Music is an inescapable part of our collective human experience and culture, with Web2 giving us access to a range of music that our parents and grandparents could never have even dreamed off. This is largely down to the advent of streaming services, where any song can be heard at the click of a mouse.
While this has brought some positives in terms of the discovery of new artists and the ease with which fans can discover back catalogues, many artists have become increasingly vocal about the (re)distribution of earnings. While it’s always been the case that most people simply enjoy music without thinking about the contracts, royalties and licensing that goes on behind the scenes, musicians of all stripes, even high-profile ones that have conquered streaming, have come together to say that the current model is not working.
So what’s the alternative? We can’t get rid of streaming services, and the old model of music ownership also has its fair share of problems. Blockchain gives us a new way, with evangelists claiming that it can empower both musicians and fans, allowing for greater control and minimizing the necessary evils of having middlemen in the picture.
Blockchain and music is a huge topic that is constantly expanding. This is why dedicated projects such as Water and Music, and blockchains getting into this space such as NEAR Protocol, have created in-depth series’ of blogs dedicated to how music on blockchain works, how it can be organized, what the benefits and drawbacks are, what unique opportunities are available, and how new pricing models can benefit artists and their fans.
A common rallying cry is that Web3 will put music back in the hands of the artist. But is it as simple as saying that blockchain and DeFi as part of music Web3 can solve all the problems that artists face? Not by a long shot; but there is indeed an ability for artists to experiment with different business models, boost their earning potential, and explore a new world of creativity afforded by the technology.
In this blog we will:
- See how Web2 and streaming has changed music production and consumption.
- Examine how blockchain and specifically the NFT music platform as part of Web3 offers a new space for musicians.
- Check out three key projects operating in this space.
- Look at some key questions about blockchain for music artists that remain unanswered.
How streaming in Web2 has changed the music business
While streaming is not the only music-related phenomenon to be facilitated by our current version of the Web, most people can agree it is the most significant. It has also helped to highlight what many artists feel is unfair remuneration in the industry.
Global protests at Spotify, led by the American Union of Musicians and Allied Workers, and a parliamentary hearing in the UK in 2020 are just two events that have helped raise consciousness about this issue; but another factor is the transparency of figures in terms of how much an artist is paid for a play. There has never been much scrutiny into how much an artist gets when their song is played on the radio or what percentage their record label takes per album sale, as these figures were changeable and often hidden. With streaming services on the other hand, we can get a clear view that is easy to digest.
So what’s going on, and what are the effects of streaming?
Consequences of streaming
Streaming has many effects, some predictable and others less so. While some can seem negative, there is always another angle for consideration, which we’ll discover.
Less money to artists?
This is chief among the concerns of artists and the reasons for the protests mentioned above. Indeed, looking at the streaming comparison graphic in the previous section, the pay rate seems miniscule (250 streams on Spotify equates to $1 earnt), and it’s even smaller for those on major labels whose managers take a cut.
It’s really easy to find articles with musicians speaking out against the low pay that streaming services provide, but this depends which figures you look at and your assumptions about what traditional earnings were like before streaming came along.
According to an article on the website Producer Hive, music industry revenues are at their highest point since 2002. Another article from the Guardian references a report from the UK’s Intellectual Property Office, entitled Music Creators’ Earnings in the Digital Era. While it does show that artists with 1 million streams can be left with just £1,500 after royalties and agent fees are paid, there is also this counterpoint:
…Musicians make the same in real terms from recording rights revenues now as they did in 2008 – the pre-internet era – and royalty income taken home by artists across physical and digital sales has grown by 42% since then, far more than the 8% rise in the growth of record company revenues.
The division of royalties
Building on the basic rates offered above, many streaming critics talk about the way platform royalties are divided, as they tend to favor the big artists. Spotify, Apple Music and most other major platforms operate on a pro-rata distribution of royalties. In simple terms, all money brought in by subscribers and ads goes into a pot that is divided by the total number of streams. If a big artist like Ed Sheeran gets 2 percent of all streams in a month, he will get 2 percent of each user’s money. This means that even if a particular user doesn’t like Ed Sheeran and has never purposely listened to his music, 2 percent of their premium subscription fee will go to him regardless.
Further complexity can be considered with the fact that there is no differentiation between the payouts for songs that are actively searched for — “lean forward” songs — and those that get automatically played as part of a playlist — “lean back” songs.
Finally, there is the issue of songwriters. As ABBA’s Björn Ulvaeus points out in a recent article, songwriters occupy last place in terms of streaming royalties, which can be disastrous considering they don’t have the option to make up for a fall in income by touring, as artists who sing the songs can.
