How independent musicians can leverage NFTs to their benefit

The most significant digital disruptor since streaming platforms, NFTs, or non-fungible tokens, are set to change how music is created, shared and owned for good. NFTs have the potential to change the relationship between independent artists and their fans.

Paving the way for direct transactions between the people who create music and those who consume it, NFTs give emerging artists and independent musicians a new way to connect with fans without necessarily depending on a middleman.

Here, we look at how independent artists can use NFTs to further their careers, and how SmartLabel is operating on this frontier.

What are NFTs?

NFTs are digital assets that exist on the blockchain. These assets contain digital information, which can be anything from a song recording to an image or contract. Marketplaces like Fanfare.FM let independent artists create, or mint, their own NFTs.

NFTs represent the arrival of a third music model, which returns ownership of the music to the artist. Built around scarcity, NFTs drive up demand among fans and collectors, making it easier for artists to earn an income. As the NFT community is open and inclusive due to its decentralised nature, NFTs let independent musicians tokenise their work and offer it straight to those who support and appreciate it, providing a new way to make money outside traditional channels and platforms, such as Spotify.

NFTs and master rights

As NFTs are kept on blockchains, which are digital ledgers, they contain a record of all transactions of a particular token. One of the main draws of NFTs, besides offering independent artists a transparent way to do business, is that they can pay royalties to their creators. An independent artist usually has a beneficiary contract and a master rights contract for every song and album they create. These are legally binding contracts, with the names and signatures of all parties, stating who owns what rights to the work. When the music is streamed on a platform or played on the radio, for example, the artist receives a small percentage according to these contracts. However, many independent musicians argue that the payout from streaming platforms is not enough to make a living.

Spotify reported paying between $0.00331 and $0.00437 per stream in 2019, taking two to three months to pay artists. With 80% of all songs on Spotify streamed fewer than a thousand times, this is hardly enough for anyone to live off. With music NFTs, SmartLabel is bringing the power back to the artist.

NFTs and royalties

NFTs let music creators decide for themselves how they want to divide their works and master rights, and how much they want to sign away. Any money made from the first sale of the NFTs goes directly into their accounts. For example, musicians can divide the master rights to a song into 10 NFTs, each representing 1% of the master rights. If each NFT sells for 100 euros, the artist makes 1,000 euros and can use that money as they choose, without being accountable to any middlemen.

The potential of NFTs for independent artists

Unique or collectable pieces of art and music often gain value over time, but the original artists are usually left out of the equation. When a work of art is sold, the artist makes a profit, but if it is resold at a higher value, they usually have no share in the following transactions. NFTs give that control back to independent artists. If fans own part of the master rights to a song, they will likely do everything they can to promote it, helping drive up the value of the NFT. That creates a positive feedback loop for the artist and the fans. Every time the song is streamed on a platform like Spotify or Emanate, each holder of the NFT receives an allotted percentage. NFTs can also be coded to let their creator collect royalties on every transaction of the token.

Musicians can add the option that 10% of every token sale goes back to the original creator, for all time. If early fans first bought the master rights NFT for 100 euros and later traded it for 150 euros and then 300 euros, the creator receives a kickback of 15 euros and 30 euros respectively. That way the artist reaps the rewards of their work for years.

Interested to learn how NFTs can help you further your music career? If you want to delve into the world of NFTs and how to monetise them, get in touch with SmartLabel.