Welcome to the fifth installment of PYMNTS’ series on NFTs, the newest craze in crypto.
Over 12 days, we’ll be looking at every part of the non-fungible token craze sweeping the worlds of art, video games, social media, fashion, and sports.
When it’s finished, you’ll have a solid grasp of the basics of NFTs — what they are, how they work, what they are going to be used for, what their drawbacks are, what you need to be aware — and wary — of, and why people are paying so much money for them.
So, how is the music world engaging with NFTs? Any way it can.
The rapper Nas jumped into the NFT world this week, announcing that on Jan. 11, he’ll sell some of the streaming royalties to two of his hit songs to fans for as little as $50.
Tokenizing music royalties is a subset of one of the biggest projected uses of NFTs from a business perspective: Selling off small chunks of large investments that small investors have never had access to before, such as real estate (a hotel was tokenized). That’s a topic we’ll look at in more depth in a separate article in this series.
But it’s only one way recording artists are using NFTs. Songs and even albums can be hosted and sold on NFT tokens, with a variety of benefits to the musicians. Notably, artists are cutting out middlemen, ranging from record labels to streaming services. But the move is also a way of connecting with fans, offering special perks, and even selling merchandise usable by fan avatars in the metaverse.
In selling off 50% of the rights to “Ultra Black,” from his 2020 Grammy-winning “King’s Disease” album, and “Rare,” from 2021’s “King’s Disease II,” Nas has jumped onto a crypto bandwagon that is fast picking up steam in the music business.
In this case, Nas is selling 400 “Rare” tokens in three tiers: 700 Gold tier $99 NFTs for a 0.0133% share, 400 Platinum NFTs at $499 for 0.0658% and access to exclusive merchandise, and 10 Diamond tokens for $9,999 for 1.5789% plus two VIP concert tickets, an exclusive signed vinyl album, and streaming conversation with producer Hit-Boy. “Ultra Black” tokens run from $49 to $4,999.
Nor is it limited to top-tier artists. Crypto-fan and Coinbase investor Nas is creating and selling the NFTs through Royal, a firm started by Justin Blau. Also known by his DJ stage name 3LAU, in March 2021 Blau auctioned 33 NFTs related to his “Ultraviolet” album that included things ranging from new versions of the albums songs to access to unreleased tracks to artwork. The $11.7 million he raised was the largest-ever NFT sale at the time.
“Having Nas be the first artist to sell royalty rights through Royal is an incredible affirmation of our mission,” Blau told Forbes. It’s proof that artists across genres feel strongly about democratizing ownership of their music, and that they want to be connected to their listeners on a deeper level.”
NFT tokenization isn’t something entirely new — David Bowie famously sold 10-year “Bowie Bonds,” backed by his catalog and other revenue streams for $55 million.
It’s also a new way for artists smaller than Nas to make money in the streaming era. About 90% of all streaming royalties go to the top 1% of musicians, with artists like Daniel Allen only making a few hundred dollars from millions of annual streams, he told TIME in December. And with touring cancelled by COVID-19, he turned to NFTs, selling 50% of future royalties to fans — far more than he get from traditional labels. He also sells songs on NFT music site Catalog. Altogether, NFTs account for 85% of his revenues.
The goal, Allen says, isn’t to get rich. NFTs, combined with strong social media fan interaction, will “create a musical middle class” that hasn’t existed for quite some time, he said.
That isn’t to say it’s guaranteed. Kings of Leon released NFT versions for the release of its “When You See Yourself” album in March 2021 — the first major band to do so. But response was mediocre, despite extra goodies like art to concert tickets.
Beyond the Music
All this isn’t to say the big labels don’t see the value of NFTs. Warner Music Group in April 2021 announced a partnership with Genies to create avatars and NFT wearable merchandise for its artists. The goal, Warner said in a statement, is to “facilitate fan reach across immersive platforms and metaverses.”
Universal in November announced the creation of a new supergroup called KINGSHIP, consisting of four Bored Ape Yacht Club avatars that will develop and release “new music, NFTs, community-based products, activations and experiences in the metaverse, and kick off a new generation of artist, fan and community engagement,” it said in a statement.
Genies also has worked with Justin Bieber, Rihanna and Cardi B, among others, and offers a 3D avatar and NFT production kit that lets musicians (and others) make NFT wearables, accessories, tattoos and other limited edition goods for fans’ avatars.
Mick Jagger and Dave Grohl in April released an NFT artwork related to their “Easy Sleazy” single that was auctioned for charity, and musician Grimes — who has a son with crypto-favorite Elon Musk — auctioned a series of NFT artworks for $6 million last year.
Even music legend Quincy Jones has jumped on the NFT train. In November, he teamed up with the Recording Academy and NFT marketplace OneOf to produce a series of NFT collections that will commemorate the 64th, 65th and 66th Annual Grammy Awards.
“I’ve been advocating for artists my entire career, so any technology that serves to help musicians make a living is something I fully stand behind,” Jones said in November 202 statement. “It excites me to know that OneOf is working to bring more money into the ecosystem, and simultaneously, I’ve been with the Grammys/the Recording Academy since its inception. So, it makes my soul smile to see OneOf partnering with this wonderful organization, and I look forward to seeing the good they will do for artists.”