The Metaverse: flashback to 2007

Posted on | by Bas Grasmayer

Music’s future is intertwined with the development of its media context. The metaverse, a concept describing persistent shared virtual spaces, is a currently much debated topic in order to think about the media future we’re creating. This article is about that future.

The development of technology tends to move through hype cycles and reaches a peak of inflated expectations, before disillusion sets in and a phase of productivity kicks off. In music, blockchain went through such a hype cycle once and now its NFT use case is at the start of another cycle.

I assumed the same of another trending topic in music: the metaverse. I was wrong. Or at least, the Google Trends graph didn’t look as I expected: flat and then a spike in 2020. Instead it looked like this:

Google Trends: Worldwide interest over time for ‘metaverse’

I was curious about the spike in interest in 2007. Heydays of virtual world Second Life and Entropia. In particular, I was interested in how people used the word metaverse back then and what ideas they had.

Peaks of inflated expectations are often highly creative phases. There’s an influx of mental energy spent on a new technology or concept and many ideas get tested. Just look at NFTs right now. Over time, some ideas get lost or become implicit and eventually forgotten.

What stood out to me is a 2007 article by futurist Jamais Cascio titled Openness and the Metaverse Singularity. It lays out four potential pathways towards the singularity through various metaverse models based on an axis of simulation vs augmentation and intimate (personal & expression) vs extimate (informational & control).

All of these scenarios occurred simultaneously.

For virtual worlds, you can look at Fortnite and Roblox. Mirror worlds can be interacted with through Google Street View. Augmented reality in this context describes the meta-layer of information about the world around us, e.g. a friend’s review of a coffee place you’re about to enter, but also use cases such as Pokemon Go. Lifelogging describes concepts like the quantified self, but also the footprints you leave behind in Google Maps, smart speakers, and other learning systems that can then help you better in the future.

For each of these media contexts or metaverses, there are music examples:

  • Virtual worlds: VR concerts, shows inside games, but also virtual avatars and avatars as pop stars (Lil Nas X x Roblox, Travis Scott x Fortnite, The Weeknd x Wave).
  • Augmented reality: geo-located music unlockables (Jonas Brothers x Landmrk, Jeezy x Drops).
  • Lifelogging: personalized music experiences based on past data (streaming service UX, smart speakers).

I find mirror worlds a little difficult to clearly define as an existing context for music, especially right now during the pandemic, but perhaps livestreams made with 3D cameras fit the bill.

When we talk about ‘the metaverse’ in 2021, we’re discussing a convergence of trends:

  • Gaming & virtual environments going mainstream.
  • Development of new virtual economies, possibly underpinned by blockchain technology and tokens.
  • Artificial intelligence and its ability to understand users in order to create or provide suitable content and context, and create realistic simulations.
  • The Internet of Things with all its connected devices, like smart speakers and smart phones – which provide a pervasive and persistent virtual layer to our physical world which is always turned on.
  • Connectivity improvements have meant it’s feasible to jump into virtual worlds from your mobile phone, watch streams, or stream to thousands (or hundreds of thousands) of people.
  • Various improvements in hardware & software have made it possible to create beautiful virtual environments, incl in VR, that are highly interactive and customizable.

In the convergence of these (and other) trends also lie the contexts in which we can explore music’s future as a business & creative medium. As we define and design that future, it’s important we embed the ethical dimensions in that process: things like privacy, representation & inclusion, power concentration & dynamics, ecological footprints.

Flashback even further than 2007:

A necessary legal fight: collective rights management and allocation

Posted on | by Maarten Walraven-Freeling

Copyright has always lagged behind technology. Now that streaming is the dominant force in recorded music and UGC is becoming an ever greater source of income it’s time that the business of rights collection and allocation catches up with the tech. Whether the existing Collective Management Organisations (CMOs) are in a position to play catch up is what I’ll explore here.

Let’s break down some of the basics here first. What is copyright? what does it do? where does it exist? and who owns it?

The basics

A copyright is an intellectual property right, an economic right and it exists to generate money from ‘intangibles’. A copyright in music protects the expression of an original musical work. This can relate to a sound recording, use of music in films or broadcast TV, airplay on radio, but also an individual performance. The copyright needs to be written down or at least permanently fixed in some way.

Copyright exists everywhere, but each country has its own rules. This means that if you were to give a history of copyright lecture it would be different in each country across the globe. That said, there are some international conventions that aim to harmonise the various national laws.

