How NFTs revolutionize collecting music
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Similar to previous inventions like radio, vinyl records or online streaming, NFTs are a complete paradigm shift in consumption of music.

The idea of NFTs isn’t hard to sell to musicians:

  • gain complete creative freedom and release whatever & whenever you want

  • distribute and monetize your music while keeping full ownership of your masters

  • sell music directly to your fans and cut off all middle men & gatekeepers

  • get paid instantly with no more 3-6 month delays

  • keep transparent accounting and automatic splits with collaborators

  • tap into a global market of potential collectors

  • build an intimate fan base independent of currently trendy social media platforms

  • try the “1000 true fans” business model - no need for millions monthly streams to make a living

But then the question becomes: why would anyone want to buy a Music NFT?

While there have been many conversations around how NFTs revolutionize the music industry from the creator’s perspective, it may not be as obvious on how they revolutionize collecting music. In this article I’d like to cover:

  • The current state of music

  • What are Music NFTs?

  • Common misconceptions about Music NFTs

  • Why collecting Music NFTs beats collecting physical vinyl records

The current state of music

In the good old days, people either listened to the radio or went to record stores to buy physical forms of music they wanted to listen to.

In today's world of digital music and streaming, all music in the world is available 24/7 with a couple clicks for just $10 a month. Apps like Spotify could have completely killed the need for now outdated vinyl records and album CDs but with the increasing rise of sales, it’s clearer than ever that there’s still demand for collecting music.

Why?
Music is in many ways priceless and by far the most consumed type of art. It makes us feel deep emotions, brings back memories, takes us to imaginary places, connects us with other people and makes us move. Who doesn’t have at least 1 genre of music that they enjoy?

People also like collecting and expressing themselves through things that matter to them the most. When it comes to music, they might collect merch, concert tickets, wristbands or pin hats to establish a deeper connection with their favorite musicians.

But so far the only way to collect music itself has been by buying vinyls or CDs.
They might satisfy a small nostalgia part in some of us but with the world going digital, the next generation of music enthusiasts won’t feel the need to touch a piece of plastic, manufactured by a 3rd party, in order to feel like they own music by their favorite artists.
Musicians create music, not press vinyls, so what if there was a way to collect music in its purest form?

What are Music NFTs?

Music NFTs are tokenized audio files (songs, albums, EPs or mixes) - digital vinyls distributed on the blockchain.

They usually come with a visual component (cover art) but the main difference to other popular types of NFTs (like pictures of monkeys) is that its real value is captured in the audio file.

Examples of Music NFTs:

For the first time ever, NFTs enable true and indisputable ownership of digital files which allows us to collect songs online, have a free market for music and establish a direct relationship with our favorite artists.

Just like before, artists release music on the internet where everyone can have the file but now they can use NFTs to assign ownership of their art.

Common misconceptions about Music NFTs

Music NFTs won’t work because people love using Spotify

Music NFTs aren’t exclusive to the NFT holders. You don’t have to buy a song to listen to it.

While there might be some interesting use cases where artists release music available to only holders of the NFT (imagine a high class party playing only rare music unavailable to the public), the point of Music NFTs is not to exclude anyone from being able to enjoy the art.

When an artist releases a song as an NFT, they say:
“Here’s my song, I’m only ever going to release it in 10 (or whatever number they choose) digital editions. Feel free to listen to it for free and if you’d like, collect a limited edition digital vinyl of it.”

Musicians can leverage both web2 & web3 technologies at the same time. Nothing is stopping their music from being available both on Spotify and as NFTs. In fact, as a collector, I want the music I collect to be on as many streaming platforms and radio stations as possible since the value always comes back to the NFT.

Let’s say Pharrell released his single “Cash In Cash Out” as a 1/1 Music NFT that I collected.

While anyone can still listen to the song on radio or Spotify, only I own the NFT of it and can sell it to others - similar to how everyone knows Mona Lisa and can Google & screenshot the image but only one person gets to own & sell it.

