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The State of the Music Industry Today
Did you know that the average American listens to four hours and five minutes of audio every single day? This is broken down into broadcast radio (52%), owned music like CDs, Vinyls and music downloads and more (20%), streaming services (12%), satellite radio (8%), podcasts (2%) and others like audiobooks (2%). With audio consumption extremely accessible to most people, it is no surprise that the music industry is worth $57B.
With so much money floating around the music industry, one might be safe to assume that musicians are drowning in cash.
However, the hard truth is that it is brutally hard for most musicians to make money in the streaming era. It is estimated that the average, working musicians make a gross salary of $30,200 a year. The average American wage for 2022 is $53,490. Artists get paid fractions of a penny per stream, and plenty of artists make nothing at all.
In fact, it has been reported that musicians often take home less than twelve percent of the profits from their album sales.
So where’s the rest of the cash going?
Well, anybody who knows anything about the music industry will tell you the record labels and ticket resellers are gobbling up the lion’s share of the profits.
Why don’t they share the wealth?
Because mega-stars like Beyonce and Bieber who make a lot of money for the labels are very rare, they use their profits to subsidise their other less successful acts. This has led to a lot of frustration among headline acts.
Protesting his treatment at the hands of Warner Bros, the artist and musician Prince wrote “slave” on his face before performing numerous gigs. Prince even titled his first album after breaking free from Warner: Emancipation.
And in the mid 2010s, streaming platforms like Spotify came along, promising a fairer economy for artists, but as you probably already know, they didn’t deliver on their promises.
The Streaming Era
The economics of streaming platforms like Apple Music and Spotify, which were supposed to make music a fairer industry, have created an even more brutal situation for artists.
Spotify reportedly pays about $0.003 to $0.005 per stream, which is split between multiple parties, including the record label, the publisher, the songwriters and the producers, to name a few. The other streaming sites offer similar rates.
So after the record labels and streaming sites have eaten their fill, the people who write the songs we love are left with scraps.
Then we have the thoroughly entrenched ticket scalping and ticket resale sites to consider, which hoover up event tickets only to sell them at ten times the price. Of course, the streaming sites’ poor pay-outs aren’t the only problem plaguing the music industry.
Ticket Scalpers and Resellers
Watching your favourite band play live is an ethereal, often magical experience.
But paying four times over the original asking price because ticket scalpers hoovered up all the tickets can dampen the experience. The scalpers argue they’re merely capturing additional value by selling tickets to willing buyers who want them enough to pay a premium for them.
In reality, scalping pushes out poorer fans who can’t afford to pay thousands of dollars to watch a band live.
Some ticket resellers, however, like Ticketmaster and StubHub, are legitimate businesses, because they have permission to sell tickets for inflated prices. But not everyone agrees that ticket resellers are necessary, and some see only a superficial difference between scalpers and resellers.
Chainsmokers manager Adam Alpert told Rolling Stone Magazine that the ten billion dollar secondary ticket market is the “biggest elephant in the room of the music business,” because it’s the resellers and not the artists who are getting most of the money.
Resellers haven’t done much work to improve their image. A few bought hundreds of tickets to an Ed Sheeran’s concert at the Royal Albert Hall only to sell them on for thousands of dollars. Sheeran and his team were understandably furious, as the ticket sales should have gone to the Teenage Cancer Trust, but instead lined the ticket reseller’s pockets.
So we’ve established that the music industry’s got some problems.
But it’s not all doom and gloom!
Over the past year, musicians have turned to a new technology to help them level the playing field: non-fungible tokens (NFTs). Forbes, the Verge and Rolling Stone have all shared articles about how crypto music platforms could revolutionize the music industry.
NFTs Are the Technological Tour de Force Driving This Revolution
To quickly recap, NFTs are digital representations of art, music, or video game skins on a blockchain, like Ethereum. Although there are more use cases for NFTs, such as digital identity, the current NFT market revolves around images, or JPEGs in NFT-lingo, that are used as profile pics (PFP).
NFTs have been around since 2014, but only broke into the mainstream last year, in part because Beeple’s $69 million NFT sale made headlines around the world.
NFTs create digital scarcity, which is a quality the music industry badly needs. Because most media on the web, like photographs and music, are easily duplicated and plagiarized.
But What Are Music NFTs?
Music NFTs are basically just music audio tracks stored on a blockchain.
So let’s say you wanted to buy some NFT music from your favourite band: the Red Hot Chilli Peppers. You would visit a music NFT store and simply buy the tracks you want, just like you would with today’s music stores.