Within music we always deal with multiple rights including:

  • the musical composition
  • the sound recording
  • individual performances
  • audiovisual, or sync

The rights that are protected are:

  • mechanical: the right to copy and make copies
  • distribution: the right to publicly perform or broadcast
  • sync: the right to fix a musical work to visual content

These rights are owned by:

  • the author or their publisher and/or collecting society own the musical composition
  • the label and/or collecting society own the sound recording
  • the musician and/or the label or a collecting society own the performers’ right

What to know about those collecting societies? [Songtrust, as always, has a great background article on the differences between various collecting societies]

  • non-profit organisations that exist in each country
  • mandated to grant collective licenses
  • different societies for compositions, sound recordings and performers’ rights
  • lots of reciprocal agreements creating an international network
  • effectively, they’re monopolies and as such regulated by governments
  • they must be fair and non-discriminatory

Into the 21st Century

We all know the painful transition of the height of the CD era in 1999 to the lows of the digital, Napster-dominated early 2000s. With the shift from physical to digital the industry, and especially the labels, had to reinvent itself as a licensing business. New digital rights were called into life:

  • streams
  • downloads
  • linear
  • on-demand

A key question here revolves around how well-suited the CMOs are to collect and manage these digital rights. Are companies built around analogue licensing models fit to collect and manage digital rights? Or, to put it differently, if there’s effective monopolies what’s the incentive to innovate?

Embrace the tech

Europe is an example of how difficult the current structures around copyright and collectives are. The EU adopted a new collective management rights directive in 2014 which aims to ‘improve the online licensing of music across the EU.’ This directive became enforceable only in 2016 and member states started implementing it around 2018/19. While this has taken some time, one of the effects of the directive is the option to establish an independent management entity (IME).

These new companies are now starting to make their mark. One example is Jamendo, which started out as a catalogue of royalty-free musical works. They’ve expanded into rights management with a view to provide greater transparancy and better allocation of revenues. Those two elements are key to how newly established IMEs can kickstart change in the management of copyrights.

To understand how this works, we can look at Unison, another IME. They use a broad range of technologies to create greater transparancy and better efficiency. One of the ways they are doing this is by utilizing blockchain technology. Not immediately the kind associated with crypto-currencies, but the Dot Blockchain Media initiative. All of this with an eye to correctly identify rights holders and pay them their royalties. What this technology does is that ‘it offers precise information for achieving increased efficiency in order to overcome the problem of unidentified “black box royalties”.’

The Black Box

The black box is a concept that means that unallocated money paid to CMOs ends up a in a big pool for distribution to, usually, the bigger fish in a specific CMO’s pond. In order to break this black box, Unison not only uses blockchain technology, but also works together with BMAT, a company that allows them to listen to TV, radio, etc. to analyse which music is being played where and when. Unison told MUSIC x that the goal is to end up with no unassigned royalties, no more black box.

Into the future

The IME seems to be pointing the way forward for managing and collecting musical copyrights. They can do this by being more transparant, more efficient, and embracing technology to make that happen. Moreover, they operate independently of both the rightsholders and the users avoiding any conflict of interest. In the future, then, we’ll see more players like Unison come into this market. We’ll have to pay attention to the ownership structures around any new initiatives. Moreover, opportunities bring with them friction and this will continue to play out in defining common methods of usages (is a stream a sale or a broadcast?) and the legal fights between new and traditional players (e.g. Unison v. SGAE in Spain).

One year of COVID-19 lockdowns

Posted on | by Bas Grasmayer

It’s been a year since I sent out the first MUSIC x CORONA email: the newsletter turned all of the most important music-related pandemic headlines into a daily digest (since November it’s been folded into MUSIC x). One year later, we take a moment to reflect on that extremely uncertain time.

This week, one year ago

On March 11, 2020, the coronavirus outbreak was officially classified as a pandemic by the World Health Organisation. In the first weeks of March 2020, global stock markets saw a series of crashes, the worst being on March 16 when the Dow Jones saw the single largest point drop in history. Italy was the first country in Europe to enter lockdown, with people there expecting concert cancellations until May and then a recovery. Meanwhile, they waited and sang on their balconies.

