The 3 Biggest Lessons Learned From the Music Industry’s Early Web3 Adopters

While music fans live in the best of times when it comes to enjoying the works of their favorite artists, musicians themselves are dealing with new challenges behind the scenes. The streaming platforms that make music accessible to fans also pay less to artists — and with physical music sales unlikely to make a comeback, artists now rely on demanding live show schedules and selling piles of physical merchandise to support themselves. For musicians seeking alternate ways to make a living from their music, some of the most promising opportunities lie in NFTs (non-fungible tokens) and Web3 technology.

Early adopters like Grimes, John Legend, and Snoop Dogg proved that musicians could earn revenue while forging a direct connection with their biggest fans. For artists big and small, these pioneering moves into the blockchain yield some great examples to follow — and, occasionally, some pitfalls to avoid.

Choose Your Blockchain Carefully

While crypto experts sometimes refer to “the blockchain” as a singular innovation, it’s important to remember that several blockchains exist for artists to mint tokens on; each comes with its own benefits and drawbacks. For example, Ethereum is currently the most popular blockchain for NFT projects due to its open design and robust community. Unfortunately, Ethereum also has some of the highest fees for creating NFTs, often up to $100 per NFT.

Before minting NFTs, calculate the projected returns a given platform offers instead of just partnering with the first platform you see. There are also brand safety considerations to keep in mind. As the public becomes more aware of the environmental impacts of inefficient blockchain technology, more people are looking for ways to mint tokens without contributing to climate change — particularly artists who are outspoken about the issue. That’s one reason Doja Cat and John Legend signed up for OneOf, an NFT platform made for producing and selling environmentally-friendly tokens. Always research the currently available blockchains and find a revenue model that lines up with your brand and conscience.

Be Smart About Smart Contract Royalties

Royalties are a significant part of how artists earn a living in the music industry, so it’s vital to understand precisely how NFT royalties differ. When minting a token, the creator can use a smart contract to specify a percentage of each transaction that goes to a particular crypto wallet. This means that after someone buys an NFT from the initial token sale, artists will continue to earn revenue on each secondary trade within an NFT marketplace.

The critical part to remember is that smart contracts are immutable. In some cases, it’s possible to adjust the logic of a contract by managing outside factors. Yet, even then, once a smart contract is created, no one can change its specific terms — it will always attempt to send a fixed percentage to a fixed crypto wallet address. That means artists must have an airtight financial mechanism to ensure they will not lose potential revenue or set themselves up for future conflicts.

For example, what happens when royalties go to multiple parties, such as bandmates, producers, or sound engineers? What measures can artists take to guarantee a particular wallet remains in their control? Do you have any recourse if a marketplace makes royalties optional, as LooksRare did last October? At least some of these questions will likely shift as legislation around the world begins to catch up with Web3 innovations, but until that day, musicians should take every reasonable precaution.

You Can Start Slow

While NFTs are a promising alternative to traditional record deals, they are not yet a complete replacement for them. Though it may be difficult to wait, musicians who are just beginning to establish a brand for themselves may wish to stick to broader channels at first — and yes, that includes streaming.

“NFTs don’t invent demand,” Chris Robley wrote for CD Baby’s DIY Musician. “Just because my neighbor makes a one-of-a-kind voice memo of his dog barking at 2 am doesn’t mean I want to buy it.”

“Scarcity isn’t your problem. Obscurity is. Your time might be better spent finding fans.”

Even for established talent, Web3 should only be one part of a diversified revenue strategy. Shannon Herber, the managing director of Steve Aoki’s A0K1VERSE, told CoinDesk that traditional streaming platforms and record labels still drive interest and circumvent the early volatility of NFT markets. However, hybrid strategies that include music NFTs can be particularly effective, such as:

• Fundraising for an upcoming album using an NFT token sale that rewards early adopters with additional benefits.
• Marketing a song on streaming platforms to drive interest, then releasing a limited NFT with exclusive content.
• Publishing individual songs as NFTs instead of going all-in on an NFT music album.

Music NFTs are a promising opportunity for artists, but it’s a reality of the current NFT market that the most valuable tokens will be practically out-of-reach for most listeners. However, by broadening your approach and making NFTs an exclusive channel for a specific audience, musicians can make a larger impact with all fans while earning far more than they could on a single market alone.

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