New models, such as Equitable remuneration (ER), is one proposed fix, although as Rolling Stone points out, with this model, jazz and classical music would prosper at the expense of hip hop and rap.
Tailoring music to the platform and algorithms
An unseen consequence by many, the fact that 90% of plays on Spotify go to the top 1% of artists means that the stakes for a winning song are higher than ever. This has meant that many artists have felt pressured into tailoring their music to the algorithm. This may mean making sure the song is catchy in the first few seconds, has a clearly defined genre to have a better chance of making a playlist, or falls within a certain desired song length.
Knowing that more people search for solo artists and songs rather than bands and albums can mean that the whole composition of a group and the music they release can be changed to have a better chance of getting more plays. This can have a negative effect on creativity, where songs are optimized for streaming rather than contributing something new and daring, especially when trying to land initial success.
Where do record labels and radio stations fit in?
Having such a fundamental impact on the way we consume music, streaming has become the focus for artists and individuals to complain about the current industry’s state of affairs; however, as hinted at above, big record companies also have their problems. While John Lennon was big enough to take on Morris Levy and win, the predatory producer was just one figure in a long line of executives and businessmen who have taken what many people to be more than their fair share of profit from the work of artists without a right of reply. Even the biggest stars such as Taylor Swift and Paul McCartney have struggled with the issue of ownership of their own music, demonstrating that the ills we see today aren’t simply a consequence of streaming.
Traditional radio stations also have their role to play in boosting already big names while neglecting independent and up-and-coming artists, as shown clearly by the graph below.
Beyond streaming
While we have limited our focus to streaming in this article, we should point out that Web2 has brought many other developments to the music industry. As we saw amid Covid-19 lockdowns and restrictions, musicians could perform to people all over the world through online platforms and connect with their fans in novel ways, such as through recording and sending personalized video messages. Artists could also increase their exposure by becoming more prominent on social media and crowdfunding on Web platforms such as Kickstarter and Patreon. P2P filesharing through sites such as Napster and Limewire are also a product of Web2.
Where we are now
While Web2 has definitely brought both positives and negatives to the music scene, many seem to acknowledge that from both a financial and cultural aspect, things could be improved. Primarily, this is due to the fact that Web2 has largely not delivered musicians a satisfactory enough way to gain control over their own creations.
So what can we do better? This is where blockchain steps in, providing the infrastructure for musicians to get paid better, establish a more direct relationship with their fans, and retain their creativity.
Web3 and music NFTs – a new space for artists
So what can Web3 bring to the table in terms of what artists produce, how their fans consume culture, and how the business of music functions.
As Amber Stoneman of Minting Music, a NEAR-based blockchain music NFT platform, talks about, “NFTs don’t just give artists a new revenue stream, but a way to feel like they are not simply struggling, removing the stress that can block creativity.” Of course, this may be wishful thinking, as not everyone can drop a selection of NFTs and make ≈ $6 million, as with Grimes’s WarNymph Vol 1 collection.
Currently, NFTs are the main way that music can be packaged and sold, but we are likely to see a greater diversity of platforms as the sector develops.
Blockchain-based music projects – new developments
So what features can we see by looking at blockchain music platforms currently on the market?
Changing music format
“The medium is the message” is a common saying for a reason. Albums have traditionally had their length limited by the physical constraints of the record or disc, and as we talked about above, songs on streaming services are optimized to fit an algorithm. Within the NFT music industry, a song can be as long or as short as you want, without it being a negative trait.
Variations on themes with collections
Rather than standalone songs, NFT collections my have common musical themes running through them, as demonstrated by Kaien Cruz’s collection of 500 NFTs on SoundMint.
Importance of art
NFTs are still very visual mediums, meaning that the art that accompanies the music plays a part and can even incorporate aspects of rarity that affect the price.
New ways of organization
Chaos, a DAO comprised of 80 creatives, has come together to release 45 songs over a period of 8 weeks. Each artist plays a role and their work is split into 20,000 music NFTs, the sales of which are divided among the artists automatically through smart contracts.
More direct fan engagement and add-ons
Fans no longer need to worry that only a small fraction of the price they pay goes to the artist. They get to feel a closer connection to the musicians they want to support. In turn, NFTs provide versatility, meaning the NFTs themselves can act as governance tokens within DAOs, tickets to fan-only merchandise hubs, gateways to music previews, or priority tickets to attend music in the metaverse — and this is just scratching the surface.
A great place for smaller acts
According to OpenSea analysis, indie-label and unsigned artists accounted for the majority (64%) of primary music NFT sales. The absence of middlemen has been a strong drawcard for many artists entering Web3, particularly the appeal of artists having direct control of rights and access to their own communities.