When you buy a Music NFT, you don’t actually own the audio file - just a link pointing to it

Whenever this conversation comes up, I love referring Punk6529's Twitter thread on the concept of ownership.

Since ownership is a social construct we create to serve us, we can think of NFTs as social contracts between creators and collectors. When a musician creates an NFT pointing to their song and says it represents ownership of a digital vinyl of their song, who’s to say it doesn’t?

Audio files are too big and expensive to save on-chain so storing links with the finger print of the original file is way more efficient. NFTs are essentially digital receipts that no one can fake having in their possession (crypto wallet).

Side note: iTunes and Bandcamp sell mp3 files but they don’t assign their ownership on a public blockchain, only their limited and centralized databases, which makes these mp3s & their ownership worthless, since anyone can pirate them for free. Music NFTs take a different approach - while anyone can still “right-click save” and have mp3 files on their computer, only limited number of people get to own the NFT of it. More on why that’s useful later in the article.

Music NFTs without streaming royalties attached are a scam

The idea of collecting passive income by holding Music NFTs is interesting but why do people collect vinyls, even though they don’t come with any ownership of masters?

Because being able to own and connect with the art on a deeper level is enough of a reason to buy them.

Many of the same reasons apply to collecting Music NFTs as they’re not just digital art collectibles - NFTs allow for an even deeper & more direct connection between the artist and collectors. So just like vinyls, there are many other ways in which Music NFTs can be valuable to collectors outside of streaming royalties, which we’ll explore in the next segment.

Why collecting Music NFTs beats collecting physical vinyl records

I see this argument brought up a lot so let’s analyze how Music NFTs are better than outdated physical media like vinyl or CDs, even from a collector’s perspective.

Storage & maintenance

Vinyls are constantly exposed to physical damage and even when left untouched, depreciate in value if not stored properly.
Sealed vinyls are the most rare & expensive editions so as soon as you open one to actually listen to the music, it immediately loses value. Where’s the utility in that?

Music NFTs are digital collectibles stored on an open distributed ledger which makes storage efficient and maintenance costs non existent. Unlike vinyls, I can play Music NFTs as much as I’d like without worrying about getting them scratched or torn up. Once I buy them, they can stay in my wallet perfectly intact forever, without any additional work required. My music collection is going to be in mint condition when it’s time to pass it on to my grandkids and the same when it’s their turn to pass it onto their grandkids. Even if all the Music NFT platforms where I collect don’t exist anymore, the NFTs stay fully functional and in my possession as long as the blockchain they’re stored on is still up and running.

Authenticity & scarcity

Artists (or in most cases labels) can print an infinite supply of CDs & vinyls with no way to track the actual number of copies that still exist so it’s hard to figure out the real value of what you’re buying.
Example: the legend of Blaze Foley says there’s only a 100 copies of the original pressing of his album after DEA destroyed the rest but there’s no way to definitively verify that.
When collectors want to buy a rare vinyl on secondary markets like reseller stores or Discog, they have to trust the seller or platform that the vinyl is authentic. To know for sure, they might need to pay a trusted expert to confirm if the vinyl they bought is original or not.

Distributed ledger makes verifying authenticity & scarcity of Music NFTs free, instant and available to everyone. When I collect music, I don’t have to trust anyone but the blockchain to know who created the Music NFT (in order to separate an original edition from a fake), what’s the supply, previous owners, trading history and current market value.

Distribution & global access

Some artists sell vinyls on tours which limits their reach to those who were able to attend their shows. Selling them online with international shipping might solve geographic hurdles but removes any interactive experience and possibly adds expensive shipping fees. Being born and raised overseas, I can share the pain of not having access to most of my favorite musicians’ online stores since shipping worldwide is usually unavailable.

Blockchain is the ultimate distributor. It enables any musician to create internet native music drops which allow fans from anywhere in the world to collect music in a matter of seconds. It’s an economy anyone with an internet connection can participate in.

Social signaling & status

Vinyl collectors are limited to showing off their collection to their family & friends who come to their home. They can take pictures of rare vinyls and post them online but the possibilities pretty much end there. If they discovered an up and coming musician and bought their vinyl before they blew up, there’s no easy way to prove it.