Schemes to help live music were launched. In the UK, the government abolished business rates for small venues. Sound Royalties launched an advance fund. Bandcamp announced its first COVID-19 fundraiser, which would see monthly repeats and become known as Bandcamp Fridays. The American Guild of Musical Artists set up a fund, the Recording Academy and MusiCares set up a fund, and UK Music started calling on the government for a support scheme similar to the one already in place in Denmark.

There was a strong sense that ‘this could be it’ for the music business. Various essays outlined that the streaming model alone can’t support the industry and called on people to support artists more directly.

In an effort to explore ways to stay connected and potentially identify new revenue sources, artists turned to livestreaming:

This week, next year

One year ago, few of us imagined we’d still be in a state of lockdowns right now. Although it should be noted that for many workers & entrepreneurs in music the situation is absolutely dire, some of the worst case scenarios didn’t become reality.

While the music business still struggles with necessary restrictions and (sometimes unnecessary) uncertainty, things are a lot more predictable than one year ago. The past year has clearly shown that innovation lies not just with technology, but also the application thereof. We’ve been able to celebrate countless artists who put their creative force into livestreaming, virtual and mixed reality, new business models, or NFTs. They dreamt up ways to use this tech to build connections and new revenue and brought innovation into the world. Artists are innovators.

This thing is not over yet. As vaccinations will allow for certain parts of the world to almost completely open for business again in 2021, I implore everyone to remain supportive of industry workers in countries where vaccines are not expected to be readily available this year.

The pandemic is a bleeping marathon. I want to say “congrats! You’ve made it this far,” but we’re not at the finish line yet. So instead, a pat on the shoulder and a drink of water in the form of the MUSIC x newsletters to keep you going. It’s been rough, especially with lockdown fatigue setting in after all these long dark months in the northern hemisphere. The days are getting warmer, vaccination numbers higher… just a little bit further.

As a 2020 veteran, 2021 will be a breeze. You got this.

Image
Music-related meme circulating the web during the first months of the pandemic. Please consult local health authorities for the most up to date guidance.

The MUSIC x CORONA newsletter archives are available for free and provide an organised daily snapshot of how the music industry dealt with the pandemic in 2020. The newsletter has since been folded into MUSIC x, which you can subscribe to for free at http://musicx.email.

You can support our work on Patreon: http://patreon.com/musicx

Vaccination Passport example

Guide: Vaccination passports & their role in reopening live music

Posted on | by Bas Grasmayer | 1 Comment on Guide: Vaccination passports & their role in reopening live music

After a year of lockdowns, the live music business still faces as much uncertainty as it did in 2020. One of the solutions under consideration is the use of vaccination passports to make events exclusive to people who have received a vaccination. It’s a seemingly straightforward solution, but politically sensitive and technically complicated. Here’s the MUSIC x analysis, jointly written by Bas Grasmayer and Maarten Walraven.

[Disclaimer: Bas started the daily MUSIC x CORONA newsletter one year ago (now folded into MUSIC x), bringing on Maarten a little while later. Despite having studied Covid-19 and its impact on the music industry daily, we are not policy or public health experts. Furthermore, this is one of the most actively researched topics right now. New insights emerge regularly. Please consult local experts when planning & find the most up to date information.]

What are vaccination passports?

A ‘vaccination passport’ is a government-sanctioned form of evidence that the holder thereof has been vaccinated against Covid-19. The concept started appearing early in the pandemic, for example as part of an ‘immunity passport’ study by German researchers who wanted to find out how lockdown restrictions could be lifted for some people. 

Fast forward to today, plus a five hour flight away, and we find Israel as one of the first countries in the world to use a vaccination passport in order to ease restrictions. The country has already given over half of its population at least one vaccine dose. The plan, called the Green Pass, allows people to visit gyms, hotels, theatres, and concerts by showing a QR code. When scanned, it tells the business whether that person has been vaccinated recently. 

China has launched a similar scheme, which integrates with WeChat and is intended to make international travel possible. The EU will come with a similar proposal this month, dubbed a Digital Green Pass. Now, international governments are opening talks about mutual recognition of each others’ certificates in order to allow a return of unrestricted travel – or at least travel with less limitations.

Travel

This is where the topic of vaccination passports gets hairy. The World Health Organisation has cautioned against such certificates for international travel, due to the still limited global availability of vaccines. This leads to practical and ethical concerns, the latter stemming from the fact that existing inequalities get reinforced and amplified due to the unavailability of vaccines in large, mostly poorer, parts of the world.

This is not the only ethical concern.

