NFTs: is it worth the hype ?
There is no doubt it's a very distracting topic nowadays. NFT acronym standing for non fungible token is everywhere across the web and in zillion discussions on the net and outside.
By looking at Google Trend we can clearly notice over the last 12 months that NFT as a keyword is getting a massive momentum across the web as you can see below:
The number of posts, article related to Music NFTs on the web has also exploded over the last 12 months as you can see below.
Even if you are not familiar with Non Fungible Token, I'm pretty sure you may have heard of those 3 particular NFT as it was all over the news).
Bored Apes Bored Ape #232 sold 2.8 millions USD
Crypto Punk who sold his artwork for millions of USD
Or perhaps you may have seen some artists and bands starting to incorporate NFT in their strategy:
Kings of Leon
Grimes
Aphex Twin
deadmau5
While we are still far from mass adoption, it's clear there is a real interest and curiosity among non corporate and corporate companies who start using them through various forms.
Major companies such as Nike, NBA, McDonald, Taco Bell invest in NFT. Also British Auction House Christies and Sothebys are recognising NFTs and are selling them in their auction.
In the music industry, non fungible token are being used through various goals by companies such as:
Warner is investing in NFT with a partnership with Genie
Grammies is selling NFT
Universal is involved with the Bored Ape Yacht Club
I do believe that NFT is here to stay. Massive investments are made to ensure this new technology continue to grow. Everyday, I see new use-cases on how music NFTs are utilised. Again we are still at the early stage. Non fungible token has now already it’s own eco-system in place and is growing rapidly in terms of technology but also adoption.
What is NFTs (a quick recap)
A lot of education posts are available on the web about NFT. I listed some fundamental definitions in order you don’t get lost with this jargon…like I was at the beginning.
A non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded.[1] Types of NFT data units may be associated with digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin.
I like to think NFT is unique digital collectibles ( it could take the forms of a jpg/audio file/video file/meme..) that can be purchased online and have a digital proof of ownership.
What is a blockchain:
A blockchain is a growing list of records, called blocks, that are linked together using cryptography. NFT is using the blockchain technology such as Ethereum, Cardano, Solana, Polygon where they can be found and purchased. (source wikipedia)
What is a digital ledger (also called DLT):
It is all about the idea of a "decentralized" network against the conventional "centralized" mechanism. (source wikipedia)
Mint NFT:
It's the action to publish your NFT on the blockchain and make it sellable.
Who are creating NFTs (use cases related to the field of art)
I identified various category of creators (I just listed a few):
- 1Gamer - Best example is Axis of Infinity, the blockchain gaming industry is becoming huge and has developed a revenue model such as Play & Earn.
- 2Musician (Artists/Bands) - King of Leon released their last album on NFTs. Shawn Mendes about to launch his own token.
- 3Artist (painter, photographer, video/film maker..) : a good example is Quentin Tarentino selling some uncut scenes from Pulp Fiction on NFTs
- 4Music festival promoters - Coachella or Live Nation starting to use tokenised tickets
Who are buying music NFT
I identified 2 type of persons:
The collector/Investor: people buying your art and hoping the price will increase over the years.
The buyer: who will buy your NFT because they are fond of your art and want to support you.
The 2 profiles listed above have one common point: a certain awareness of the crypto world and blockchain environment. This is something to keep in mind once you start implementing NFTs into your strategy.
Music NFTs as the new revolution in the music industry? Really ?
If I look at the technological aspect, I would say yes definitely. NFTs technology and features can be the source of a great framework in the career of an artist.
With regards to the narrative around music NFTs and some "heavily promoted" use cases, the main idea is that any artist/band could be "financially" independent and in full control of their art distribution. In this ideal world, an artist won’t need to sign an unfair deal with a label and will be less dependent on streaming platforms and finally they will be fully free in terms of creativity and release cycle.