As we can see, there is a lot of potential here, which is why the NFT landscape for music has already seen so much development.
Three promising music platforms on blockchain
Here are three prominent projects that have already gained some traction in terms of blockchain music distribution, offering a clear vision for how the future can unfold for artists and fans.
ModaDAO
ModaDAO describes its place in the blockchain music industry as “defining the future of music ownership, distribution and publishing via NFT standards, decentralised governance and automated finance”.
Designed by creators with 30+ years in the music industry, ModaDAO aims to intersect music and blockchain through three pillars that leverage the sector’s infrastructure to drive creativity and monetization opportunities for creators.
Despite aiming to remove the middlemen associated with streaming services, ModaDAO doesn’t aim to completely replace the current system; rather, it hopes to offer an alternative where artists have full ownership of their body of work and fans can listen to NFTs without the transferral of ownership.
The most high-profile signing so far has been DeadMau5, who came onboard at the end of 2021.
Sound
Over $1.1M has so far been earned by musicians who have released NFTs through Sound, a platform that also aims to help (mainly unsigned) musicians make a living from their art. As co-founder David Greenstein put it recently:
If we build for the artists who are making a lot of money on Spotify, it’s 7,500. If we go for the artists that aren’t making sustainable careers, we’re dealing with the 99.9%.
A song is monetized through a set of NFTs that are released, giving holders the option to comment at a specific place in the song, similar to SoundCloud’s functionality. If an NFT is transferred, the new holder can overwrite the old holder’s comment. Aside from this, there are other features such as listening parties and curated drops which hope to built out the community aspect of fandom within Web3.
Two high-profile artists that do feature on Sounds are Snoop Dogg and Pussy Riot, who come up at the top in terms of all-time sales at the time of writing.
Audius
Audius is one of the most well-known and successful decentralized music streaming platforms that launched all the way back in 2018. With a similar layout to Spotify, Audius is run as an open-source community of artists, fans, and developers. This means users can build their own apps on top of Audius, creating a musical ecosystem.
Audius crypto, the AUDIO token, sits at the center of the platform, with a plan for 90% of the circulating supply to go to artists as they interact with the service or achieve certain milestones, such as having a trending track/playlist, or levels of engagement, such as promoting their work through social media.
The fact that Audius has a familiar layout and connects to existing popular social media platforms such as Twitter and Instagram means that its crypto music streaming can easily be used by those who have never engaged with a DeFi platform before.
With governance staking and the ability to integrate NFT-collectibles, Audius is definitely more evolved than its younger competitors and points to a future where music can thrive without large corporations running the show.
Does everyone win from Web3 music?
Web3 NFT and music metaverse platforms offer us a utopia where you can get greater access to your favorite musicians and their creations, while the artists themselves get better pay, conditions and control. It sounds like a win-win for everybody concerned when put like that, but there are of course some real considerations that need to be addressed before the sector expands to wider audiences. These include questions such as:
- What happens if a piece of music wants to be used in a movie or TV show? Is it the artist that is compensated or the owner of the NFT? As a recent article from Water & Music says:
…behind the explosive financial growth and hype lies a surprisingly shoddy foundation of knowledge and awareness about what people are really buying when they buy a music NFT — and whether, legally speaking, the technology actually “solves” any fundamental issues around the complexities of music copyright ownership.
- It’s great that unsigned and independent artists get more of a shot, but people still want to listen to their favorite stars. How will these platforms stop big names from monopolizing them, as is the case with Web 2 music services?
- Web3 projects often claim to take out the middleman; but how will promotion work once more artists join? Musicians will still need to have agents and publicists to further their interests.
- How far should integration with Web2 go? ChaosDAO, Minting Music and other projects listed above still have Twitter accounts, as a connection to current social networks are needed to gain prominence.
- What power will DAOs have on the artist? DAOs can act as record labels, but this may limit the creative or financial control that the artist has.
- How will artists manage their income stream when music NFTs continue to follow the cycles of popularity within the crypto market?
Music and Web3 — a new frontier
As you can see, this topic is a big one and we have only just scratched the surface. There are plenty of unanswered questions, but one thing is for certain, merging blockchain and popular music is a step forward for Web3 and the future of the music industry. For new technologies to thrive, they need to integrate into our needs and interests, of which film, art, television, literature and music play a huge part.
A question that comes up is whether legacy structures should be brought into Web3, or whether completely new systems should be created. This is something that will need to be tackled in the next few years. Until then, INC4 will keep working to strengthen Web3 through the creation of bold and innovative blockchain-based projects.
Reach out to our team for a consultation on your big idea today.