Ethics

For a year now, we’ve all craved to ‘get back to normal’. Therefore there are justified concerns that certain vaccination passport schemes may get rushed. This would leave a number of ethical challenges unaddressed:

People who can’t or won’t get vaccinated. Leaving aside that not everyone might be able to get a jab as soon as they want it, there are people who, for health reasons like pregnancy, immunodeficiency, or allergies, can’t get vaccinated. In some places in the world, certain ethnic minorities are vaccine hesitant. That goes not just for developing countries, but even the UK. How is this dealt with? What aspects of public life are they excluded from? What accommodations are made for them? For how long? Can employers require proof of vaccination?

Privacy & security. Throughout the past year, a lot of expertise has been built up around this topic. One of our favourite examples of a privacy-friendly contact tracing app is closecontact, born out of Berlin’s club culture. Unfortunately, there are also examples of security fuck ups, like in The Netherlands where its national ‘municipal health service’ (GGD) had a data leak with millions of data points, which was then sold online (not by hackers, but by call center employees who could export everyone’s private data with a single click). In the same country, a provider of corona tests also had a data leak that exposed thousands of people. So the question is: how do these systems get designed in a way that respect privacy and don’t accidentally end up exposing sensitive information, like medical history, contacts, passport numbers, bank info or social security numbers?

Immunity

The next difficult question is how long immunity actually lasts and how different vaccination passport schemes account for that. The big question since the early days of the pandemic was: can you catch it twice? The answer to that is complicated.

While it is currently uncommon for people to catch Covid-19 twice, it is possible, as scientists in Hong Kong recently confirmed. A key word in the preceding sentence is currently, since it’s not yet known how long immunity lasts which is likely to differ from person to person. It is also unclear whether being protected by antibodies means you can’t harbour and transmit the virus to other people.

Oh, and there are open questions around the various mutations.

That’s all fine & dandy, but…

Yes. The upsides. 

We are so close to finally being able to work towards the recovery of so many sectors of our lives and societies. Patience is running thin, especially in countries where many people haven’t been able to count on any significant financial support from employers or governments.

Vaccine passports are happening. They’re already a thing in Israel and China, whereas the EU & many other countries will likely have their own schemes in place by summer. While we depend on our governments for guidance and support, it’s also up to all of us to take responsibility. Governments don’t always act in everyone’s best interest, e.g. in the case of Tanzania, where the government has been falsely claiming they’re Covid-19 free. 

So, don’t be a Villalobos and fly to Zanzibar for a plague rave. If you’re planning a tour in a country where venue wheelchair access isn’t government-mandated, do you just say “too bad” and exclude part of your fanbase? It’s a complicated topic and we don’t intend to put things in black/white terms: there is plenty of room for nuance and hard trade-offs. The point is: our responsibility doesn’t end where the law ends.

The return of live

So what’s next for live music? Are we heading into a period where live concerts and festivals start up with access restricted to those who can prove they have either been vaccinated or have a recent negative test result? It’s not a straightforward decision. In the UK, after the government announced its roadmap towards opening up society after 21 June, Reading & Leeds and Creamfields festivals sold 170k tickets in three days (whether this number includes those tickets punters kept from the previous year is not something we’ve been able to verify through their public statements). The optimism of the UK government’s roadmap isn’t shared across the European continent, let alone the rest of the world. Festivals such as Rock am Ring & Rock im Park in Germany have just been cancelled. Other organizations have moved their festivals to the fall (see: Bonnaroo, Slam Dunk, Aftershock) or are still postponed from 2020 for later this year, such as Wonderfruit. It’s all up in the air, it seems, which is one reason why organisers are keen on certainty and a Covid passport can provide it. 

Responsibility

A concert promoter, festival organiser and even artists themselves work with varying levels of insurances surrounding concerts, festivals, and tours in 2021. Whether any future cancellations are covered by insurance depends on many variables. In one landmark case in the US from last year where the venue The Raven & the Bow took their insurer to court, it seems that the parties worked out their differences outside of the courts. In other words, no precedent has been set there. In countries such as the Netherlands and Germany (but not yet the UK) governments have set up insurance schemes to secure organisations for their losses should they need to cancel because of variants or other unexpected pandemic-related changes. 

