Right now, everyone in the music industry is talking about NFTs. But there’s a few questions to answer here: What are they? Why are people willing to spend so much money on them? Can emerging artists benefit from NFTs?
We had a ton of DMs asking us to go into this topic, so in this article we’re going to explain everything you need to know about NFTs, how they are creating a new mode of monetisation for musicians, and how you, as an artist, can make use of them.
WTF is an NFT?
So what actually is an NFT? NFT stands for ‘Non-fungible token’. Essentially, it is a piece of digital art or media that lives online which you can purchase with cryptocurrency and have credible ownership rights for. This could be anything from video to audio, an image, or even a tweet.
Most forms of cryptocurrency are ‘fungible’ – in other words – you can exchange them or spend them in compatible online stores. You can’t do this with an NFT. Instead, they act more like a rare digital trading card. They are stored on a cloud-like structure known as a ‘blockchain’ where your ownership of the NFT is verified and you can only trade or sell it as a sort of collectible item.
NFTs can be sold at a specified face value or auctioned off to allow demand to drive the value higher. Usually, they are limited in quantity to increase the rarity and exclusive nature of the product. Plus, they can be resold as the value increases. Basically, they are only worth whatever someone is willing to pay for it.
What’s the Point?
We’ve already begun to see huge artists raking in thousands, if not millions from the sale of NFTs. Kings of Leon made around $2 million dollars through releasing their latest album in NFT format, whilst DJ 3LAU set a new record after selling just 33 NFTs for a staggering $11.6 million dollars. Each of his NFTs included custom artwork and songs, access to never-heard-before music and a limited edition vinyl pressing of his album.
Some of you might be saying: “What’s the point in some of this NFT content if other people can still see it or listen to it elsewhere online?” and you’re right – you could simply go stream Kings of Leon’s new album on Spotify. However, it’s not so much about the accessibility of the content, but the actual ownership certification of the original asset and the bragging rights that come with it.
It’s a bit like going to a gig and catching something that the band throws into the crowd at the end, like a drumstick or guitar plectrum – you gain a stronger connection to the artist through owning this item that you know is one-of-a-kind.
We’re going to be bold and say that NFTs could well be the biggest development to the music industry since streaming began, as they are paving the way for an alternative music economy. Here’s why…
The State of Monetisation in the Music Industry
We all know how hard artists and the music industry have been hit by the pandemic. A recent UK study showed that 64% of musicians were considering leaving the music profession, presumably due to the loss of income from live shows being cancelled – the main source of revenue for most artists.
Not only that, but the past year or so has seen a lot of attention put on the royalties that Spotify and other streaming services pay artists. In 2020, 42,100 artists on Spotify made $10k or more from streaming royalties, and whilst this is a strong 80% increase since 2017, it’s still just a drop in the ocean of approximately 8 million creators on Spotify.
As a result, artists have struggled to bring in their regular income, or even survive, and have instead been struggling to find new ways to monetise from their music. NFTs could well be the answer.
Recent studies from 2020 have shown that the ‘creator economy’ is the fastest growing type of small business. But with such exponential increases in the number of creators, finding ways to monetise that creativity has proved extremely difficult.
Fans will always want more and more content – no amount will ever be enough – but what else can you offer them? What if you could increase that fan connection by offering them the opportunity to buy an exclusive item created by you with significant collectible value?
What Do NFTs Offer?
We often speak about creating value in your content for your followers as, after all, this is how you convert them into real fans. Nurturing those who have already shown dedication to your music is vital as well, but how exactly can you do this? This is where NFTs can prove their worth.
Monetising from your fans is never something you can do straight away. Like we said, you have to nurture and provide for them until the point where they are invested enough in your music and brand that they are willing to spend money on you. Consequently, it’s important that once you have fans who have reached this point, you make the most of their loyalty as it’s a prime opportunity for making some money.
Possibly the best thing about NFTs is the legacy of income that they can create for artists. For example, if you were selling an exclusive piece of artwork for your latest release, you can actually specify a percentage of that asset which you own, so every time it gets resold, you make money. Plus, should that asset increase in value over time, you’ll be making more money whenever it changes hands.
