On Music NFTs

Somewhat embarrassingly, in retrospect, I grabbed an unused dessert plate, retrieved a dry-erase marker, and began to diagram two stylistic visions of the world on the flatware.

Something like this:

Is a caption necessary?

A crude oversimplification, to be sure. 

But in my egg nog-fueled enthusiasm, I wanted to inspire my niece with the prospects for a world where:

  1. Artists would be able to retain the rights to their IP while making a living
  2. Fans would be able to build direct relationships with artists, and potentially participate in economic upside
  3. Rent-seeking middlemen would be kicked to the curb … where they belong

The pace of development — particularly by the team at Sound — has been astonishing.

It’s still very early days, but I’m finding that music NFTs are the epicenter of crypto-enabled business model innovation.

In a landscape burgeoning with scams and vaporware, music NFTs are the first instantiation of web3 I’ve encountered that leverages crypto rails for disruptive innovation in the real world.

This is not why I collect them — I think music NFTs are intrinsically valuable.

That said, music NFTs illuminate multiple vectors for entrepreneurs to build disruptive companies in other verticals.

I’d like to highlight five for non-crypto natives, particularly those managing or investing in private markets funds.

1 /  Disintermediation via Protocol

Web3 blows up conventional conceptions of competition.

All an artist needs is an audience that is willing to pay for their NFTs.

Admittedly, this is no small feat. However, building a crop of supporters is probably easier than securing a decent deal from a label.

2 /  Working Capital and Financing

A few months ago, artists relayed that it would take 1 million streams on, say, Spotify, to generate a payout of ~ $3,500. Their fates were tied to algorithms over which they have little to no control.

Today, an artist can release a single on Sound.xyz’s curated platform (distinct from the permissionless protocol) and hit that revenue figure with just 25 collectors. And unlike time-lagged royalty payments, music NFTs’ smart contracts enable instant payouts — not only for primary releases, but also for cuts of secondary sales.

Going direct improves artists’ working capital position. This enables earlier investments in their own branding / capabilities / distribution, and faster experimentation.

Social media is fostering an emergent culture, and incumbents appear ill-equipped to harness or capitalize upon emergent phenomena. While legacy intermediaries seem stuck in the starting blocks, the infrastructure in web3 is capable of capitalizing on emergent trends in near-real time.

Individual human capacities, rather than the capacity to aggregate financial capital, become the economic core of our information and cultural production. Some of that human capacity is currently, and will continue to be, traded through markets in creative labor. However, its liberation from the constraints of physical capital leaves creative human beings much freer to engage in a wide range of information and cultural production practices than those they could afford to participate in when, in addition to creativity, experience, cultural awareness and time, one needed a few million dollars to engage in information production. From our friendships to our communities we live life and exchange ideas, insights, and expressions in many more diverse relations than those mediated by the market. In the physical economy, these relationships were largely relegated to spaces outside of our economic production system. The promise of the networked information economy is to bring this rich diversity of social life smack into the middle of our economy and our productive lives

Music NFTs enable you to experience this first-hand. Crypto rails provide the value capture / exchange that had largely been missing.

It’s all a bit nascent and inchoate, but there is an ethos of the cooperative in the music NFT community. Artists are supporting artists. Collectors continue to show up for new artists. 

There’s a sense that the community is pulling in the same direction to manifest a different economy — one that gives artists a chance to live off their creativity and talents. 

Apart from the intellectual edification, I am confident that if you go in with an open mind, you will uncover insights germane to the future of your own business, and have fun along the way.

See you there.




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