If you say Music NFTs three times — nevermind.

There has been a lot of chatter around Music NFTs over the past 6 months and I have only recently started to see explanations that are interesting and extend beyond buying fractional ownership of songs.

I read this thread last week and think I finally started to understand what “Music NFTs” means.

Prior to this, Music NFTs have seemed hand-wavey to me and the most often used examples were revenue sharing on royalties.

Retail access to royalty revenue streams already exists (see Royalty Exchange) just as retail access to fractional positions in art has already existed (see Masterworks). NFTs offered retail investors a more fluid and composable experience when investing in digital art or tokenized versions of physical art. Much of what we have seen in this space is related to speculative upside on art-based asset appreciation. Until I read the thread by @fascinated I failed to conceptualize a large influx of capital to fractional royalty ownership and revenue flows beyond hype driven investments.

There are, of course, other loud proponents of Music NFTs who have been further defining the asset class. As I have some of those individuals muted, however, I haven’t been paying attention. I’ve taken an actively ignore approach to Music NFTs up to this point — it’s not been something that has excited me.

“Music NFTs” and Conceptual Branding

The term “Music NFTs” has annoyed me for months and I’m not the only one.

fwiw, Palmer is poking fun at the “Music NFTs” tweets.

People will literally tweet “Music NFTs 🚀🚀🚀 ” and everyone else will pile on and say “Yeah music nfts rock”. It’s taken months for me to better understand what people refer to when they talk about Music NFTs. I think that “Music NFTs” is the wrong way to describe this type of asset. It’s lazy to talk about tokenized access, revenue sharing, and social tokens related to musicians as music NFTs. There is room for further definition and crystallization of these concepts.

Another quick note on branding and naming…

Please stop referring to Regenerative Finance as ReFi. ReFi means re-finance and is commonly used in the mortgage space. I’ve seen crypto proponents advocate for usage of traditional financial terms rather than defining our own and I believe they have a point. Why do we use TVL instead of AUM? In this case, TVL may have a different meaning than AUM and therefore the distinction matters. In the case of ReFi, co-opting a traditionally used term will create more confusion than value.

This is all to say that the label we use to refer to concepts matter. Music NFTs is a lazy way to talk about the opportunities and value creation mechanisms related to tokenizing the relationships between artists and fans.

Access as an Asset

Right now, access is often bought on a per use basis or through a subscription. It’s a cost for the accessor and a revenue generator for the entity providing access. In music, there are access products inclusive of meet and greets, sound checks, exclusive music, etc.

Each IRL access event likely has its own ticketing. Once the buyer has acquired and used the access, the value for the accessor has ended. Their takeaways are memories and pictures — trophies of their early emotional and/or financial investment in the artist.

When we reframe access as an asset instead of a product, we can start to better understand some potential paths forward for tokenized access related to artists and fans. Instead of ticketing meet and greets for each city in a tour, artists could mint tokens for the entirety of the tour. Fans could then purchase, utilize, rent out, and re-sell these assets depending on their availability to attend various events. As a super fan, I might want to retain my access to an artist’s in person events despite my inability to attend each event. I could then rent my access tokens to other fans or sell my access. The artist can earn a revenue on each subsequent transfer of the access token.

Tokenized IRL access is occurring in collectible pfps where a token may be your ticket to an event. It’s not a new concept, but it’s under-explored and overtly linked to ownership of a speculative asset. These experiences and engagements can be bifurcated. The tokens associated with an artist can extend beyond a revenue sharing token that also supplies access. Music NFTs more likely refers to a number of token offerings associated with an artist.

Investing Early in Culture and “Selling Out”

Many of us have had a favorite artist that no one else knew about before us. We knew about them before they were big! And we act like this makes us special or signals the sophistication of our taste.

There’s a bittersweet reality about one of our favorite underground artists “making it” — it’s unfortunate and ironic. As a fan, our value decreases! There are now more fans than ever and we are no longer special. The artist reaps the rewards of their work and we fade into the background despite our evangelism.

What if there was a way for fans to earn value from the artists success? A quantifiable way to demonstrate the reality of being early to and believing in a musician before their big break. While royalties remain a simple way to capture or access this value, there are likely much more creative ways to structure relationships. Musicians could offer positions in their success that are later bought out by record labels. These trend towards social tokens and/or ISAs and provide a new way for patrons to support artists and for artists to return value to their early supporters.

How can we re-frame the experience of an artist “selling out” to be beneficial to their early fans who are now one in a million?

The State of “Music NFTs”

I’m not going to spend a lot of time on this. There are individuals and resources out there that can point you to projects that are exploring the Music NFTs space.

I’m going to continue to ignore the “Music NFTs 🚀🚀🚀 ” tweets but I’m excited to participate in more nuanced discussions around tokens in the context of patronage, access, and revenue sharing.