Learn about the opportunities provided by NFTs for musicians, the new complications surrounding NFT licensing rights and how to create NFT art using Rotor Videos.
It’s clear that digital content has been injected with a fresh gold rush ever since NFTs entered the spotlight. Artists everywhere have been keeping an eye on this new method of monetisation thanks to the hype around using NFTs to manage ownership and value in art— an eternal battle within the music industry. So how does the rising popularity of NFTs affect copyright and licensing for creatives?
As part of our NFT series, Alex Branson writes about NFTs and the music industry, complications surrounding licensing rights and making NFT art as a musician.
What are NFTs?
Non-Fungible Tokens (NFTs) are widely understood as representing a unique piece of art which is then sold, as in the case of the Beeple artwork sale or Kings of Leon album auction (or the Nyan Cat gif, if you are really in the know). NFTs are also used in decentralised finance (‘DeFi’) to help unlock cash flow.
NFTs identify a unique, real-world asset and establish value through verification, ownership, and the use of decentralised ledgers to keep track of that value and ownership. This often enables a continuous revenue stream for the creator, every time the NFT is bought and sold. This has rightly got everyone’s attention. NFTs are an evolution of rarity, which has always driven demand-based value, particularly where music fans are concerned. As a concept, the music industry is naturally very comfortable with that. They’ve been doing it for years.
NFTs & The Music Industry
The music industry has long wrestled with the difficulties of tracking the exploitation of its assets and correctly paying owners. This was recently illustrated by the near half-billion dollars DSPs paid to the Mechanical Licensing Collective (MLC) in the USA. You can see the appeal of using secure public ledgers to track transactions. Reporting and meta-data is growing exponentially, consumption trends are merging formats and creating ever more complex data sets.
Rotor Videos is a great example of how content creation in multiple media formats is made easy and efficient for users. This is what the market wants. The inevitable increase in online content could point to technical solutions designed to keep track of the data whilst keeping transactional information secure, accessible and verifiable. Currently, there are low volume, high-value NFT ‘drops’ happening but, the really exciting prospect of NFTs is their potential to open up to a wide audience. As creation accelerates, high volume, low-value NFTs will become more common. Unlike other, big value ‘investment’ trends, this kind of scale could democratise investment across the creator community and support a more niche repertoire.
One of the great opportunities new technology presents is an ability to progress free of technical debt. Other established systems suffer from having to navigate legacy architecture on their way to establishing something new. Collection Societies, digital distribution companies and DSPs the world over, continually battle with building on top of systems sometimes designed decades ago. These systems need to be adapted to cope with modern-day use-cases.
In the NFT space, we’re already seeing a bewildering number of companies (Centrifuge, Substrate,Lightning Network to name a few) that are building off-chain solutions to improve efficiency and add functionality. These platforms retain links to established and trusted blockchains like Ethereum. This continues to evolve at pace.
NFTs & Licensing Rights
Like so many new things in the music industry, innovation eventually gets mired in centuries-old issues of copyright and ownership. Typically, music does not always have one owner, due to the song and recording often being created or owned by different people. Not only that, due to the variety of exploitation forms, private enterprise has created multiple rights administrator organisations who perform some sort of intermediary service but who, crucially, lay claim to aspects of permissions and price-setting.
So, where will this leave music-related NFTs?
The music you create as part of an audio-only or audio-visual piece of artwork may have been created for sale on these exchanges but will your record company or publisher want some of that income from the sale and any ongoing royalties? You bet they will. Will some of the collection societies eventually look for an administrative claim too, as they recently did in the UK with livestreams? You bet they will. Has any of that really shaken out yet? Well, kind of.
I’ve had many conversations with others in the music industry who are looking to try and add the commercial model around NFTs into their revenue matrix. I’ve found that artists inevitably rely on parts of their team to help enable this to happen. As a consequence, this will be presumed as another part of the revenue those partners will share in, albeit one not necessarily specified in their existing artist deals. Evolution needs to include the business end too, as demonstrated by those historic record deals that don’t deal with the concept of streaming very well or fairly. This, however, should not worry the artist who wants to get involved.
NFTs & Musicians
NFTs offer innovative paths to an audience. For example, Rotor brings efficiency to the creative process which has a multiplying effect on an asset’s value. It is a great way of producing multiple, non-fungible assets that lock in the required uniqueness so that an NFT can be used to represent them. It creates unique assets at scale by using a mixture of audio analysis, fixed and dynamic visual manipulations that are easy and cost-effective (Check out this post for more details on how Rotor creates NFTs).
While NFTs can open up valuable opportunities for creators, the use of a mechanism trusted in financial circles could reduce the perception of music as a ‘risk’ business as it moves into a new understanding of investability. Do NFTs introduce music content as a new and valuable ‘asset class’*, open to ideas of durable and secure desirability afforded to other, trusted rarity markets? We’ll have to wait and see.
It seems NFTs should be embraced and developed. They have the potential to show how value can be established in art. As with boxsets of the past, the more value that can be added to an artistic asset, along with scarcity, the more it improves the opportunity to monetise art and it's potential to last. After all, the underlying administration and non-fungibility is hard-wired into the NFT concept. This is arguably the first time that has truly happened in the history of the music industry.
* coined by Lucie Caswell on considering music and NFTs.
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