Similar to these insurance schemes, putting in place a Covid passport is something that governments will have to take the lead on. Søren Eskilde, of Danish festival Smukfest – due to take place early August – puts it as follows:

“The government has to provide a phased plan with certain criteria that must be met for us to hold a festival. For example, a dialogue about the possibilities of the quick test and what the corona pass will be able to do to get as safe and sound on its feet as possible.”

Similarly, Eric van Eerdenburg, director of Dutch festival Lowlands – scheduled for late August – firmly told NME [ed. note: emphasis ours]: 

“As long as there are restrictions then there will be a need for testing and maybe vaccination passports. It’s not something we’ll push upon the people, but if the government says we have to then we will. We won’t make it up ourselves because it’s a hell of a lot of work. It’s a government that should impose that upon the people.” 

Concert and festival organisers alike have made their day-job out of problem-solving, but they need clear guidance from their governments. If that guidance includes a vaccination passport, organisers will move forward and implement that solution to bring big crowds together. In other words, this means that responsibility for whether big and small music events can go ahead lies squarely with those same governments. Give a mouse a cookie… and they’ll put 50,000 people together in a field. 

Effectiveness, or what’s possible

Will a vaccination passport even be effective when it comes to visiting a concert or festival? Can you completely exclude Covid-19 from your event this summer with rapid testing and vaccination passports? Two questions that probably get two very different answers from the promoters of concerts and organisers of festivals versus the epidemiologists and public health experts. The reason for that lies with the risk involved. Is, to put it bluntly, a little bit of Covid at your event manageable, or a risk that should be completely avoided? There are festivals that aim to go ahead with rapid testing, like Albanian festival Unum which has its government’s blessing, even though there’s the issue of false negatives. Furthermore, talk of variants gets everyone’s hair to stand up on the back of their necks. Especially when it comes to the question of a vaccine’s effectiveness against them. It’s in the nature of a virus to mutate so it makes sense that vaccines will need upgrades in the future in the form of booster shots. But as Dr. Michael Head, Senior Research Fellow in Global Health at the University of Southampton, told NME: “we’d rather that didn’t happen this year and that we could have a bit of time to prepare for that kind of thing.” The message there is clear, do not rush anything this summer, or even this year. There are so many unknowns and to invite those to play havoc would be a bad idea. 

Where to draw the line then? It makes sense to think about a couple of things when it comes to events this summer and fall. 

  • Think local, both in terms of line-ups and in terms of visitors. The risks around international travel are greater than those on the national, or even better, regional levels. This also includes the rules around quarantines for artists travelling around, or sudden lockdowns and travel restrictions. 
  • Focus on scientifically backed trials that help set boundaries on how to operate a large event within a pandemic. Remember that trial in Germany and their advice:
    • No full capacity concerts
    • Only seated concerts
    • Increased number of entry points
    • Mask-wearing mandatory
    • Consume food and drinks while seated
    • Adequate ventilation systems (for indoor events)
    • Hygiene stewards to enforce rules
  • In light of the previous point, focus on a steady return to full capacity shows. It’s great to finally be able to put concerts and festivals back on, but they don’t necessarily need to be at full capacity immediately. Let’s wait until, for example, we move from a pandemic to an endemic situation. 
  • Think about hybrid events. Livestreaming is here to stay and offers both a different dynamic and a way to engage a broader geographical audience. One example is Montreux Jazz Festival who are still hoping for a live and in-person festival in July, but have also prepared for the music to stream live and reach people regardless. 

Considering the above three points, a vaccination passport would not make too much of a difference. Of course, if you take a strict policy that only vaccinated people can attend your event, that will exclude a bunch of non-vaccinated people (whether by choice or circumstance). It could be an option this summer, whether it’s one to take is another question. And as shown in the above quotes by festival organisers, the tendency in the industry will be to jump headfirst into problem-solving mode and to get your festival, or concert, up and running with as many visitors as possible. There is a responsibility at the government level to set expectations that are realistic and, preferably, will take into account various scenarios. 

Will an event’s target audience actually be vaccinated by the time planned events occur? Most vaccination schemes are prioritized by age group, so might classical music, the audience of which tends to skew older, be one of the first genres to return to normal? To what degree will we be able to count on international and especially intercontinental travel?

Even with vaccination passports, 2021 is shaping up to be a year with much uncertainty and pioneering.

Photo by Lukas on Unsplash.

