State of Indie music and music NFTs

Over the last few weeks I have exploring what is now fairly ubiquitously known as web3. There have been various applications built catering to different industries including, but not limited to, decentralised finance, insurance, decentralised cryptocurrency exchanges, logistics and even music.

Music being close to my heart, I started researching related products that people are building and came across some interesting work.

  1. Sound
  2. Audius
  3. Arpeggi Labs
  4. Royal

The common theme among these projects, that derives from the prominent theme of web3, is ownership. Music and other content on these is owned directly by the artists and their listeners and fans. This is typically achieved in the form of NFTs. The platform in these cases more as an automated decentralised distribution platform.

The motivation for these and even some of the new platforms outside of the web3 world comes from the state of the music industry at large; specifically the music streaming market which accounts for 62% of all music revenue worldwide and more specifically the indie music streaming scene. Online consumption of music, in the form of recorded and live events has spiked in the time of the pandemic and we only see it rising in the foreseeable future.

How the money flows

Rise of music streaming platforms, has signalled the rapid decline of vinyl and CD sales (deja vu) over the years, and growing dependence of artists on them and the intermediary entities (rights holders) which artists have direct contracts with. As a consequence of the power structures and the way money flows in this ecosystem, contracts have never been very favourable for artists, especially independent and upcoming musicians.

The payouts have been abysmally low for artists. Here are snapshots of payouts per stream from recent years on a few popular platforms which act as a good indicator of this:

  1. Spotify: $0.004
  2. Apple Music: $0.0078
  3. Gaana: $0.001
  4. Amazon Music: $0.004
  5. Youtube: $0.002

One may be mislead into thinking this is what the artist makes, but it actually gets even worse. This is the payout that the intermediaries receive, who then pay a percentage of this payout to the artists.

Indie Music Life

In my conversations with musicians, it appears that they end up making a tenth of these numbers on an average. This is not the picture of a sustainable profession for most artists. To make things worse, the artists report that they face constant pressure from rights holders to keep producing more music in order to stay discover-able. This is not great for their creative process of producing music and consequently for music lovers. The evidence for this is out there, with a narrow set of genres dominating the entire industry and the music progressively sounding more and more identical like a factory manufactured product.

Music NFT market

Community is the primary MO of most successful NFT models, and music is no exception. When a listener buys a unique edition of the music production, or purchases an NFT tied ticket to an event, they’re truly invested in the success of their favourite artist. A more tangible incentive to buy into these communities is through future rewards which can be any of

  1. special privileges such as

    1. exclusive access to the musicians
    2. early access to future events
  2. long term value in case the NFTs can be traded

There are even more interesting models that are coming up and I hope to cover more of these soon.

The publishing and discovery is largely DIY from the artists’ perspective, with the platform acting only as a facilitator. The music rights are not only retained by the artists but established firmly and permanently on the blockchain. Once the content is on these platforms, the transaction is essentially directly between the artist and the musician. This gives power back to the artist and their communities, including in a monetary sense.

One of the problems that these platforms inherit from web3 is user experience. The audience largely is not used to the web3 experience, and neither are the musicians. The UX problems I see are:

  1. Listeners connecting their crypto wallets to these platforms
  2. Musicians minting NFTs
  3. Understanding and trusting the trustless platforms

Despite these challenges, which of course a lot of web3 builders are trying to address as we speak, I think this is a great start to what could be the beginning of the next big evolution in the music business.

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