Music NFTs: What Every Musician and Fan Should Know

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The following information about Music NFTs is provided for educational purposes only and may not apply to your specific situation. We do not provide financial or investment advice.

If you walk into an art gallery and see a painting that speaks to you, you often have the option to purchase the original piece, and it is yours. The value may rise or fall depending on the artist’s evolving reputation. If the artist becomes well-known, you could be in possession of a valuable asset. You also run the risk of the painting losing or not increasing in value. In any case, you find that piece of art intriguing and decide to buy it. This is the financial model that exists in the fine arts, and it is now extending into the digital realm, not only with NFTs but also with music NFTs.

Some believe that music NFTs are the future of the music industry, while others believe they are just a passing fad. Let’s take a look at what music NFTs are, how to buy and sell them, and what two Berklee alumni think about their viability.

What Exactly Are Music NFTs?

Music NFT, or non-fungible token, is a one-of-a-kind digital asset that exists on the blockchain and can be bought and sold. Whereas a regular NFT is typically just a visual asset, music NFT includes both a musical and a visual component.

The transparency of data ownership and accessibility is one of the advantages of owning an asset like an NFT on a blockchain. Because a blockchain is a decentralized system, anyone can participate as long as they have a fast enough internet connection and enough money in their digital wallet to fund the purchase. Cryptocurrency does not have the same policies and regulations as a centralized banking system, but the blockchain’s transparency is self-regulating by design.

A Shifting Dynamic

Money-making opportunities for musicians have significantly decreased since the advent of streaming. As previously discussed, NFTs treat music as a work of art, transforming it into a commodity that can be bought and sold in the same way that it could in the heyday of the music industry, via MP3s, CDs, cassette tapes, and vinyl records. Music NFTs enable fans to invest in artists they like and believe in while (ideally) profiting financially. In contrast, they enable artists to directly fund (or at least partially fund) their music projects through the support of their fans.

Fans as Potential Investors

Ryan McCulloch, a Berklee Digital Marketing Manager, musician, Berklee alum, and NFT investor, sees the changing artist-to-fan dynamic as beneficial to both parties.

“Normally, when you decide to invest in an NFT, you end up gaining value from it, both symbolic or cultural value, but also monetary value,” McCulloch says. “It’s great that music is catching on to this because for many decades, there have been horrifying stories of artists being exploited.” Fans are turned into shareholders in this case; they own a stake in their favorite artists and stand to profit from it. It completely flips the consumerist narrative.”

The investor role is traditionally held by record labels, which has resulted in deals that frequently do not benefit the Artists. Records deals with Prince, Taylor Swift, Frank Ocean, and TLC were notoriously exploitative. However, it is undeniable that record deals provide opportunities and infrastructure that artists may not be able to obtain on their own. Fortunately, there are now more independent record labels that recognize that more mutualistic deals result in better business relationships.

Fans as Followers

Before music NFTs, one of the primary ways for fans to fund music projects was through crowdfunding, in addition to direct contributions through sites like Bandcamp. While some artists have been able to fund their projects entirely through donations, this may be the exception rather than the rule.

The distinction between purchasing an NFT from your favorite artist and contributing to a crowdfunding campaign is that a donation is considered a gift with no expectation of return. Aside from that, it allows artists to fund their projects. The relationship is a little different with music NFTs because they are purchased to help fund an artist’s creative endeavor while also hoping for a financial return.

Benji Rogers, a Berklee Online instructor and co-founder of the digital strategy consultancy Lark 42, sees this investor-investee dynamic between artists and fans as a flaw in music NFTs.

“The artist-to-fan connection is the future of the music industry,” says Rogers. “That’s always been the case. What happens if you go to your fans and sell them a digital picture for $100 and tell them, ‘hold onto it, because it could be worth more,’ and it plummets in value?

Constructing Music NFT Communities

Can the best of both worlds exist if fans invest in NFTs as if they were a donation or a purchase of a T-shirt, with no expectation of financial return? That is up to the individual, but NFTs may offer more than just a way to make money: community and identity. McCulloch says one of the main reasons he invests in NFTs is to support causes close to his heart, specifically diversity, equity, and inclusion in web3.

“Normally, when we think about investing, we think about money exchange,” McCulloch says. “I believe this goes beyond investing.” This has a lot more to do with connecting our physical and digital selves to the things we care about. So, to be honest, I believe it goes beyond money.”

Musicians are increasing the incentives for fans/investors to buy music NFTs by providing holders with special perks and access to an exclusive fan community.

Leon’s Kings

When You See Yourself, by Kings of Leon, was one of the first major bands to release an album as an NFT in 2021. The band offered incentives such as front-row seats to their live shows for life, a special album package, and exclusive audiovisual art on the platform Yellowheart. They sold more than $2 million, with $500,000 going to Live Nation’s Crew Nation to help live music crews during the pandemic.

“We’ve seen the devaluation of music over the last 20 years—two lost decades,” Josh Katz, the founder of Yellowheart, told Rolling Stone. “Music has become extremely effective at selling everything except music.” There has been a race to the bottom in which you can have access to everything for as little money as possible.”

Aoki, Steve

In February 2022, Steve Aoki, another early mainstream adopter of NFTs, launched A0K1VERSE. Users become members by purchasing an NFT passport, which includes free tickets to live shows, free merchandise, members-only events and performances, and other benefits.

“NFTs allow for a two-way conversation between artist and fan,” Aoki explained to Forbes. “Previously, it was always a one-way street. The artist creates something, and the fan either buys it or does not, but there is no dialogue. There is always a conversation with NFTs.”

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