BY: Kiana Lozzi, RBFL Student Editor
Artists’ incomes have significantly shifted from mechanical to performance royalties and the next shift should be to music NFTs. NFTs, or “non-fungible tokens,” are data units that are stored on a blockchain that transfer ownership of either physical things or digital media. Additionally, NFTs have given artists an opportunity to retain the copyright and reproduction rights for their work and allow musicians to directly license ownership to fans.
NFTs incentivize musicians by offering perpetual royalties, new revenue streams, and the easing of payments. NFTs allow music artists to garner profits that are traditionally inaccessible under copyright law. Under most record label contracts, copyright owners have control over a specific copy up until it is first sold. Therefore, the copyright holder has protection, but receives no royalties from sales after their first copy. In comparison, NFTs allow for continual payments beyond this initial sale. Therefore, royalty payments could increase for music releases and other traditional revenue streams. Merchandise that is sold at shows provides music artist a one-time payment for each article of merchandise. However, if music artists sell NFTs as collectibles, then they have the potential to earn endless stream of revenue from their pieces.
NFTs allocate a percentage of the royalties to someone’s favorite artist and grant other benefits, which has increased the connection between the artist and fan in a novel way. Thus, music NFTs help artists build their community. Additionally, the traditional record label framework for music artists has led to numerous artists getting exploited. However, music NFTs turns fans into shareholders because they own a stake in their favorite music artists and can gain value from it. Thus, altering and promoting consumerism. The role of investor typically and historically has been the record label, which then creates deals that are unfavorable for the artist. Taylor Swift, Frank Ocean, and TLC are a few artists who fell victim to these exploitative record deals and no ownership of their masters.
Music artist, Steve Aoki, launched AOKIVERSE, for his music NFTs in early 2022. Users could join AOKIVERSE by buying an NFT passport that included free tickets to live shows, merchandise, and other members-only events. Moreover, artists no longer need millions of fans spending a dollar on them and supporting a lot of middlemen. Instead, they just need a few hundred fans that really appreciate them enough to invest in their success.
Current legislation does not typically deem NFTs as securities, but they can be securities. The strongest argument for music NFTs not being deemed securities is that the value that music NFTs create is not a standard securitized investment contract, but it is tied to the personal connection that fans have with the artist and their work. Thus, the NFT itself does not produce a high expectation of profit, but it produces the chance for artists and fans to meaningfully connect prior to this technology. Overall, the internet and securitization offered a new revenue model for music artists, and now blockchain technology and NFTs may have forged a new path for artists to disrupt the music industry.
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