Not only that, but the by-product of this is some easily accessed word-of-mouth marketing. Whoever buys your NFT is going to want to share their new prize purchase with others and show it off on socials, automatically gaining you some extra exposure. It’s providing a new element to your content game.
Strengthening the Fan Connection
Turning followers into fans is all about letting people feel like they know you on some level, and NFTs are a great way of doing just this. Fans can feel even closer to you as someone they admire because they own something you made that no one else does; they gain that sense of exclusivity.
Think how many people, given the opportunity, would run up to one of their favourite artists exclaiming “OMG I’m your biggest fan!” – NFTs allow fans to actually prove this.
What About Emerging Artists?
The question is though, is there enough demand for these items when it comes to emerging artists? The point that a lot of people are making about NFTs is that, like many things in the industry, they will only benefit a small percentage of artists at the top of the game. This is why some of these items are being sold for millions.
Maybe you’re thinking: “Nobody is going to pay serious money for an NFT from me”, and perhaps at this stage in your career, you might be right, but this is why cultivating super-fans of your music is going to be so important. It only takes one of them to be willing enough to pay a decent price for a one-of-a-kind asset created by you.
We already see artists with dedicated fan bases making money on platforms like bandcamp and patreon, purchasing limited release merchandise and vinyl for substantial sums – even paying more than the list price or donating to the artist out of their own good will and loyalty.
Be the Investment
Also, think about the kind of music fans who love discovering new artists in the early days of their career: the people who like to say “I knew that band before they were big – I’ve been listening to them for years”, as if they are some kind of uncredited industry tastemaker. Similarly, there will be people like this, with a lot of spare cash, who want to invest in up-and-coming artists before they hit the big time. This could be achieved through purchasing an NFT early on and watching the value rise as that artist grows to superstardom.
Plus, NFTs don’t have to be ridiculously expensive, nor do they have to be auctioned; Grimes recently issued a series of NFT artwork of which there were 400 pieces available per item. These were priced at just $20 each – proving that the NFT market is accessible for emerging artists and the typical music fan. This makes the NFT market seem more like ‘digital merchandise’, rather than a playground exclusively for the super-rich.
This is the only way NFTs can truly help the whole music industry, rather than just well-established artists. The price points need to be accessible for everyone.
However, NFTs will only become financially valuable when a serious amount of people are aware of the content and its creator. So, although you may not be able to benefit right this moment from selling NFTs, this is exactly why you should be taking every care with your fan base to make sure those fans are engaged, dedicated and loyal.
How Are Artists Using NFTs?
So you know now that NFTs can make you a lot of money and that they aren’t necessarily just for the top end of the music industry spectrum. But how are artists actually using them and what kinds of things can you sell as an NFT?
- If you’re an artist with a particularly strong visual brand, then NFTs are definitely something to think about. You could create exclusive artwork for your latest release and sell one-off graphics designed by you, or you could collaborate with an artist you like for extra credibility.
- ‘Social tokens’ are being used to allow access to exclusive fan events and communities, private chat servers and paid email newsletters, with incentives of course. The value of the token rises as the communities grow.
- Integrating NFTs with online events such as live-streams or album listening parties. The fans attracted to these sort of events are more likely to be the ones willing to invest in you.
- Reignite interest in an artist’s back catalog (as 3LAU did with his Ultraviolet album). For example, limited release reissues of an old album with exclusive content added in like vinyl copies or bonus tracks.
We’re still in the early stages of this phenomenon, but it seems that just about anything can be sold as an NFT, so there’s a lot of scope for creativity and unique marketing ideas here.
Prepare Now, Profit Later
In some ways, purchasing NFTs is no different to being an art collector, the only difference being that we’ve transitioned from the physical to the digital. It might seem a little crazy at first, but there are people out there who are willing to pay for these sort of ‘collectibles’.
What’s great is that NFTs are establishing a new form of content for artists, alongside new kinds of experiences for fans. Plus, for once, artists are in control of the money they can make – not just on the initial sale, but further down the line too.
So although focusing on getting new fans is usually an artist’s priority, don’t forget to provide value for those who are already your fans – look to those who have invested their time, and potentially money, in you already – they are the ones who are more likely to part with their cash for you.
Unlike most music marketing methods, the NFT market isn’t about reaching the most people possible; it’s about reaching the right people.