NFTs enable collectors to show their support publicly, natively and on multiple platforms at the same time. As more mainstream social media (like Instagram) integrates NFTs, it’s going to become easier to flex our music taste and express ourselves through collections on apps we use every day.

Any music enthusiast can relate to discovering an artist early in their career but having no tangible way of proving or showing it off. Since every purchase of NFTs is forever part of blockchain’s indisputable history, Music NFTs become time-stamped social proofs of not only discovering but supporting artists before others. This proof of ‘being early’ is clearly important to many fans as YouTube & Tik Tok comment sections are flooded with “here before it blows up” or “y’all are late” type comments.

YouTube comment section on one of Travis Scott's first songs "16 Chapels"
YouTube comment section on one of Travis Scott's first songs "16 Chapels"

Speculative market & investment opportunities

Vinyls are usually a bad investment since their supply is unpredictable and out of collectors’ control. Labels often decide to dilute the market with reissues/remasters if they see the demand for it.

The speculative nature and limited edition culture of NFTs offers a chance to not just collect music but to make real investments. Once an artist blows up, all the action happens on the secondary market since there’s no reissues of music to meet the new demand. So when other collectors are late to discover the artists you were early to, the only way they can collect their earlier pieces is to buy them directly off you.

While nothing is stopping artists from creating new NFTs out of the same audio file, the open nature of blockchains keeps them honest. Artists can’t dilute the market without collectors finding out about it, which would damage their reputation & make it harder to sell new collections in the future.

People who are able to consistently discover ‘undervalued’ artists before they become famous, can now A&R and invest at the same time. Similar to how labels make bets on artists, anyone is now able to capture their career upside in a meaningful way.

Since NFTs have creator royalties, artists automatically get a piece of every resale on secondary market which incentivizes them to continue providing value to their NFTs even after the initial sell out. Therefore every big resale on the secondary is a shared W between the artist and collectors. Imagine getting rich with your favorite up and coming musicians!

Emotional connection

I grew up in the LimeWire, YouTube2Mp3 & Spotify era so I never had to buy music in its physical form but the only time I did, was when I found Nas’ “Illmatic” CD album on sale at a random store and thought it’d be cool to own an edition of it.

I remember coming home, popping the CD in my computer and experiencing the album in a whole new way. All of a sudden, Illmatic wasn’t just a part of my YouTube playlist anymore, it was music I owned!

I ended up listening to it back to back for weeks after even though I already knew all the songs by heart for years prior. But actually buying the CD made me appreciate it more and helped build a special connection to the music that wasn’t there before. To “get my money’s worth”, I ended up listening to even the intro track a bunch of times, which I’ve always skipped before.

Interestingly with Music NFTs, I’ve developed a similar emotional attachment to the music I’ve collected.

One of my favorite Music NFTs is Daniel Allan’s “Poison.”

I bought the song, supported the artist and am proud to own it. Even though I can’t touch and feel the Music NFT like I can a vinyl or a CD, I own a digital copy of it - I see it’s in my possession when I open Etherscan, FutureTape.xyz or Opensea. Everyone, including Daniel, can see and verify it’s mine too. Even though I listened to Poison a bunch before the 24h auction for it ended, it felt completely different listening to it once I actually owned it. I’ve listened to the song countless times since owning a digital copy of music raises its replay value too.

But not only did I collect music I love, I now own equity in Daniel’s career and a percentage of his content. I became both emotionally and financially invested in Daniel so selling Poison would make me feel empty and take away the feeling of euphoria when listening to it.

Poison went viral months after I bought it which created a unique feeling of pride as an early collector that I’ve never experienced before. I promise no one enjoys bumping this song as much as I do!

In today’s world, we don’t need to touch something in order to feel like we own it. Similar to how our parents have photo albums, we post photos on social media to capture memories & moments of our lives. Blockchain allows us to assign real and indisputable ownership over digital things we already feel are ours. So even though it might be hard to grasp at first, NFT collectors often describe emotional connection to their NFTs.

