While early adopters of Ethereum have always believed that there would be utility for the token via smart contracts we are finally starting to see some evidence, and when I say some… I mean a lot.
It started with Defi and has expanded into NFT’s.
Looking at the absurd numbers from Opensea it’s clear that Ethereum has found some type of product-market fit when it comes to NFT’s. With Ethereum as the settlement layer, it has allowed the creator economy to further accelerate with limited friction. While most of the upside has been captured by digital artists in the form of jpegs, I believe there’s still plenty of use cases that can capitalize off digital scarcity. One of the main ones I’m excited about is music.
JPEGS to WAVS
"In 2017, the music industry generated $43 billion in, revenue but only 12% of that made its way to artists. As points of comparison, NFL players capture at least 47% of the revenue generated by the entire NFL, and NBA players capture between 49 and 51%. Centralized user-generated music distribution platforms have succumbed to the influence of legacy institutions, struggling to find sustainable business models as existing institutions reap the rewards of their (and artists’) labor." - Audius Whitepaper
Music disruption has been happening for ages. Over time we've seen vinyl, 8track, cassette tapes, CDs, digital songs, and they've all been displaced now by streaming.
While a lot of barrier to entry has been broken down for artists to showcase their music they still don't have direct access to their fans without someone taking a cut of their overall content. They've been able to disrupt through technology innovation but the current infrastructure still has its flaws. I would argue that we still have a long way to go in terms of disrupting the music business by not only giving artists a better way to monetize but also a way for fans to participate in the upside.
This is the biggest unlock where I see the most potential for music NFTS. By giving users the ability to invest in artists big or small and participate in their upside has never been available. This allows fans to invest in music directly which there has never been direct access for. Through crypto, it's possible to transfer music and value instantaneously across the Ethereum network. This unlocks multiple layers of upside for both the user and the artist. Now that the artist knows who their biggest fans are (holders of their NFT) they can reward them with exclusive music, merch, or even concert tickets. This allows fans to be more engaged with their content since they are incentivized cause they're all NFT holders. Artists could use these proceeds to generate new music and it allows the fans to feel more involved in the process. This could lead to things like albums being funded by tokens and only allowing the ability to access the new music through holding the underlying artist's NFT.
One of the most promising projects that is trying to capitalize on this next wave of NFT use cases is Catalog Works. While it’s still in beta, there have been some positive signals that this could become the go-to platform for music NFT’s. Just like how Opensea’s first mover advantage gave them a tremendous market share I think Catalog has the potential to do the same. Catalog is an audio NFT platform that enables artists and fans to auction and bid on their favorite music. As they put it, Catalog is a
“New medium for music. One of one digital records. Owned by you. Free from platforms. A blank canvas for a new world of music ownership.”
Just this week we’ve seen some signs of the project catching on.
I believe that this is just the beginning of music artists discovering an alternative monetization strategy enabled by crypto. You can imagine that it will only be a matter of time before bigger artists begin to realize the potential of music NFTs. Not only does it give artists a direct way to capitalize on their work, but it also engages fans that want to participate and take ownership in their work. Tokenization of music aligns the incentives of artists and fans and creates a win-win scenario for all. As Chris Dixon has laid out in his NFTs and a Thousand True Fans
“Users and creators globally connected, unconstrained by intermediaries, sharing ideas and economic upside. Incumbent social media platforms sidetracked this vision by locking creators into a bundle of distribution and monetization. There are, correspondingly, two ways to challenge them: take the users, or take the money. Crypto and NFTs give us a new way to take the money. Let’s make it happen.”
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