Music NFTs have made some impressive leaps forward this week with the launch of sound.xyz. Music XYZ is a platform that enables artists to seamlessly launch their new music in the form of an NFT. While there are other platforms like catalog work that specializes in 1/1 music NFT's sound allows artists to mint multiple. I love to experiment with products and so far I am very impressed with the design and the frictionless capabilities for both artists and listeners to participate in digital ownership of music.

The Platform:

So far supply has been capped at 25 total NFT's at Ξ.10 each. Unlike 1/1 music NFT's the platform creates a listening party where users can back the artist and have a chance to be permanently showcased in the audience. This is a nice touch that enhances the artist and listener connection where the artist knows who their fans are and the fans can prove that they've backed the track.

The listening party also allows the artist to share the background of the track their releasing. Artists can tell the story behind making the track as well as the inspiration for creating it. This gives fans a deeper level of understanding about how the track came about.

Owners of the NFT are then allowed to comment on the track where they have a chance to unlock a "golden egg" which is a randomly selected timestamp in the track. If the owner selects the right timestamp their NFT is upgraded to a unique 1/1 chosen by the artist.

The Numbers:

They've launched 5 songs so far with 5 different artists all at the previously mentioned 25 NFTs at Ξ.10 each. Demand seems to be incredibly strong with listeners apeing in and selling out all of the drops in under a minute. This type of instantaneous value creation is incredible for newer artists that don't have huge followings yet.

25 NFTs x Ξ.10 = Ξ2.5 ($9,500) at the time of writing this.

$9,500/.0040 = 2,375,000 Spotify streams

$9,500 in minutes, rather than having to earn this overtime on the traditional streaming platforms like Spotify. For comparison's sake let's take a look at what streaming platforms pay per stream.

The table above highlights the different artists that have dropped on sound.xyz and compares it with their top streamed song on Spotify. Strictly by the numbers, it looks like an awesome launchpad for artists that might have a less established following (based on total streams). For example, Daniel Allen's top streamed song on Spotify is 1.6 million which accumulates to roughly $6,750. When you look at his most recent drop of "Too Close" he eclipsed these earnings in under a minute. For a more established artist like Marian Hill, these NFT sales numbers look a lot less than the streaming revenue. While the total revenue earned is a big component of this I think artists are also going into their drops with the intention of building a community around their music and NFTs through things like DAOs. While I'm sure there might be plenty of cash grabs, I think the best artist will use NFTs as a tool to build a deeper relationship with their fan base and share the upside in their music with their fans. Not only have the multiple drops sold out within seconds there have been multiple secondary sales that have passed many multiples more than the initial mint price.

The Future:

I think we are still in the early innings of music NFTs and the upside for both artists and listeners is starting to become apparent thanks to platforms like sound.xyz. I'm excited to see which artist takes the leap of faith next and hopefully, I'll be able to mint one soon 🙂

S/O to all the artists @whoinvitedgrady @oshimakesmusic @imdanielallan @MarianHillMusic @_AbJo @IbnInglor

“The only ways to make money in business are bundling and unbundling.” - James L. Barksdale

While listening to a recent Balaji podcast with Tim Ferris I came across a section where they talk about unbundling and bundling and one example they use is music.

"For example, you take the songs off of a CD and you unbundle them into MP3s, then you rebundle them into Spotify playlists" - Balaji

This example got me thinking about what would be the next phase of this unbundling and re-bundling when it comes to music and I think the next unbundling will be in the form of music NFT's. When you look at the current landscape of music NFT's, artists are actually going back to unbundling their work into scarce digital assets. Now, instead of releasing a bundle of songs (CD, Album Streams) they now have the ability to capture the value of individual songs. Platforms such as Catalog allow the artist to release their songs as 1/1 NFTs directly to collectors.

"I would say we look actively for the pattern of large incumbent, established industry, bundled product or service offering, coupled with underlying technology change, coupled with idea for unbundled product that the customer might prefer" - Marc Andressen

Large incumbents such as Spotify have been successful in rebundling individual songs into playlists and streamable albums but the emergence of music NFT's have the potential to unbundle these into 1/1 tracks. This creates a new distribution method for artists to monetize even more. While streaming platforms have been successful by eliminating friction and allowing seamless ways to listen to music they limit the artist's ability to reap all the rewards from their music as well as providing a way for fans to be more engaged in the content. The key here is the ownership aspect of music NFT's.

