off-chain between Jacques Greene and the buyer of the NFT. Similarly, Eugy’s Your Touch NFT, listed on Serenade, allowed the buyer to record a verse on the remix of Eugy’s previously released track “My Touch,” and granted the owner of the NFT a 25% share in the streaming royalties of that remix (only after “My Touch” reaches 15 million streams across all platforms). However, the Terms & Conditions related to the Eugy NFT purchase made clear these rights do not constitute an actual transfer of analog-world IP ownership.

Even many music NFT platforms themselves seem to be lacking in basic education about the different kinds of copyrights implicated in a song. For example, the landing page for the Republic / Lil Pump NFT drop states to investors that “you will get a share of potential profits generated by the master record,” and then proceeds to display the following graphic:

As one of our members Jonathan Larr pointed out in our accompanying annotations for this drop, this is “immediately concerning” because many of these listed sources also generate composition royalties, not just master royalties. “Interactive streaming generates sound recording royalties and composition royalties. Downloads pay mechanical royalties which go to the composition. Synch can pay master and/or composition depending on what’s used, etc.,” wrote Larr. “It would worry me from the start that they’re using these terms incorrectly.”

Again, when we are dealing with singular 1-of-1 NFTs and/or independent artists, these nuances may not matter as much. But imagine if 1,000+ people purchase shares in the royalty stream of a song, or if these NFTs are for songs with multiple writers, or if major-label artists (whose labels may actually own or have exclusive rights to the master recording) try to create their own music NFTs. Or, what if the NFTs representing those royalty shares are sold on secondary markets, or the artist records newer versions of their masters (à la Taylor Swift)? Not to mention the fact that copyright laws and notions of “ownership” differ from country to country. Further, what happens if an artist is sued for infringing the work of another artist; are you now also liable for 25% of their losses as an NFT owner? And if you buy the NFT thinking you “own” it, will you be satisfied with a mere right to receive royalties? Or would you want the right to create derivative works, remixes or control the work yourself?

With the Republic / Lil Pump example specifically — if as an NFT investor you want to sue the artist over not receiving your fair share royalties, how would a court accurately determine what royalties they are even supposed to be getting if the initial information presented is inaccurate? If a court is unable to determine what royalty streams should be flowing to them (e.g. whether there should really be masters and composition royalties involved), then, at best, that leads to complex litigation over the intent of the contract drafters in the first place. A court could just as easily decide they are entitled to both kinds of royalties — or to neither.

… You can see how this all can get complicated quickly. Clearly, smart contracts on the blockchain — with all the benefits we’ve described — are still not yet a match for the complex, global music copyright ecosystem.

It is worth noting that the relationship between the NFT creator and the NFT purchaser/investor in these situations can seem analogous to the traditional relationship between the record label and the musician. But that is not in and of itself a negative, as investing in artists can certainly help further their careers. Perhaps the solution isn’t necessarily to alter the way creators offer rights as part of their NFT sales, but rather to ensure purchasers have clear understandings of what rights they are purchasing and how exactly they can benefit from these rights.

A technology in its infancy

NFT records will likely never replace the streaming powerhouses and their ease of use. (Audius, a crypto streaming platform built in 2018, has about 7 million monthly active users, compared to Spotify’s 381 million.) The NFT music space has high barriers to entry for many: it prioritizes artists who are tech-savvy, extroverted, and able to be constantly online and releasing content. “You can only give so much of yourself to your community,” Maul says.

And for now, the purpose that NFTs serve for music fans on Catalog is more conceptual than functional. This isn’t like Martin Shkreli buying the only copy of the Wu-Tang Clan’s Once Upon a Time in Shaolin. Others can still listen to the song all they want. In most cases, buyers also aren’t purchasing the actual rights to the recording or composition, meaning they’re mostly paying for virtual bragging rights and to support artists they feel are undervalued by the traditional system.

Mat Dryhurst, a technologist who works on projects at the cutting edge of digital music—including in AI—is skeptical about the way that NFTs are being rolled out in the music space. “I’m not 100% convinced that the mechanisms of collectibles are a perfect fit for a crypto music ecosystem that I would like to see,” he says. “I would like to see ways to support artists in the album process that don’t involve doing all the things that Web 2 [the current iteration of the internet as most people know it] made you do, like going online all the time and updating people with music you made in the last week.”

Dryhurst is more interested in looking into how NFTs and NFT-adjacent technologies might be used to cultivate music collectives that might communally own a physical concert space or recording studio. “Fundamentally for me, the lifeblood of a lot of music is giving people a place to make music and enjoy music together,” he says. “The optimistic part is thinking about how to take the vibrancy of strangers with a shared purpose in virtual space—like a Discord group—and coordinate them to support spaces, or a network of spaces, in real life.”

But whether music NFTs ever reach mainstream saturation, they’ve already transformed the lives of many artists for whom the previous system was failing. “I felt that a lot of my career was making a certain type of music that I had to make—and at times I didn’t really connect with,” Allan says. “From an artistic standpoint, I just feel like NFTs and Web 3 in general can create a much brighter space for art.”

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Impact of NFTs on the music industry

By selling music and related assets through the blockchain, the artist is able to create a direct relationship between themselves and the fan base without having to rely on the traditional methods, such as through a record label or even a music-streaming service.

Depending on how the process is handled, the artist – or creator – can find themselves ending up with a bigger profit, rather than the money ending up in the hands of a company.

Yet, there is a cost involved in creating music NFTs, as there is still a price for Ethereum gas fees, which are the cost to compute and record a transaction on the blockchain, and NFT marketplace fees for listing and selling work.

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