The music industry is in dire need of change, and crypto is the saving grace it needs. Currently, artists struggle with representation, growth, and payment, and gripes with record labels and streaming services only increase the burden and struggle an artist takes on when entering and staying in the industry. One of the biggest faults of the current structure is how artists get paid. According to a 2017 study by Citigroup, musicians only netted 12% of the 43 billion dollars the industry generated that year when they are the raw product creating the music. Additionally, streaming services have gouged artists of revenue by sometimes paying less than $0.01 per stream. Currently, the median income in the US is around $36,000, meaning that an artist would need to have about 36,000 streams per week just to make what would be considered the bare minimum. Overall, you can see the issue. The creators, designers, mixers, producers, and singers of the most popular, most experimental, most raunchy music are not getting the credit and the payment they deserve.
A solution to this problem would involve artists taking full or more control over their assets. Artists should be allowed to make decisions about their rights, capital, advertising, branding, and engagement in a way that is not all-encompassing like labels. One option can be social tokens. Social tokens “are a fully customizable, branded cryptocurrency unique to the individual creator.” This definition is sourced from rally.io, a network and protocol that allows creators to launch their own tokens and micro-economies on the Ethereum blockchain. For example, you, the reader, could create a social token and use it as a way to grow your personal brand and generate capital. There is actually an instance of this happening recently with the $ALEX token. The founder created the token to fund his relocation to San Francisco, and holders of the token receive a share of the founder’s income and other perks. You can read more here.
Now, thinking in music terms, artists can use any of their assets and access as incentives for fans to invest in them through social tokens! Social tokens are like a ticket into a club with perks, and a fan owning their favorite artist’s coin would give the fan unprecedented levels of access, engagement, and patronage. An example is best suited for explaining the true value of these tokens. Say Drake created a social token called DrakeCoin and released 10,000 tokens. Drake can incentivize purchases of DrakeCoin by stating that token holders get perks like exclusive merch, the ability to vote on his next album cover, invites to special events, discounts at Drake’s shop, and bragging rights to being a member of an exclusive and valuable Drake community. Drake would receive all the money from purchases of the token, he could even make a percentage when the tokens resell, and would hold a portion of the tokens as an investment in himself. I say investment in himself because as Drake grows bigger and bigger, the value and desire to be a DrakeCoin holder could rise exponentially, and Drake, as well as his fans who hold the tokens, will be able to make massive profits if they choose to sell. This would reward early fans who supported the artist before they blew up in the industry. Additionally, this could open up lots of marketing and analytics opportunities for the artist through the ability to track and reward long-term token holders, which is the equivalent of proving long, sustained, and passionate fandom.
Another avenue an artist can take that is more significant is fractionalizing the rights and assets of their music catalog. This would be auctioning off or directly selling songs or percentages of the publishing, distribution, mastering, or composition rights. So far, this method has not been as widely used compared to others; however, it opens up the door to many possibilities for smaller artists that blow up off one song. Streaming and social media created a new type of artist that breaks through with a hit and massively grows due to TikTok or influencers or some other facet, and because streaming revenue offers little financial relief, artists’ careers stall or are forced to sign broad record deals. An alternative could be minting the song as an NFT and fractionalizing and selling the pieces of the rights where heavy investors can become involved, but the artist can still control their assets. This would provide capital to small artists who need income to survive or funding to develop their full album and so on.
Another aspect of the industry that could benefit from incorporating crypto would be payment distribution from DSPs like Spotify. Jack Spallone and Simon de la Rouviere have theorized this idea many times, and that is creating a place where the rights of songs are detailed and centralized. This would mean one could immediately determine who did what on a song, whether it be the mixer, producer, drum programmer, guitarist, singer, and so on. All of this information could be stored in a smart contract, a digital self-executing contract on the Ethereum blockchain, that a buyer or licenser could pay. Then the coded contract could immediately distribute the correct percentages to each party involved in the song or album. Getting paid in an efficient, transparent, and proper way from streams is a major challenge, but this offers a potential solution.
There are countless other ways social tokens, NFTs, and crypto can influence and upend the creator space, specifically music, that I have not touched on, and that should be a sign that there are more than enough opportunities for it to make a difference. I believe that sooner or later, fans and communities will realize the power they have with decentralization and will rapidly onboard themselves to crypto to support and engage with their favorite artists. This may be an individual thing or community-driven with DAOs, which are decentralized autonomous organizations that allow for member governance and participation. I think it would be naive to say these ideas will put record labels out of business right away. Still, labels and artists need to realize that the crypto ecosystem will become a bigger and extremely impactful facet of the music industry over the next few years, and they should be ready. It would be smart for labels to start incorporating crypto into their suite of digital marketing and branding tools and to start building and familiarizing themselves with space before they fall behind on the next wave of new artists and fans.