Four reflections on SoundCloud’s fan-powered royalties & the flaws of subscription models

Posted on | by Bas Grasmayer

SoundCloud is adopting the user-centric payment model, branding it ‘fan-powered royalties‘. I’m a proponent of the system and was even product director at a music streaming service that employed a user-centric model (IDAGIO’s ‘Fair Artist Payout Model’). Yet, recently I wrote a piece in which I worried about fan-powered royalties being a distraction for SoundCloud, so here are four reflections on the latest announcement.

[Out of the loop? Read my primer on user-centric payment models.]

#1 Recalculations of revenue distribution don’t tell the full story

I’ve sat in on more than a few discussions about user-centric payment models. These discussions often cite research papers that compare how the status quo of music revenues would differ in a user-centric model versus pro rata model. While it’s important to use the data at hand, this also causes a bias.

The streaming landscape, including the vast majority of all digital strategy employed by labels & artists, are based on a pro rata model. What types of services would succeed in a user-centric landscape? What type of strategies would emerge?

#2 SoundCloud should consider fan-powered royalties a platform pivot

The way music streaming services function is strongly influenced by their economics (funding models, user payments, rightsholder compensation models).

Music streaming services sell the catalogue to get new subscribers, who are treated as listeners first, fans second. “Music for every moment”: radio stations, curated playlists, autoplay – all ways to stretch people’s listening sessions to get more value out of the service & either subscribe or stay subscribed (or at the very least trigger more ads).

In a user-centric model, encouraging high listening diversity runs counter to artists’ interests. If I start a rap career (under an alter ego, to avoid another trademark claim) and I bring a fan to a platform because it’s user-centric, I do not expect that platform to then do everything in its power to make sure that fan listens to many other artists, thus diluting the value I get per fan. Rather, I’d expect the relationship to look a bit more like fan clubs (e.g. some crossover between the Patreon / OnlyFans walled garden model and streaming’s attention diffusion model).

In other words: SoundCloud should follow these fan-powered royalties with feature sets that make the platform more fan-centric.

#3 The flaw is in the subscription model, more so than the remuneration model

60,000 songs are added to Spotify daily. The democratization of music has been great if you think it’s important that more people than ever participate in the creation of recorded music. It’s also creating an increasingly competitive landscape.

What happens when the entire potentially addressable market has been sold streaming subscriptions? The pie stops growing. Long before that, the growth of that pie will slow down much faster than the number of new artists adding their music to services’ catalogues.

Streaming subscriptions are a dead end road. A user-centric model only rewards those artists whose fans don’t listen to a lot of music or are extremely loyal, thus maintaining a high “average listening-share per user“. User-centric models don’t generate more revenue.

One of the most insightful people about this problem, who regularly writes & speaks about it, is Mark Mulligan.

#4 Music streaming services need to become ‘music services’ with revenue models that scale vertically

I’m going to skip over some important nuance:

Streaming is not a feature. Music access wasn’t a problem. Piracy solved that. Legal music access was a problem. Rightsholder remuneration was a problem.

For nuance, read my 2016 piece “Streaming is not the future of the music economy“.

When you look back at the history of streaming services like SoundCloud and Spotify, you find an era with APIs that allowed external developers to tack on all kinds of additional experiences. Much of that has been shuttered (in part due to licensing agreements) and an assumption has emerged that music streaming subscriptions paired with the familiar UX conventions are the definitive model. They’re not.

Music streaming was only supposed to be the base layer. It’s a layer on which we need to build alternative revenue streams that scale vertically. I may be butchering economic terms here, so what I mean with that is this:

Music streaming has done a tremendous job at scaling horizontally: getting millions of people around the world to pay a flat monthly fee of $10, or the local equivalent. It has done a horrible job at scaling vertically: fans with more to spend basically go unmonetized.

Meanwhile, the model for artists still looks the same:

  1. Make great music.
  2. Grow your fan base.
  3. Monetize your most limited resource.

That most limited resource is time. A live show is a limited event. A virtual meet & greet is limited. A livestream is limited. An autographed shirt or record is limited. An NFT is limited.

Streaming services, besides integrating merch, have done very little to create new revenue opportunities for artists. This is a failure of the landscape, rather than specific services. It’s hard to run a music streaming service: the economics are brutal. You have a high burn rate with upfront ‘minimum guarantees’ paid to rightsholders, you need to justify that burn rate to investors with fast growth, so streaming services tend to get locked into a single model.