What’s the Difference Between an NFT Music Store and the iTunes Store?
When you buy a music NFT, you own the music you buy. Meaning you can sell it on secondary NFT music markets, just like how you can sell a CD in second-hand music shops.
What’s more, every time a music NFT is sold on a secondary market, the artist gets a percentage of the sale, forever! Isn’t that great? Musicians are justifiably excited by NFTs, especially those in the EDM community like deadmau5.
How Are Music NFTs Better for Musicians?
So NFTs for the music industry sound interesting, right? But you’re probably wondering: how will NFTs help musicians and artists to earn a fair wage? Here are five ways that NFTs are getting more money into artists’ pockets.
Reduce Piracy and Plagiarism
Music piracy is an enormous problem. The US economy loses $12.5 billion annually as a result of music theft, and the loss of nearly half a billion dollars in tax revenues.
But NFTs are immutable, meaning when an artist mints an album as an NFT, it’s timestamped and stored in the blockchain, which will greatly simplify plagiarism claims, and eventually reduce the quantity of stolen music.
With NFTs, you can resell tracks and albums on secondary music markets, thereby reducing the incentive to pirate music. After all, if you’re bored of a band, you can sell their music and buy music from a new band you want to listen to.
Returning Control to Artists
Record labels and producers usually decide where an artist’s music is streamed or sold. Which is odd, because other creatives, like painters and photographers, can charge whatever they like for their work. So why can’t musicians do the same?
Well on the one hand, music production is a far more collaborative process than both painting and photography, so sharing the workload is necessary. On the other hand, new artists must sign over control of their work to the labels and producers in exchange for their production and marketing efforts.
But NFTs could change all that.
NFTs give artists far more control over where their music is shared, and how much fans need to pay to listen to it. But NFTs also enable bands to crowdfund their production and marketing requirements by selling limited edition NFTs. Those holding the band’s limited edition NFTs could receive a share of the album’s royalties, transforming their role from fans into investors.
By cutting out the label’s role and being financed by their fans, artists could keep far more revenue for themselves than they can today, while also forming a closer relationship with their fans.
Faster Payment and Additional Royalties
Today’s musicians struggle to get a regular paycheck for numerous reasons. This is because the music industry is a behemoth of bureaucracy. Countless administrators need to rubber stamp every dollar bill that leaves the record label’s accounts, so artists wait inordinate lengths of time for their paychecks to arrive.
But were those artists’ albums NFTs, they wouldn’t be waiting around for a paycheck for longer than a few seconds. Smart contracts can automate NFT sales, and artists could receive royalties directly the moment every track or album sells.
What’s more, should those payments be made in a stablecoin like Tether or USDC, the artists could theoretically spend the money directly from the wallet in businesses that accept crypto. What’s more, if music NFT marketplaces accept stablecoins like Tether or USDC, the artists could spend the money directly from the wallet.
Closer Connection Between Artists and Fans
DAOs like the Bored Apes Yacht Club (BAYC) and Friends with Benefits (FWB) use their NFTs as tickets to exclusive live events like yacht parties and raves in Paris, so there’s no reason musicians couldn’t do the same with limited-edition album NFTs to give their fans access to in-person meet and greets, private parties, or online AMAs.
They could release limited-edition albums that let fans jump the queue at live shows, or NFT backstage passes that allow fans to hang out with the band.
Musicians could also sell digital merchandise as NFTs, like hoodies or sunglasses, that their fans can wear around the metaverse and sell on secondary markets. Owning NFT merch could be a requirement for entry into exclusive metaverse events, like the music festival that took place in Decentraland at the end of last year.
In time, NFTs could provide musicians with a way to interact with their fans one-on-one, building deeper connections with their fan base.
Check out our overview on the top social DAOs, including BAYC, FWB and more.
Reduce Concert Ticket Scalping
Live music event tickets can also be sold as NFTs, which could contain restrictions on where and for how much they can be resold.
For instance, bands could decide to restrict ticket resales to a 30 percent markup, which would still allow resellers to make some profit, but only a capped amount. They might also restrict ticket resales to pre-approved blockchains or NFT marketplaces.
An agreed percentage of the profit from ticket resales could automatically go to the band or venue, which would further deter resellers from buying tickets in the first place. Attendees could be compelled to show the genuine ticket NFT before being allowed into the gig, which would prevent scalpers from using a workaround.
What’s more, all these restrictions could be programmed into the NFT tickets themselves and enforced by smart contracts. In the end, NFT tickets could drastically diminish the music industry’s losses to scalpers and ticket resellers.