Music isn’t as obvious as visual art because it’s invisible but that doesn’t take away the possibility and feeling of owning it.

Experiences

Artists can’t offer much to their collectors after selling them their vinyls outside of simple things like autographing them on their tour. There’s no easy way for them to track who owns them which makes it impossible to continuously reward their holders.

Unlike with vinyls, the initial Music NFT sale can be the beginning of the experience, not the end. While the art (music) remains the most valuable component, there’s infinite design space when it comes to building on top of NFTs, therefore turning collecting music into collecting not only art but digital assets that unlock experiences never possible before.

For whatever reason, current streaming platforms offer no way for musicians to separate their #1 fan who streams their music all day from a casual fan who only likes a couple of their biggest songs. Through NFTs, artists can identify & communicate with individual fans directly by simply messaging them or going further and creating on-chain & IRL experiences. Because of this, NFTs enable collectors access to their favorite artists.

The most personal experience is collecting a single edition Music NFT which is usually a ticket to a 1 on 1 relationship with the artist. But buying a multiple edition can be a way to connect with the them as well since they can take their smart contracts and create intimate experiences like access to token gated group chats and other content.

By having access to who their holders are, artists have endless possibilities on how to continuously & retroactively reward their closest fans. Even if they didn’t plan anything after the initial sale, at any point, artists can decide “hey, I wanna do this for my collectors:”

Artists can use blockchain not only to release digital vinyls but recreate the feeling & the thrill of opening vinyl boxes with surprises inside:

  • After a collection on Sound.xyz sells out, one of the randomly chosen NFTs turns into a ‘golden egg’ holding special utility added by the artist. When Snoop Dogg released his first DJ mix on Sound in 1000 editions, he decided the golden egg winner gets a case of wine & a shout out on his next mix.

But musicians have the ultimate IRL utility built-in by default: shows.
Collectors can get access to free tickets, free drinks, backstage access, invites to private album listening parties, music video shoots, after parties, exclusive shows for collectors etc. The value of these experiences rises as the artist’s career grows.

Since artists can identify individual fans and their past support, live shows can create more priceless moments like this between artists & collectors. It’s not hard to imagine how in the future, big artists call out & bring their early supporters on stage.

Interoperability & composability

Unlike vinyls, Music NFTs are easily integratable with the rest of the internet so let’s compare them to the current web2 digital era of music.

Right now, we live in an era of big closed off ecosystems (Spotify, Apple Music, Tidal, Bandcamp) competing with each other and limited to each company's resources & experiences they decide to implement. By moving music consumption on-chain, we create a shared & open sourced underlying system (blockchain) where anyone can build on top of the things other people have already built and leverage the existing infrastructure to expand beyond what was the original idea. The open source nature of blockchains allows anyone to come build infrastructure that all Music NFT collectors benefit from, creating space for experimentation & bottom up innovation. All of a sudden, it’s not just up to the web2 platforms to build closed off experiences.

What is an example of interoperability?
When I buy a song on iTunes, I can’t bring it to Spotify or Instagram but I can buy a Music NFT on Sound.xyz then connect my wallet to Audius or Opensea and have it show up in my collection. If I want to sell the Music NFT, I can instantly connect to a global market of potential collectors, open 24/7, where I can auction it off or sell it directly to the person who wants it the most, in exchange for any other on-chain asset like currency (dollars, euros, BTC, ETH) or other NFTs (pictures of monkeys, tickets to a festival, visual art NFTs)

What is an example of composability?
Since Music NFTs are all stored on blockchain, anyone can create an app like FutureTape where we can listen to them. Anyone can pull up data from Music NFT marketplaces (Sound, Catalog, Royal, Mintsongs etc.) and compile all types of different information about music collectors like Bello or create a new generation of music charts like Top of the Blocks.

If Spotify was completely open sourced, anyone could build this type of app:

While there’s no doubt that Spotify is one of the best consumer products of all time, it’s no secret it was never meant to be ideal for creators. Luckily in the future, we’ll have web3 DSPs that create the same (or even far better) user experience as Spotify for free, with the option to pay musicians a custom amount of money per stream, not set in stone by big tech companies. In a world like this, it’d be very easy for artists to split the streaming revenue of Music NFTs with their collectors.