I noticed with the arrival of music NFTs on the market, there is a real and strong communication made by various crypto companies (the ones conceiving music NFTs) highlighting the unhealthy system in place within the current music industry with regards the unbalanced revenue distribution.
I also found an interesting post from Coindesk illustrating the struggle of artists in the current model. I enclosed a screenshot below.
On that point, I do agree with all NFT aficionados saying the current music framework is not ideal for artists. You have an unfair distribution in terms of revenue. It’s clear that a bunch of middlemen and streaming services monopolise the music market in order to grow consistently their corporate profits. The shares usually proposed are rarely split evenly.
Among all the advantages stated on the web about music NFTs, I would highlight the 3 below
- Better control of your distribution
- Additional direct-to-fan revenue stream
- Opportunity to build a closer relation with your community/fanbase
However I have to nuance my answer. If you are an independent artists who used to release independently your music and growth your fanbase, those advantages listed above are certainly not a new topic. Instead using music NFTs could be considered as an additional path to reach another layer of an audience and consequently generate extra income
Note: we should not disregard the work of labels especially if we think for instance in terms of power of leverage marketing campaigns or by connecting artists or bands with booking agencies or festival promoters.
Why people get excited for the release of certain NFTs:
The drop of a token by an artist in their dedicated platforms is focusing on very effective factors:
The concept of scarcity and exclusivity are not new, it’s widely used across the web and also by independent artists who are selling directly to their audience. Those aspects are purely psychological but extremely very powerful.
Scarcity works well. No one want to feel they are missing something. The value of music NFTs is driven by uniqueness.
Limited time offer - similar to scarcity where the goal is to increase the sense of urgency, you may see certain website making such an offer with a clock ticking.
Exclusivity: an offer made to a sub-set of your audience (Tier 1 audience or VIP)
Just think of a vinyl of your favourite artist pressed in just 100 copies (scarcity), and if we add another dimension such as: offer limited in time, it creates among the fanbase a sense of urgency to purchase it !
Below, you can see a good example where 3Lau is about to drop his NFT and it's clearly mentioned: Limited Edition and 5 days before the auction starts.
Can an independent artist use NFTs in their strategy
Yes. Everyone can access the NFT world BUT and consider it as an extra entry point to generate sales or growth another layer of your community.
Note: If you are a band and face challenge to sell your albums, or your concert tickets, there are a strong chance that you won’t be able to sell your NFT as well.
I would advise first before to launch your first NFT to:
If you are interested about how to build an audience for your next touring for instance, you may be interested to read my previous post which focused on that crucial topic. You can click HERE.
Where to sell your NFT
There are a certain number of platforms available to sell NFTs. Type of services provided can differ from one to another. I invite to check them:
Process to Buy an NFT
Another aspect which makes me things we are at the early stage of NFT is the sales process. To buy a music NFTs, it is like running a marathon, it takes time if you are not familiar with the process which is far to be user friendly. The customer journey is not simple.
Buy your NFT with your digital wallet
(you may notice in the picture below is on Open Sea, the limited time to purchase - scarcity factor)
If you are not in the world of crypto, it will represent at least 30 to 60 min of your time with a lot of clicks and some frustration before to be able to purchase your first music NFTs. Not ideal at all !
Too many frictions in the sale process, in my opinion, which may result on a HIGH abandon rate.
There is definitely an area of improvement in the customer journey here which I hope to see someday.
In fact it remind me the early days of internet when you wanted to buy something online ! It was new, not simple 🙂
My Conclusion
Music NFTs are here to stay and it seems we just touched the tips of the iceberg. It's not yet a perfect model. In a near future, we may witness a complete redefinition of the music industry and a better compensation system in favour of the artist . I'm also very curious to see the evolution of crowdfunding platforms based on the blockchains and how they could play a major role for helping artists. Also we may expect tons of evolutions and improvement in the future with regards music NFTs/Web3 ecosystem which may lead to a mass adoption eventually.
What about you? Do you plan to use NFTs in your strategy ? If yes leave a comment, I'm always interested to get your feedback.