The first link in this article, about SoundCloud’s fan-powered royalties, goes out to Fred Wilson‘s blog – an investor in SoundCloud. Hopefully it’s a signal of an understanding between SoundCloud’s leadership & investors that the company has to pivot from being a music streaming service, to being a music service that supports fan-centric business models.

That’s essential, because what happens now is that an expectation has been created with artists. They expect fan-powered royalties to work out better for them, but what’s the strategy to grow the pie?

Music NFTs: why buy them?

Posted on | by Maarten Walraven-Freeling

The more I read and hear about NFTs the more sense it makes to me for artists to get in on the act and find a new way to broaden their revenues (here’s how artists can go about creating and selling an NFT). But what about the buyer’s perspective? Why should they get in on it too? Is it about having a collectible, a one-of-a-kind? Is it just about supporting a specific artist? Or, is it an investment? Moreover, and this is the focus of this article, what’s the potential for artist-fan relations in light of the functionalities and possibilities of the blockchain?

Screenshot of audiovisual NFT by Teebs & Yuma Kishi on Foundation

The buyer’s value

Just one month ago Bas spoke about NFTs in the context of Mike Shinoda‘s first sale. In that article he argued that buyers step into this world because they’re building a world, a metaverse. In that metaverse, we need items that will help us showcase our identities. An NFT is one way of expressing identity and there is value in that. Similarly, in her The state of music NFTs [paywall] article from 14 January, Cherie Hu argues that one way to look at the tokens is as a form of rare digital merch. This, again, relates to confirming your identity, this time as a fan. Continuing along those lines, Hu asserts in a follow up article [paywall] that we shouldn’t even be paying that much attention to the crazy bids driving the hype through auctions but on the potential of selling multiple NFTs at a fixed price point. That’s what will allow artists to tie their fans to them and open up new fan-to-artist interactions.

The buyer’s value, then, is much closer to what happens with certain membership platforms. One example is Hanging Out With Audiphiles, Jamie Lidell‘s podcast, which has a Patreon where he shares the sounds he makes for each episode. His patrons can then make music with those audiofiles. An alternative would be to mint each sound file as an NFT and in that sense give some extra ownership to those ‘superfans’. Even more exciting is when the NFT ownership provides access to more than just, in this example, the sound file. The NFT can then come with special access to the artist (kind of similar to 3Lau‘s recent auction where the highest bidder gets creative direction on a new song by the DJ).

From membership to equity

In a world where what’s called the creator, or passion, economy is growing the distance between artist and fan is shrinking at a similar pace. Livestreaming during the pandemic has provided access to artists in their private spaces and often without lights and make-up. Similarly, services like Cameo and Clubhouse allow the type of interaction between artists and fans that was often unthinkable just a few years ago. With greater access to your favorite artists through a variety of social media and the ability to support those artists directly through membership platforms the logical next step is to consider the artist as something you can have equity in. Jess Sloss from Seed Club explained this idea to Colin and Samir:

Viewed simply, this just looks like moving from paying a monthly subscription to support an artist to buying NFTs with the same result. Where this evolves, however, is when FTs come into play. Once an artists gets their own token, they can start playing around with various layers of access. Because this token represents real value – for example on the Ethereum blockchain, but there might be more potential with something like Polkadot – the investment changes. The point of a membership is that you can cancel it at any given time. Conversely, the only way to get rid of the equity you buy into an artist is by selling it. In other words, to shift it to another fan.

From equity to growing revenues together

There’s a bunch of start-ups working in what Rolling Stone dubbed ‘equity crowdfunding‘ back in 2019. The idea, roughly, is that based on future streaming royalties, fans can invest in their favorite artists to help them create new music. By investing in an NFT or, for example, a social token, the fan engages in the potential for revenue growth. Whether this is through a resale factor, which usually holds a percentage for the artist in the smart contract, or through a secondary right attached to the token (see Jacques Greene‘s publishing rights).

Besides the artist and the fan, there’s also a space here for the developer. As Bas argued in his article on NFTs, we should view the whole blockchain experience as a metaverse in itself. As artists and fans find their ways to connect within that metaverse, there’s also a lot to be gained by the developers that pave the roads that allows those connections to grow. Where these three levels find each other, is where we will see the most growth in this world. What’s more, those types of collaboration will hopefully advance mainstream adoption both for fans and artists throughout this year.

In short, NFTs are one logical next step in a world where the interaction and proximity between artist and fan respectively grows and shrinks and moves towards levels resembling collaboration.