But is there a way for musicians to earn more from streaming? This is where decentralized music platforms come in.
What Are the Top Decentralized NFT Music Platforms?
Decentralized music platforms provide music streaming services similar to Spotify, but with a twist: they don’t prioritise the interests of shareholders over musicians or their fans.
Some let you stream music, while others operate as music NFT marketplaces. One operates as a music creation platform, where you can create and mint music directly onto a blockchain.
A string of popular musicians and artists have bet big on decentralized music taking off — including Katy Perry, Nas and Deadmau5.
Here are some of the decentralized music platforms that could one day replace Apple Music and Spotify.
Audius
When you listen to a song on one of today’s streaming apps, the artist is paid a tiny sum of money about a month after you listened to it. But what if artists were paid just a few moments after a fan listened to their music?
Imagine how helpful that would be for artists who are struggling to make ends meet!
That's exactly what Audius has set out to achieve.
Audius is akin to a decentralized Soundcloud, where musicians can interact with their fans on a much more personal level. On Audius, artists set the rates for how much fans should pay to stream their music, so listeners only pay for the music they actually listen to.
Fans can also crowdfund their favourite artists, contributing to their long-term growth.
Up-and-coming artists will benefit most from crowdfunding, as they can bootstrap their production and marketing costs after releasing just a few sample tracks, which is considerably easier than fighting for a meeting with a big record label.
In return for their contributions to the band’s crowdfund, the band can reward their fans with a share of the royalties from an upcoming album or track. A band’s listeners and fans can both invest in and profit from listening to their favourite artists. Once an artist is streaming music, they receive ninety percent of the revenue from their music streams; the other ten percent goes to the people supporting the network.
While Audius is mostly free right now, artists will be able to create premium tier content that only loyal and paying fans can access at some point. That premium content might give fans access to exclusive experiences like meet and greets, AMAs, or early access to new music.
Audius has so far received backing from Jason Derulo, Nas, the Chainsmokers, Linkin Park’s Mike Shinoda and Katy Perry. While nothing is set in stone, Audius is in prime position to knock Spotify and Apple music down a few pegs.
Arpeggi Studio
Arpeggi Studio is the first ever on-chain, in-browser, music creation platform. Arpeggi’s product is music creation and editing software housed on a blockchain, which enables artists to create and then mint their music as NFTs, all within a single program.
Arpeggi is currently in beta, and was developed by a collection of software developers, musicians, artists and blockchain experts, who share the belief that creatives should be able to benefit from blockchain and NFTs.
Every time an artist mints a new track, Arpeggi stores an immutable copy on the blockchain. So there’s no wait times for artists, and no intermediaries charging fees for storing music.
But doesn’t storing large files on a blockchain cost thousands of dollars? And how does Arpeggi upload music directly to the blockchain?
They’ve developed a way to store music in a format similar to sheet music, but which doesn’t sacrifice any quality, and requires just 256 bytes. For comparison, a standard mp3 music file is usually around a million bytes. Going forward, Arpeggi’s team hope that their future collections will incorporate the first ever artist royalty system for on-chain music.
Nina
Nina is a digital marketplace for music. It is somewhat similar to Bandcamp — an online record store and music community — only Nina is designed for Web3. Nina was launched onto the Solana blockchain by a team of record label executives in November last year.
Users can listen to all of the music uploaded to the platform for free, much like with Soundcloud. However, unlike on Soundcloud, artists who upload music also issue a limited set of tokens which fans can buy if they want.
Buying album tokens doesn’t guarantee you any specific perks, but it could get you some pretty cool bonuses somewhere down the road. For instance, a musician could say to their fans “my new album is on sale in a week, but anyone with a token can buy and listen to it today.”
They could also host token-gated meet and greet events, like AMAs, or start a Discord server where they hang out with their token-holders.
Musicians don’t necessarily need to offer certain perks — they can choose to offer none at all — although most will offer something, otherwise nobody would have any reason to buy the token. Like other crypto music sites, the music tokens also provide residual royalty payments to the artists every time they’re bought and sold, helping to pad their bottom line.
However, unlike most other crypto music sites, Nina deliberately steers clear of the crypto jargon. In fact, you won’t find the term “NFT” anywhere on its website.
The idea is to encourage people who are new to crypto to use the site and not be put off by its crypto mechanics.
To further encourage users lacking crypto knowledge to use the platform, Nina allows you to pay for music using the USDC stablecoin. It’s early days for Nina, but so far it’s a platform showing a lot of promise.
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