Music NFTs: artists are out for a cash grab
As an electronic music artist Justin Blau (3LAU) fetched $17M from NFTs, other bands excitedly dived into the blockchain and started minting their singles or even albums. Experts say NFTs may revolutionize the music industry, and artists, especially niche ones, could also make a living out of their music.
Spotify, iTunes, and their knockoffs have changed the music industry significantly. Yet, they didn’t save musicians, especially the niche ones who do not have mass audiences and therefore don’t make much money.
So it is no wonder that many artists are now embracing the opportunity to earn money outside of the well-oiled machine of the music industry. This opportunity comes in the form of non-fungible tokens (NFTs). Examples of successfully minted and sold music NFTs are now numerous: Gorillaz, Grimes, and Kings of Leon being among the more prominent artists jumping on the bandwagon of blockchain technology and hoping it would become another source of revenue.
What is happening?
“We’re witnessing a paradigm shift in the digital world with the NFT craze exploding. I believe NFTs will play a critical role in driving commerce across digital marketplaces that will offer long-term benefits on returns,” Hatem Hanchana, COO of Utopia Genesis, the ecosystem for tokenized songs, told CyberNews. He believes NFTs are here to stay.
According to the investment bank Citi, music artists get only about 12% of the whole music industry revenue. That’s what’s left after deducting the production and distribution costs. At the moment, NFTs offer artists direct distribution of their music to their fans, basically going behind the big labels’ backs. No wonder artists are trying to grasp the opportunity.
“People are out for a cash grab. Before that, artists were not interested in doing NFTs, but when 3LAU raised millions, everybody was like, how do I do NFT? The funny thing is, when you do NFT, it is in the crypto. You raise money in crypto. But many musical artists do not want to raise money in crypto - they want to raise cash. People want to get rich, but they do not want to use the concept. People want to jump on the trend,” Hanchana said.
For 3LAU, it would take thousands of tours, if not more, to raise that kind of money. For pop artists with mass audiences, this might not be a large sum, but for struggling niche artists NFTs are a goldmine.
“He is a medium-sized artist but pretty big in the crypto community. That is why he succeeded. It is the same thing with Grimes. She raised a lot of money, but she is big in the crypto community due to her husband. Very niche artists can raise money, but you need to have super fans that have the money and understands how the crypto works, or else I don't think you would not raise that much,” Hanchana said.
Hanchana believes that Gorillaz minted their album on blockchain because they didn’t want anybody else to mint and sell their music as intellectual property is one of the weighty concerns around NFTs. Anyways, Gorillaz fans went crazy after the news.
The cartoon band delved into the topic of climate change and the devastation on Earth on their album Plastic Beach. Yet, they moved on to minting NFTs that, alongside blockchain technology, are criticized for their negative impact on climate. According to Wired, Joanie Lemercier’s NFTs that sold out in 10 seconds consumed 8.7 megawatt-hours of energy - that’s the amount of electricity a household uses in a year.
Hanchana laughed when I asked him whether environmental concerns can stop music NFTs from becoming mainstream.
“Sustainability is what people see now. When you think about it, before corona, how much were music artists out touring and flying? (...) Maybe there is a back thought about it. There can be an industry behind it that sees ok, shit we are not earning money anymore, maybe we should sabotage it,” he said.
Grimes’s NFT artworks, including music and graphics with flying cherubs, a cross, a sword, and glowing light, sold for $6M. She pledged a portion of the sales to the tiny think tank Carbon180, which, as the Atlantic put it, celebrities are agog over. This American non-profit organization is studying the removal of carbon dioxide pollution from the atmosphere.
What are you buying exactly?
What does it mean to buy an NFT? Even if you buy an NFT song, it doesn’t really belong to you. It only shows up in your wallet and stands as the original signature of the author. People can still copy and use that song in various ways.
According to Hanchana, some musicians are trying to sell the music rights with NFTs but no one has yet done it successfully.
“When you sell an NFT today, you don't do any KYC (know your customer) on it. You just go there, you connect your wallet, pay the price, and get it. But if you want to buy security (copyright security refers to the protection of unauthorized duplication of copyrighted materials - CyberNews), then it becomes a different jurisdiction. You need to do KYC, you need to be in the right jurisdiction to be allowed to buy this NFT. No one has actually done it. We can do it, but to do security is expensive. I think the cost of making one security can be around 40K dollars,” he explained.
Artists can mint songs that labels refused to release, and sell them to their fans. If you buy such a song, you have the first mint on the blockchain as a proof that you actually bought it from the artists.
“If you buy an exclusive piece, you can say that you are one of the owners of this exclusive piece. It's an authentication,” Hanchana said.
What does the future hold?
Hanchana believes that NFTs are here to stay, and people will continue to try and find the next Banksy to find “cool stuff and keep it”.
“I think it will open up a little bit more how artists will sell their merch. For instance, they can start selling more exclusive stuff more quickly with less planning. I can set up an auction and sell exclusive VIP tickets that you can buy and have access to my concerts forever. The highest bidder can buy it. In some way, it is going to revolutionize how artists get money from secondary sources from their music,” Hanchana said.
Artists will depend less on their labels and will be able to release their songs as NFTs in case their producers do not want to publish a particular piece. According to Hanchana, it will open up some more freedom for the musicians.
And yet, NFTs are in the grey area, and it might change in the future.
“When you go to a Bandcamp, a platform where artists put up their songs and sell them. Usually, when they sell a song, if it is a small artist, maybe he can sell it for maybe 1,9 dollars a track. 90 cents always go to the record label. But here, on the NFT, no one knows if they are supposed to give the record label money when they are selling the music,” he said.
Another important thing is that some artists do not understand crypto, and, as Hanchana mentioned early, are just out for a cash grab.
“Some artists do not understand that when they mint an NFT on some platform, it is not them who own the NFT contract. If the platforms feel like they are going to delete your NFT, even if someone has spent 2M dollars on it, they can do that,” he said.
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