NFTs, or non-fungible tokens, may become the latest tech-based acronym that fails to catch on in the music industry in the long run, or conversely, non-fungibles may end up breaking the mold for artists considerably.
You may have heard of the term blockchain in recent years.
Blockchain refers to a public, linked, and decentralized record of all digital transactions made with a given digital currency, or cryptocurrency. The blockchain is continuously replicated, updated, and re-verified among its user base.
Bitcoin and the hordes of other oddly-named, rapidly proliferating cryptocurrencies it has inspired, from dogecoin to ethereum, are fungible tokens. Each brings its own market-determined value, similar to typical tangible currency, and each can be sold for typical currency or used to make other purchases.
A non-fungible token, however, refers to a unique unit of proprietary information on the blockchain, often acquired in exchange for cryptocurrency.
Matt Medved, co-founder and CEO of NFT Now and founder of Billboard Bands, recently joined ASCAP to explain.
“If you asked me to borrow a dollar and I pulled out my wallet, you probably wouldn’t say, ‘Oh, I want this one,'” Medved said. “It doesn’t matter how much dollar I gave you, because they’re all the same. It is a fungible token. It’s the same with bitcoin or ethereum or a dollar. They are all somewhat the same.
“But a non-fungible token is a unique token on the blockchain. So if I come to an event with a Basquiat painting and (someone else) with an Andy Warhol, we don’t know just by looking at those what their exchange is. There are all these other factors in play – the history, the art, the cultural relevance. NFT is basically a digital version of that.
Conceptually, NFTs introduced the idea of scarcity into purely digital transactions, contrasting something like the infinitely repeatable downloading of an MP3 for 99 cents.
“(With NFTs) it’s false rarity in the sense that someone decides to create a number of images and doesn’t allow them to just be reproduced in billions of versions, but it’s a rarity,” said Vickie Nauman, Founder and CEO. from digital music and licensing company Crossborderworks.
“I think two very strong elements of the NFT landscape that apply to music are that, in the world of rarity, music lovers want to collect. We have a long history of collecting.
Depending on the artist’s prerogative, a rare NFT, individually verifiable as unique on the blockchain, may take the form of a never-before-seen demo, remix, lyrics, concept image, digital ticket stubs, or of a wetsuit, really anything one can imagine owning or collecting.
“The other is access, in that end users want to be part of communities,” Nauman said. “People who like a particular artist feel like they’re in a tribe, they’re in a club. They want access to each other and to the artist. They want to help participate in artistic creation.
Essentially, the appeal of NFTs lies in bringing together the best parts of consumer-artist relationships from two different ages of art consumption, combining the uniquely meaningful and verifiable nature of rare 20th century physical transactions with the ease of 21st century digital transactions.
NFTs take this last idea to a new level.
Much of the potential promise of NFTs within the artistic community stems from the removal of digital intermediaries.
The advent of Web 2.0 (or the state of the Internet as we know it today) brought centralized control of content, which moved monetization away from creators.
For example, the majority of music is now hosted through apps with barriers to entry for consumers and/or artists, such as streaming platforms and social networks.
In the concept of Web 3.0 (or the Internet to come), NFTs represent the possibility for artists to move away from this model, favoring more direct communities.
“In theory, you don’t need millions of fans to have a successful career as a creative,” Medved said. “The original promise of the internet was that you would be able to reach 1,000 people around the world who resonate with what you do and want to show up for you.
“They (the ones) buy the ticket, drive the ride, get the merchandise, show up to the concert. The problem with Web 2.0 is that all of these centralized platforms kind of got in the way, and then all of a sudden, as a creator, you had to pay to reach even a fraction of your subscribers.
NFTs provide consumers with verifiable value that can come directly from the artists themselves, requiring no outside infrastructure to reach the consumer.
“The exciting thing about NFTs is that you’re no longer at the mercy of algorithms or ads,” Medved said. “If you’re an up-and-coming musician and you have 1,000 real fans and you post an NFT for $100, which is a pretty reasonable price for an NFT, that’s $100,000 in revenue, which is way more than a lot of independent artists see streaming services.
According to Fortune, the top 0.8% of artists streaming on Spotify earn less than $50,000 in revenue per year from these plays. Additionally, in the current industry model, revenue is typically split 50/50, with artists pocketing half and the rest split among industry professionals who help spread their brand in various ways.
Meanwhile, the NFT market is exploding. According to Forbes, NFT’s total sales volume was $25 billion in 2021, up dramatically from just $95 million in 2020.
If its potential were realized, NFTs could offer artists greater returns than ever before and, perhaps one day, a greater sense of control as well.
“Being able to have the freedom to move around in such a new space is hugely liberating,” said Grammy-nominated songwriter and producer Poo Bear. “I come from such a controlled music industry, with a marketing team and a radio team, and then you look up and you don’t even have your own fan base or your own data.
“It opens everything up and allows artists who have kind of felt left out of the industry, they can now have a place.”
And only time will tell if the model continues to catch on.
“We all invent as we go,” Nauman said. “Day to day, the landscape changes and we ride with it, and we all try to understand it.”