NFT’s… Nope, sit back down, it’s time we talk about it. It’s the dreaded subject that a lot of us have desperately tried to ignore, including myself, but it is, to simply put it, where the music industry is heading, so stay with me and we’ll figure it out together. 

The sheer amount of work that goes into writing, recording, producing, mixing, and mastering is massive, and due to streaming platforms, often goes undervalued. Could we finally be heading towards a time where musicians earn what they deserve?

Let’s start with the basics and keep it simple.

What Actually Is An NFT?

So, it stands for;

Non

Fungible

Token

All this means is that the item is non-replaceable. Each individual token is completely unique, making it extremely valuable. For example, a coat from ASOS is not of huge or fluctuating value, because there are thousands of the exact same item. You would not care which of the thousands that were made, arrives at your door when you ordered it, because they are identical, with no way of distinguishing between them, making it fungible. However, hypothetically if ASOS announced they were making a completely unique coat that would be placed in an auction, and the highest bidder wins, then the coat would be of far more value because you would be the only person on earth to own that non-fungible item. So, an NFT is just that… but digital.

So, Why are NFT’s Such a Big Deal Now?

NFT’s are similar to cryptocurrency, in the sense that when you purchase, you are making a digital investment which leaves you with a digital asset, however, whilst crypto is a currency that can be traded directly, NFT’s cannot be directly traded as no two are the same. Talking of cryptocurrency, the only way to buy an NFT is using Ethereum, which is a specific coin in the cryptocurrency world. 

So, buying an NFT is the equivalent of buying a rare collectable item with you being the only owner in the world, with each one containing distinguishing information making it one of a kind. This also means they are very easily authenticated with no possibility for faking, replicating or altering the token, making it the new wave of investment. As the concept is totally new, the prices are skyrocketing due to the market being completely up in the air, with 174 million dollars being spent on NFT’s since 2017. This will likely become more regular once the industry stabilises. 

A few NFT Characteristics to Remember:

• Non-replaceable – they are one of a kind, no two are the same – no one can replicate your creation baby!

• They cannot be directly exchanged – as they are completely unique, there is no way to value one in relation to another, therefore they must be bought and sold using cryptocurrency.

• They are bought using Ethereum – the only trading currency at this point. You can’t use pound sterling or dollars; therefore, you must purchase Ethereum before you purchase an NFT.

• They can’t be divided into smaller shares – they are a whole token, meaning multiple people can’t own bits of the same NFT – It has one owner; HOWEVER, it is possible to require a share of all further sales of your NFT, which we will discuss later in the article.

• They are verifiable – making copies impossible, the authentication process is 100% effective due to the individual information on the NFT.

• They are indestructible – all the data is stored in the blockchain, they will never cease to exist. The only way you will no longer own the token is if you sell it in exchange for Ethereum. 

Why Will NFT’s Have Such a Huge Impact on the Music Industry?

The way to put a music based NFT into perspective is by imagining you’ve purchased a one-off signed vinyl from your favourite artist. It’s a rare collector’s item, with the ability to fluctuate in value based on current music industry affairs. For example, if that artist died, the value of the vinyl would more than likely increase.

As you can imagine, after years of earning $0.004 per stream, musicians are ready to snap up the idea of selling samples of their songs for much higher and deserving prices. The NFT market now provides musicians with the opportunity to mint samples as an NFT and have fans bid on it. Minting full tracks may come with a slightly more complex contract and may involve lawyers, but it’s certainly well underway.

Another way of musicians making money – which is slightly more prevalent at the moment due to the simplicity of the process – is selling logos, cover art and other graphics as an NFT. It’s essentially digital merchandise. That leads us on to another point, that merch no longer has to be a hoodie or t-shirt. Fans can still buy tokens of their favourite artists, or you can sell tokens of your own music, but on an entirely digital basis. Now instead of owning a tote bag that will probably get given to charity, they will now own their own digital asset and have made an investment!

One huge upside to selling samples or artwork as a musician is that it is possible to keep a share of all future sales. Imagine if you sold one of your songs for £1000 and it gained huge amounts of attention, going on to be sold for £500,000 – you’d be fuming. Therefore, maintaining an agreed percentage of all future sales guarantees the creator to continuously receive income for their work.

What is Predicted to Happen with NFT’s and Music?

