The non-fungible token (NFT) space is one of the biggest subcategories in the blockchain industry, expected to reach over $1.6 billion by the end of 2023.
Meanwhile, global revenue for music surpassed $31.2 billion in 2022.
How do these two worlds collide, and — with the music industry welcoming digitalization and entering the NFT space — what evolutions can we expect to see?
NFTs Are Entering the Music Industry
In recent years, the music industry has witnessed a transformative shift with the integration of NFTs. From artists embracing the tokens as a way to redefine digital ownership and revenue streams to fans gaining exclusive engagement with the content released by their favorite acts, NFTs have entered the music industry in all shapes and forms.
Justin Kim, the head of Korea at Ava Labs, a software developer of the Avalanche blockchain, told Techopedia:
“Artists in the music industry are using NFTs to create innovative digital art forms and engage fans in new ways. NFTs have emerged as a revolutionary technology and an eloquent solution that is transforming how musicians can create, distribute, and monetize their work, and how they interact with fans”
Some examples include artists releasing original content solely on blockchain or organizing concerts and events using NFT ticketing or digital collectibles fans can admire long after a show is done.
Khalid Jones, the co-founder of Ultimate Playlist, added that artists using NFTs the best are those who are creating a digital relationship that interweaves the online and offline world — which cannot be replicated in any other setting without the use of NFTs.
“Entering the NFT space offers music artists numerous advantages, with one of the primary benefits being the ability to establish direct and enduring connections with their fan base. In addition, it allows the artist to monetize directly with their fanbase in a way that both avoids middlemen and in a manner that they could really only do through merchandise programs previously.”
Another key benefit of using NFTs within the music industry is that musicians can now earn royalties through non-fungible tokens. This is because ownership rights are securely stored on the blockchain, allowing artists to receive fair compensation every time their NFT music is sold.
A number of Western artists, including The Weeknd, Snoop Dogg, and Shawn Mendes, as well as some of the biggest names in the K-Pop industry, have already launched their NFTs, showing the industry’s influence.
In addition, the use of NFTs within the music industry has helped foster stronger and more interconnected communities, Adams added.
Enhancing Revenue Streams with NFTs
NFTs have introduced new monetization models, which can be achieved through tokenizing music.
COZ’s Adams explained that NFTs can be associated with concert tickets, merchandise, and the release of unique applications that can be done using NFT technology, revamping the way royalty payments are made.
“Traditionally, the division of a song’s revenue among producers, publishers, and artists often left the original creators under-compensated. NFTs, however, are revolutionizing this by ensuring a more equitable distribution of royalties in the music industry.”
Ava Labs’ Kim added that such an approach can help musicians gain “greater control over their work” as it eliminates intermediaries.
Moreover, blockchain technology has introduced ways through which artists can cater to their music monetization by focusing on fan benefits while also creating security and authenticity, and opportunities for recurring transfers.
Ultimate Playlist’s Jones gave an example:
“Artists can dictate that when a sale of one of their NFT’s occurs, that they receive a royalty percentage on that transfer. This gives an incentive to create truly out of this world packages and tiered access for all level of fandom.”
Enhanced Fan Engagement
In addition to offering new means of monetization, blockchain technology allows artists to provide fans with unique, verifiable digital assets that represent ownership of specific songs, albums, or even VIP experiences, revolutionizing how fans interact with their favorite idols.
Ava Labs’ Kim explained that fan experiences and rewards are elevated when artists can directly interact with their fans in ways no one has ever seen before.
NFT technologies do not require intermediaries or payment processors that might make life more complicated for fans, making engagement more enjoyable. NFT concert tickets can serve as both proof of attendance and a collectible while passing on more exclusive benefits like access to future events or discounts for new music.
“In Korea, K-Pop fans rarely purchase tickets at face value, as ticket scalping is common. This hurts artists and fans both economically and emotionally.
“But recently, SK Planet, a leading entertainment conglomerate in Korea, tackled the problem and started selling NFT tickets with resale removal features, powered by the Avalanche blockchain.”
In addition, NFT technologies can give fans a VIP pass into exclusive content and experiences, both online and in real life, making fans feel like they are part of an elite group.
“Imagine a tier that gives fans voting rights to what songs will appear on a new album tracklist. Or the right to vote on the album cover or even tour dates. This direct and personalized engagement fosters a deeper connection between musicians and their fan base, turning passive listeners into active participants in the artist’s journey,” Jones noted.
An example of this is the Coachella Keys NFT sale in February 2022, Jones explained, where 10 “keys” were sold, granting fans of the music festival “lifetime passes to Coachella with additional benefits attached to them”. All 10 NFTs were sold for a combined $1.5 million, showing how impactful such initiatives can be.
Coachella Collectibles NFTs are available now. Visit the Coachella NFT marketplace to mint a collectible or bid on a Coachella Key 🗝 https://t.co/D8v4cDhFUM
— Coachella (@coachella) February 4, 2022
NFTs and Music: A Window for New Collaboration
However, integrating NFTs within the music industry not only revolutionizes how artists monetize their art and expand their relationship with their fans but also opens new windows for collaboration between musicians, visual artists, and technology experts.
“Musicians, artists, and technologists were at the forefront of pushing boundaries in the digital space from the beginning, and the NFT space is no different. The collaborations have constantly probed the edges of the known universe of possibilities, searching for those expanded horizons.
“Specifically, much of the creativity of musicians and artists have pushed the technology to new places with the simple statement of “It’d be fresh if we could do…” The space is not limited by the technology nor creativity, but rather limited only when technology and creativity stop collaborating,” Jones told Techopedia.
Ava Labs’ Kim added:
“Ava Labs has run the art incubation program Avaissance that supports artists, including musicians, worldwide. The program has provided rising Web3 artists with marketing and tech expertise. Interestingly, musicians and visual artists have united independently and are creating NFT artwork together.”
The Future of NFTs and the Music Industry
Ava Labs’ Kim believes that in the future, NFTs will be “widely accepted first in combating illegal tickets, and then will organically lead to better fan engagement initiatives as musicians and fans collectively accept the idea of digital ownership over time”.
“Direct engagement will build stronger, more independent communities around artists while also serving as their marketing platforms.”
Ultimate Playlist’s Jones stressed that because the NFT market is down by 80% since its peak in 2022, the community must think of NFTs as a “proxy for the utility of technology” and not just as “collectibles”.
“What we have seen is that the excitement to own digital art in the NFT form has waned as there was an extreme bubble in value. However, those who have learned to build unique, bespoke and thoughtful experiences that use the technology in sync with real-world one-of-a-kind experiences.”
Adams concluded that one of the most important aspects that NFT technology brings into the music industry is the power of connection between artists and fans, as well as between fans themselves, who can exchange tracks and merch and discuss the latest artist news and concerts.
“NFTs can grant access to exclusive chat rooms or online events with your idol and NFIs can be used at meet & greets, for example. The division between the digital and physical worlds is blurring and Web3 can be used to redefine the “distant” relationship that typically exists today.”