"The music/song file will be consumed at more upstream layers of engagement and curation creating new monetization models that will accrue value directly to NFTs. The Music NFT itself will be engaged with (like to earn, emotes, etc.) and curated (staking songs into playlists, etc.) to generate revenue directly back to the NFT. This is fundamentally different from Spotify - where users are charged a monthly fee and then some percentage of the revenue is distributed to the artists" - Blockchain Brett

Music NFT's create a win-win scenario that is attractive for both the artist and consumer. On the artist side, instead of the value being captured mostly by the streaming platforms and artists only getting a percentage of that revenue they can now fully capture all of the revenue without any middle man taking a significant cut. On the consumer side, ownership incentivizes users to evangelize their favorite artists and their music and they actually own a piece of the upside for being a fan. If you discover an artist that is being under-appreciated you can actually take a bet on them that more value will accrue to them in the future and the music NFT you own will actually appreciate in value. This allows for more musicians to be discovered as well as a way for fans to prove that they were a day one fan.

Overall, music NFT's seem to perfectly fit into this idea of unbundling and the idea of disrupting incumbents with new technology and offering a new product that customers might prefer. While I believe we are still early in the evolution of this unbundling process it will be interesting to see the evolution of artist and consumers preferences over time as the upside for both parties become apparent.

Resources:

https://brett.mirror.xyz/O9Ni6irU-a8uXLJEm95m0gRCM_1Lth8vve45p3Q4IMM

https://hbr.org/2014/06/how-to-succeed-in-business-by-bundling-and-unbundling

https://tim.blog/2021/11/17/balaji-srinivasan-2-trancript/

It started with Defi and has expanded into NFT’s.

Looking at the absurd numbers from Opensea it’s clear that Ethereum has found some type of product-market fit when it comes to NFT’s. With Ethereum as the settlement layer, it has allowed the creator economy to further accelerate with limited friction. While most of the upside has been captured by digital artists in the form of jpegs, I believe there’s still plenty of use cases that can capitalize off digital scarcity. One of the main ones I’m excited about is music.

JPEGS to WAVS

"In 2017, the music industry generated $43 billion in, revenue but only 12% of that made its way to artists. As points of comparison, NFL players capture at least 47% of the revenue generated by the entire NFL, and NBA players capture between 49 and 51%. Centralized user-generated music distribution platforms have succumbed to the influence of legacy institutions, struggling to find sustainable business models as existing institutions reap the rewards of their (and artists’) labor." - Audius Whitepaper

Music disruption has been happening for ages. Over time we've seen vinyl, 8track, cassette tapes, CDs, digital songs, and they've all been displaced now by streaming.

While a lot of barrier to entry has been broken down for artists to showcase their music they still don't have direct access to their fans without someone taking a cut of their overall content. They've been able to disrupt through technology innovation but the current infrastructure still has its flaws. I would argue that we still have a long way to go in terms of disrupting the music business by not only giving artists a better way to monetize but also a way for fans to participate in the upside.

This is the biggest unlock where I see the most potential for music NFTS. By giving users the ability to invest in artists big or small and participate in their upside has never been available. This allows fans to invest in music directly which there has never been direct access for. Through crypto, it's possible to transfer music and value instantaneously across the Ethereum network. This unlocks multiple layers of upside for both the user and the artist. Now that the artist knows who their biggest fans are (holders of their NFT) they can reward them with exclusive music, merch, or even concert tickets. This allows fans to be more engaged with their content since they are incentivized cause they're all NFT holders. Artists could use these proceeds to generate new music and it allows the fans to feel more involved in the process. This could lead to things like albums being funded by tokens and only allowing the ability to access the new music through holding the underlying artist's NFT.

Catalog

One of the most promising projects that is trying to capitalize on this next wave of NFT use cases is Catalog Works. While it’s still in beta, there have been some positive signals that this could become the go-to platform for music NFT’s. Just like how Opensea’s first mover advantage gave them a tremendous market share I think Catalog has the potential to do the same. Catalog is an audio NFT platform that enables artists and fans to auction and bid on their favorite music. As they put it, Catalog is a

“New medium for music. One of one digital records. Owned by you. Free from platforms. A blank canvas for a new world of music ownership.”

Just this week we’ve seen some signs of the project catching on.

https://twitter.com/Cooopahtroopa/status/1450620311355854856?s=20

https://twitter.com/catalogworks/status/1450669739810848769?s=20

I believe that this is just the beginning of music artists discovering an alternative monetization strategy enabled by crypto. You can imagine that it will only be a matter of time before bigger artists begin to realize the potential of music NFTs. Not only does it give artists a direct way to capitalize on their work, but it also engages fans that want to participate and take ownership in their work. Tokenization of music aligns the incentives of artists and fans and creates a win-win scenario for all. As Chris Dixon has laid out in his NFTs and a Thousand True Fans

“Users and creators globally connected, unconstrained by intermediaries, sharing ideas and economic upside. Incumbent social media platforms sidetracked this vision by locking creators into a bundle of distribution and monetization. There are, correspondingly, two ways to challenge them: take the users, or take the money. Crypto and NFTs give us a new way to take the money. Let’s make it happen.”

Join the .wav

For more on music’s potential within crypto ↓

https://twitter.com/musicxnetwork?s=20

https://twitter.com/Cooopahtroopa?s=20