Now we know ‘why’ NFT’s are going to change the music industry, let’s talk about how. Whilst, unfortunately, we cannot read the future, there have been some very strong predictions made for the way in which musicians will likely reap the benefits of this huge new market. 

1. Tokens of live performance – Artists will sell small snippets of themselves performing either at a gig venue or even over live stream. There are examples of a similar thing being done already by NBA players, who are selling some of their golden match moments for huge sums, which are traded via a website called Top Shot. This will be highly popular with live streams, as usually, they are spontaneous and once they’re finished they’re gone forever. However, selling snippets of these streams as an NFT allows fans to own a super-exclusive slither of the artist! It is highly likely we will see artists like Adele, selling some of her most-loved musical moments. Whoever bought that NFT would then be the only person on earth to own this specific moment of that star and depending on who it is in question, this may end up being of huge value – so you can see the appeal right?

2. Selling songs pre-release – This is expected to be a huge market, as buying a song before it’s released is a gamble. In this scenario, songs will probably be put up for sale 24 hours before the release time, with the highest bidder at the time of the release, becoming the immediate owner of the song – essentially, you would own the song before anyone has ever heard it. Again, this is almost a risk-taking game, as buyers will have to base their purchasing decisions on previous songs and hype around that particular artist. As you can probably imagine, for artists like Justin Bieber, Billie Eilish and Drake, this market will be huge as there is already so much build-up around their standard releases. The likelihood is, regardless of whether the song is up to everyone’s taste, it will still be absolutely huge, meaning purchasing the NFT wouldn’t really be a gamble at all. 

3. Selling songs post-release – Similar to the concept above, investors will be able to purchase full songs as an NFT, but they may be put on auction, let’s say a month after its release. This will allow buyers to track the success and statistics of the song and make their decision based on the traction it has gained so far. This is of course a slightly different situation, as based on the outcome of the release, the value of the NFT could fluctuate massively in these 30 days. This could work two ways, a song may not do as well as expected and therefore sell for less than what the artist hoped, or the track could absolutely fly, meaning the NFT will go for a higher price point. Again, it is a risky business because no one can read the future. You may take a chance on a song that hasn’t started off too well but ends up going TikTok viral, and in that case… you’ll be balling!

4. VIP experiences – You know when you went for a meet and greet with your favourite artist? Imagine how good it would be to be able to own a snippet of that forever? Well, soon you probably can. We will surely be seeing a new layer to VIP packages, with the NFT of your personal meet and greet either being part of the initial package, probably at a higher cost than usual, or the opportunity to purchase the NFT after the event. Whilst it is unlikely that other people will buy your specific meet and greet, meaning these particular NFT’s won’t be of huge value, it is still a great personal touch that many artists will add to their VIP packages.

How Beneficial is the NFT Market Going to be for Smaller Artists?

As you’ve probably gathered, the NFT industry is seemingly leaning towards supporting bigger artists with large-scale fanbases over smaller, lesser-known artists. Is this just another way for small, emerging artists to get swept under the rug?

People are always going to want to invest in famous figures where possible, because we all suffer from a strong case of the ‘Emperor’s new clothes’, in which we all believe and adhere to the hype, wanting a slice of the next best thing. So, whilst, yes, it will be much easier for larger artists to profit from NFT trading, due to their already huge reputations and publicity, this doesn’t mean that smaller artists can’t use the industry to work in their favour. Like with anything, it only takes one investor to make money, so technically one person that loves and believes in your music is enough to make you some profit. 

A huge issue that emerging artists run into, is getting paid for their work as there are very few ways to earn money from live streaming or gigs other than from ticket sales which can often be minimal. There also isn’t really a service for fans to donate or tip artists like they could if they saw someone busking live. However, the NFT trading market could provide a solution to this. It could also act as a virtual tip jar, where smaller artists can sell NFT’s in exchange for whatever sum of money a fan wants to donate after say, a live stream or real-life gig, or just because they’re feeling generous, so not all is lost.

NFT – Nearly Flipping There

Phew, that was intense. We know that was probably a lot to take in, but you made it to the end! There are tons of amazing YouTube videos to watch if want to delve a little deeper – and be sure to check out the sister article which talks all things NFT’s and fashion! ***LINK TO NFT FASHION ARTICLE***

Don’t worry if you’re a little overwhelmed, just keep researching it as you go, and you’ll get there. Happy investing!