Over the course of the last two years, NFTs have taken creative industries by storm, and the music industry is no exception. A never stopping rate of innovation within this space, coupled with benefits of decentralization, has brought a period of substantial changes in the way we perceive the interaction between the artist and the fan.
As the music NFT space is developing at a significantly fast pace, the legacy music business structures are being challenged, while more and more creators are interested in using NFT technology to raise funds, fuse deeper connections with fans, and bring innovative solutions to existing music ecosystem problems.
Having recently covered the most popular exchanges in the music NFT space, as well as most active artists and creators that are popularizing the technology, it is also important to address the ways how NFT technology is allowing fans and artists to have a deeper relationship and a higher rate of interaction. If you want to find out more about the multiple ways of exactly how NFTs bring value to the community – you are in the right place.
Utility value of the NFT represents the rights granted to the token holder, these rights usually being something that the token offers in exchange for the purchase. During the last two years we have clearly seen that there is no “one size fits all” approach, and there is a myriad of various options on what artists can offer to their fans in exchange for the sale of the NFT.
Within the world of music it very often relates to some sort of combination of digital and real world bundling, whereby a digital collectible such as an artwork or an audiovisual is sold together with a physical object or an experience that has value to the fan. That includes rights and access to some kind of intimate, behind the scenes experience of the artist, where the collector could be entitled to a limited edition vinyl, CDs, exclusive access to unreleased material or alternative mixes and edits, or perhaps even tickets to the artist’s new show.
But the types of utility value offered through music NFTs go beyond that and are subject to constant innovation by new creators entering the scene. We have already seen lifetime concert passes and agreements to hang out with an artist in real life being granted for the purchase of the token, and we are only about to see more and more of new types of utility value being offered through music NFTs.
The opportunities and an ongoing innovation within this technology allow fans to interact with their favorite artist to an extent that just wasn’t attainable before, which in turn fuses more intimacy between collectors and creators and brings more and more utility value to new fans, giving them a reason to contribute and become an adopter of the technology.
Patronage and Funding
From the perspective of the music artists and creators we are entering the new frontiers of the patronage experience. However, unlike something like Patreon.com, the NFTs bring an aspect of decentralization and cut down the middleman and the limits of what can or cannot be offered to their fans.
Despite the fact that the accessibility of releasing music is at an all time high, music artists still massively rely on heavy amounts of financial capital to “cut through the noise” and reach a desired amount of listeners. Currently this funding is most often obtained through getting signed to a record label with a substantial checkbook, and it is important to note that the labels historically compensate for their expenditures by imposing draconian splits on royalties of the artists’ released music.
But we can see how NFT technology changes this as decentralization helps both creators and fans to align incentives and form mutually benefiting communities. The greatest challenge to the existing music business structures is that independent artists can start using NFTs to obtain funding and financial capital from their closest and “truest” fans and use this funding to further promote their songs and projects. As a result, we can see how NFTs provide access to funding for artists through a form of new type of patronage, massively creating value for the creators (and collectors).
Stakeholder Community Creation
Stakeholder Community Creation is another beneficial process we can clearly observe within the music NFT space. The thing is that with an increasing regularity NFT technology is used to embed rights to receive royalties from a song or album in question.
What it means is that fans can become direct financial stakeholders of the musical product of an artist, which fully modifies the fundamental operational mechanism of the music industry. This leads to a faster development of communities, where the fans are truly united with artists in marketing and promotion efforts, as they now have financial incentives to promote the music of a creator.
As a result, fans do not need to be in a “I knew him before everyone else” situation, as they now have an opportunity to be financially invested in a project of an artist they believe in. That in turn brings more investment and funding into artists, further challenging the legacy music business structures.
The creation of stakeholder communities also has direct implications for artists too – we are seeing more and more examples of interaction between fans and creators where actual opinion and input of fans is used to produce and compose a song.
Speculation is not the most valuable aspect of the NFT experience in the music industry, but is still nevertheless some part of the appeal. Investing into tokens of artists that are bound to grow could potentially lead to massive financial capitalisation.
As the popularity and platform of the artist in question increases so does the interest of the collector community, further driving the value of the NFT. As a result, the NFTs you bought to support your creator friend can actually go through significant appreciation in value and then be subsequently resold for profit.
Basis for Further Innovation
As NFT technology becomes more and more popular and continues to bring value to the newly forming communities, it also acts as a basis for further innovation and experimentation within this field.
During the last year there has been a substantial rise in approaches and ideas focused on solving the existing problems of the music business world, especially the artist attribution and payout mechanism. While NFTs continue to popularize the use of tokens and use of blockchain within the world of music, there are also new technologies being formed on top of the existing technology.
These ideas are translating in a rise of DAOs (Decentralized Autonomous Organizations) and social tokens, where different structures of fan to creator relationship are managed and created. As a result we can see how the rise of the NFT adaptability is leading to new interpretations of tokenization and blockchain in music.
We can see howNFT technology is bringing different value and different solutions to various parties within the music industry. The most important thing to underline is the creation of communities made up of both creators and collectors, where a more intimate relationship is being built and fused as we speak. These communities will in turn bring further innovation to the technology and the types of utility value offered by music NFTs.