NFTs are disrupting the music industry and giving power back to artists

Imagine being able to invest in one of Taylor Swift’s first hits as an NFT. While her career ascends, so would your investment value — with royalties to be collected.

So far, NFTs have mostly centered around art and gaming — but here’s how tech is disrupting an industry dominated by streaming platforms and record labels…

Primer: What are non-fungible tokens (NFTs)?

Giving power (and money) back to artists using NFTs

There is a lack of transparency around artist payments in the music industry. Payments are slow, and publishing rights are complex — per Stratmont Brothers.

In 2017, artists made just 12% of the $43B music industry — mostly from touring.

• Only 13,400 (0.17%) of artists on Spotify made over $50K a year.
• Popular DJ Steve Aoki said live gigs made up ~95% of his music income.

According to another famous DJ Justin Blau (a.k.a. 3LAU), 84% of his music income comes from streaming — with intermediaries taking large cuts. He turned down a $15K deal for 50% ownership of one of his songs and instead, made upwards of $700K revenue independently.

But beware of the cash grabs… Fans were furious at the Korean boy band BTS for announcing NFT plans — selling digital pictures of band members as collectibles.

Here’s how music NFTs can change that…

Dozens of crypto-native platforms have been founded in recent years to solve these problems, including:

• Audius ($AUDIO) — a music streaming platform similar to a blend of Spotify and SoundCloud with over 4.5M monthly active users.
• Royal (co-founded by 3LAU) — a platform that lets users buy song shares and royalties.
• Gala Music and Sound.xyz — a platform that lets artists sell song NFTs similar to the digital art seen on OpenSea.

On Audius, 90% of the platform’s profits go directly to artists, and Royal helps artists potentially earn more from selling ownership of songs.

Snoop Dogg, Nas and Diplo are among early artists who sold ownership in songs via NFTs. These applications also open another level of fan engagement — a level only possible through NFTs.

Investors: The industry has a long way to go

Spotify, Apple Music and record labels still dominate the industry — and many of these crypto platforms are only a few years old.

Among crypto music platforms, copyright infringement issues are still a challenge — and these services lack the benefits thatrecord labels offer (i.e., marketing, distribution and industry relationships).

• With a $674M market cap — Audius ($AUDIO) is the largest music crypto project by market cap — closely following Bitcoin’s movement.
• Benchmark: $BTC outperformed $AUDIO in the past year — with $AUDIO down 34% compared to $BTC.

Over in the stock markets, music streaming service Spotify (NYSE:SPOT) is down over 7% since reporting disappointing earnings on Tuesday.

In 2018, Spotify said it would be profitable by 2020 — but is still losing money and is struggling with slow growth and deteriorating margins.

One analyst thinks Spotify should go private or operate under a larger company (Barron’s).

Extra slice: LimeWire — the early 2000’s file-sharing service that was shut down for illegal downloads — is coming back to life… as an NFT platform with an initial focus on music NFTs.