What happens after a gold rush?
Well, just like it was a mighty long road from panning for nuggets in the Wild West to the opportunity to buy some nice, 14 carat earrings in H Samuel whenever you fancy it, so the journey from NFTs 2021 boom time to a simple business model that works for songwriters, artists, fans and rights-holders was always likely to take a while.
Are we there yet? Well, no. But even in the midst of a bleak crypto winter, there are signs that NFTs – or non-fungible tokens, if you really want to put people off – could emerge as a more practical revenue stream for musicians and the music industry.
In recent months, everyone from Warner Music to Capital’s Summertime Ball have announced NFT partnerships. LimeWire’s new NFT platform has been licensed by Universal Music, while Napster has pledged an NFT marketplace will be part of its revamped Web3-friendly streaming service. And artists from Sam Smith to the Sex Pistols have got involved with NFT projects.
Perhaps most significantly, eco-friendly Web3 marketplace Serenade recently launched the first chart-eligible NFT, for Muse’s new album, Will Of The People. The limited edition of 1000 ‘digital pressings’, billed as the digital equivalent of a deluxe vinyl edition, retailed for £20 a pop, and sold out within 25 minutes on release day.
'...there are signs that NFTs – or non-fungible tokens, if you really want to put people off – could emerge as a more practical revenue stream for musicians and the music industry.'
‘We’ve been trying to determine what is the black T-shirt of the NFT world,’ says Max Shand, founder and CEO of Serenade, which has also worked with the likes of Super Furry Animals and The Kooks on NFT projects. ‘What is that one thing that a fan will want to buy when they want to support an artist? We realised it has to be a standardised product, because NFTs to date have been confusing creative assets that have no consistency. That led to it being quite challenging for artists to make them and confusing for fans to know what they were going to buy.'
Shand wants NFTs to ‘slot into existing music industry behaviours and align with a release schedule’. That’s a far cry from the headline-grabbing ‘drops’ during the 2021 NFT explosion, when Grimes sold $5.8 million (£4.2m) worth of art NFTs and EDM producer 3LAU sold a 33-item NFT collection for an incredible $11.6m (£8.5m).
But since then, several platforms and crypto currencies have crashed, while a number of music and celebrity NFTs have been under-subscribed.
Songwriter, musician and producer Neil Claxton, aka Mint Royale, a self-proclaimed NFT sceptic, says this is partly because many NFTs’ reliance on cutting edge technology such as crypto wallets, blockchains and specialist browser extensions is off-putting to mainstream fans.
‘I don’t think the public actually knows what an NFT is,’ he says. ‘The public perception is now that they’re the joke pictures of monkeys that Paris Hilton gets ridiculed for. The bubble has burst, the prices and sales have fallen and lots of those NFT projects have just disappeared or turned out to be outright rug-pulls.’
'One potential advantage of the NFT world, as opposed to the physical sales environment, is that all rights-holders will be paid again whenever the Muse digital pressing is sold on...'
As such, Claxton hails the advent of ‘sensible NFTs’ such as Serenade projects and Sam Smith’s Billboard collaboration. But he warns that such projects may not generate the same hype – and therefore revenue – as other, more speculative ventures.
‘Once you remove all the wash trading, bots and scams, there isn’t really any demand in the real world for NFTs yet,’ he says. ‘There’s a lot of desire from the crypto community for it to work because of the wider crypto liquidity issues. But I don’t think there’s a genuine desire from the public for it.’
The likes of Serenade are working hard to change that. And, post-COVID, songwriters would certainly welcome the opportunity to increase the value of work that has been squeezed in the streaming age. Hence the rise of NFTs that allow purchasers to purchase a percentage of a song’s revenue stream.
But the emerging market has been bedevilled by copyright disputes, with some NFT drops accused of selling work they don’t actually have the rights to. David Israelite, president of the US National Music Publishers Association, has warned that ‘songwriters and copyright owners should be vigilant about NFT sales that implicate their work’.
‘Our role is to ensure that when implicated, creators are fully paid and have the negotiating power they deserve,’ he added last year. ‘Do not let your contributions to this new marketplace be undervalued as you examine new deals.’
In contrast, Serenade has a one-off arrangement with PRS for Music for the Muse project and is negotiating with the society for a long-term licensing agreement. One potential advantage of the NFT world, as opposed to the physical sales environment, is that all rights-holders will be paid again whenever the Muse digital pressing is sold on, with Shand saying 15 percent of any future sales will be distributed amongst rights-holders.
'Issues surrounding the sector mean that, in the US, the Securities and Exchange Commission has already raised the prospect of regulating the NFT space.'
All too few other platforms seem to embrace such transparency, however. Issues surrounding the sector mean that, in the US, the Securities and Exchange Commission has already raised the prospect of regulating the NFT space, while crypto currencies have been beset by issues from insider trading to fraud.
‘Part of the issue is that you’re trying to find a sensible, rational, legal business model to put onto an inherently unregulated, scammy place,’ says Neil Claxton. ‘If I was a company doing NFTs, I’d wait about three years. And I would say to any young artist, just concentrate on building a real, live fanbase.’
The relatively low barriers to entry for NFTs, coupled with the potential revenues and easing environmental fears, means that many artists will still be tempted, however. But, with the gold rush days seemingly long gone, most will be relying on something that resembles more traditional music business models.
For his part, Max Shand says Serenade has been approached by many other artists since the Muse announcement, and he hopes the digital pressing can join the deluxe vinyl album as an essential purchase for hardcore fans.
‘There’s a lot of interest in what we’re doing,’ he says. ‘We just need to do it well. Every day that goes by, we’re speaking to more artists but we’re also building more technology, building more products which make the experience for artists and fans better. I know that time will bring a lot of value to what we’re doing.’
For NFTs, the real golden years may be yet to come…