Royal is already experimenting with this concept but since DSPs aren’t on-chain yet, it requires a lot of manpower and time to collect web2 streaming royalties and manually distribute them to holders. Web3 native DSPs like Audius promise complete automatization of this process in the future. What’s exciting about these new layers of music distribution is that they can be co-owned and operated by its users (artists & listeners - the people who give it value), in contrast to something like Spotify that has to be focused on pleasing shareholders and making questionable decisions behind closed doors.

Lastly, Music NFTs are composable with other existing blockchain innovations like DeFi & DAOs which opens a whole new world of possibilities:

  • Music NFTs as collateral when borrowing money

  • staking Music NFTs for passive income in artist’s social tokens

  • crowdfunding capital directly from fans: Daniel Allan’s project Overstimulated replaced the financial role of a record label with fans who provided an advance for his EP & are financially rewarded with 50% of the revenue it creates

  • Musician DAOs which turn one sided fan clubs into organizations co-owned and led by fans

Conclusion

NFTs started a digital renaissance with music being one of the most obvious industries to disrupt. No one knows exactly how the music industry is going to look after it transitions to blockchain but when all music is released on-chain, early experimentations of Music NFTs are going to become pieces of history. Vinyl collectors like to talk about collecting historical vinyls but with Music NFTs, you can collect history in real time. Which song will become the Mona Lisa of Music NFTs?

Over the last several decades, music has been through many technological breakthroughs that changed the way we consume it: radio, cassettes, vinyls, CDs, iTunes, online streaming. Big changes in consumption of music might be scary at first but are obvious in hindsight.

The NFT model for music is inevitable because it benefits all types of music consumers while getting musicians paid more fairly.

  • casual listeners: get access to all music for free instead of paying monthly subscriptions or listening to ads

  • music enthusiasts & collectors: get to collect music and create deeper relationships with the artists they love instead of just streaming music, buying merch & attending shows

  • super fans: get to meaningfully contribute and be a part of their favorite artists’ careers by taking on new much needed roles like community managers, marketing gurus, meme masters… and easily get paid for their work in artist equity/tokens instead of running fan pages & communities for free

great meme by Sound.xyz community
great meme by Sound.xyz community

Unlike other technologies before, NFTs allow us to value music directly instead of pricing it at the fixed cost of producing a vinyl/CD, iTunes mp3 file or subscription/ad sales revenue on DSPs. Why would every song ever made be valued the same?

Given the emotional & cultural significance of music, it is extremely undervalued.

The goal of this article isn’t to convert any existing vinyl collectors into Music NFT collectors, rather to discuss new possibilities of collecting music and compare it to what we’re already familiar with.
Similar to how the rise of Art NFTs turned many non-collectors into art collectors, there’s many online communities of music enthusiasts (KTT, r/hiphopheads or theneedledrop) who live & breathe music but haven’t discovered the value of Music NFTs yet.

All Music NFTs accrue in value as more web3 layers are built and create ways of on-chain revenue that can be split between creators & holders: web3 DSPs, curated playlists, Tik Tok audio royalties etc. Because music has the most consumption, engagement, curation & social integrations out of all art forms, the new web3 infrastructure has the potential to turn all early experiments in Music NFTs from historical art collectibles into a true digital asset class.

While there’s definitely certain trade-offs in collecting digital vs physical media (the touch, vinyl sound quality & ritual of using vinyl players), the new generation of collectors won’t care as the benefits of collecting music in the form of digital assets with unlimited design space outweighs the lack of physicality.

So let me end with this question: would you rather spend $100 on a rare limited edition vinyl record or a rare Music NFT?

This article has been released as a Writing NFT in 100 editions with all proceeds going to Optimism’s retro active public goods funding. Special thank you to my editor almndbtr.eth for taking the time to help me put everything together. Feel free to follow me on Twitter for more Music NFT related content.

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