On 11 March 2021, Mike Winkelmann (otherwise known as ‘Beeple’) sold an NFTof his work, The First 5000 Days, at auction for USD c.69 million, positioning him among the top three most valuable living artists in the world.
NFTs have become synonymous with Beeple's ground breaking sale (which was both the first NFT auction at a major auction house, and the first auction to accept payment in Bitcoin), and a range of content providers have launched NFTs as the new digital collectible.
We're also seeing a surge of NFT-activity in the music industry. At the end of February 2021, producer and musician Justin Blau (also known as '3LAU') sold an NFT collection of his album, Ultraviolet, for over USD 11 million via online auction. Since then, the likes of The Weeknd, Grimes, and Calvin Harris have sold tracks, or in the case of Kings of Leon, entire albums as NFTs. In March, Harris spoke out in praise of the ongoing NFT hype saying that "it has the potential to completely revolutionise the music industry."
NFTs in the Music Industry: For the Fans?
Owning an NFT is not necessarily the same as owning the original work. An NFT is a "minted" token of the original work. In purchasing an NFT, the purchaser acquires a token which contains the digital music file or artwork, along with proof of authenticity from the artist (commonly the artist's signature), and – because it’s powered by blockchain – the ledger (a history of all transactions associated with that digital artwork or music file). Every NFT has its own unique identification code and metadata that distinguishes one token from the other, and its provenance is recorded on a blockchain. Unlike cryptocurrencies which can be traded or exchanged (fungible tokens), NFTs are recorded on a blockchain and cannot be replicated, exchanged or traded at equivalent (non-fungible tokens).
In buying an NFT of a digital work, you are in theory, buying instant verification of the digital work's authenticity. NFTs are often sold directly by the artist (adding further fan-appeal), are usually limited in number. So far, NFTs seem to be either one of a kind or part of a limited series of NFT's of the original work. In the case of music, an NFT of the work is often sold before the original work is publicly available to buy or listen to (even greater fan-appeal). NFTs are the digital age's collectors' item /ultimate fan-merch. Their value and appeal is down to perceived rarity and exclusivity.
Could NFTs have wider impacts for the industry?
In the words of Calvin Harris: "I haven't really realised the scope of what an NFT can be - I don't think any of us really have". In short, the technology is still in its nascent stages of experimental use and time will tell if NFTs take hold.
However, in theory, NFTs could transform tracking and payment of royalties, using blockchain technology to record ownership and split royalty payments at the time of creation. Artists could get greater transparency, and fractional rights ownership issues could become easier. One founder of a company looking into the possibilities, statesthat their mission is for artists to “reclaim missed monetization opportunities and sales of future royalties".
There are many unknowns, however. Could NFTs ever solve the inherent difficulties with tracking and payment for musical works and the entire publishing side of things? Could NFTs ever disrupt the existing industry given the current licensing practices, ownership and control structures, and duration of copyrights? How would session musicians and performers receive fair remuneration? It seems that this early stage that an entire overhaul would be needed with all players willing to buy in, otherwise the NFT system would have to exist alongside the existing system. And would that just lead to more complexity?
Co-authored with Lauren Neal
Despite the clear traceability, there remains enormous uncertainty about just how the rights and ownership of the original creators – from songwriters and producers to session musicians – apply in an NFT sale that includes music. One songwriter behind tracks with tens of millions of streams has found themselves in the middle of this debate.