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The next visitor publish is an abridged model of “Music NFT gross sales in 2021: What we realized,” a longform evaluation of 2021 music NFT gross sales performed by the Water & Music group in April 2022.
That full article — which features a extra in-depth dialogue of case research, NFT utility, and gross sales tendencies past what’s on this publish — might be seen here.
At Water & Music, we’ve been monitoring music NFT drops since summer time 2020 in a members-only database. Whereas it isn’t exhaustive, we imagine it’s the most complete view of music NFT main gross sales that exists on this planet at the moment, and we proceed to replace, amend, and enhance our knowledge each week.
As NFTs proceed to pervade the mainstream discourse, we thought now can be time to look at what we realized from music NFT gross sales in 2021. Over the course of six weeks, greater than 20 contributors in our group labored collectively to investigate pricing and utility tendencies throughout over 1,500 music NFT drops in 2021, representing greater than $86M in main gross sales.
A bit about our database: In our monitoring, we outline a “music NFT” pretty liberally as an NFT that satisfies any of the next standards:
- Offered straight by an artist or music model (e.g., Vérité, Billboard)
- Options cited musical/audio contributions from a recording artist (e.g., The Dreamers)
- Tied inherently to an artist or music model in its perceived worth (e.g., Leon Bridges / Wrangler, Nas on Royal)
- Revolves round music or music tradition as its core theme or worth proposition to collectors (e.g., SpeakerHeads)
- Launched on music-specific NFT platforms (e.g., Royal, Catalog)
In our view, an NFT does not should include audio to be associated to music, nor can we contemplate each NFT that comprises music audio to be an “Music NFT”. Extra broadly, our objective is to point out the place musicians or music manufacturers are benefiting from the expertise.
In our collaborative evaluation, we discovered the next high-level takeaways:
Each by way of variety of drops and complete income in USD equal gross sales, music NFT exercise spiked early in 2021, cooled down in the summertime, after which rose once more in This autumn. This mirrored the general NFT market.
Indie-label and unsigned artists accounted for almost all (64%) of main music NFT gross sales. The absence of middlemen has been a robust rallying cry for a lot of artists coming into web3, significantly the attraction of artists having direct management of rights and entry to their very own communities.
In our evaluation, we outlined genres broadly and at a really excessive stage (no multi-hyphenate sub-genres right here), and located that the hottest style by share of main gross sales income was digital (65%), adopted by hip-hop (19%). Whereas the pattern stayed true over time, we started seeing extra uptake from different genres in the direction of the tip of the yr like nation and even classical.
(Resulting from our location and group make-up our database tends to be biased towards English-speaking, Western nations, so we could also be lacking sectors on account of language and platform limitations.)
Common music NFT pricing stays costly, however has fallen over time. Between February and December 2021, the common worth per tracked music NFT fell by 46%, from $18.8K to $10.2K per unit; the median fell by 27% over the identical timeframe, from $1,000 to $825 per unit.
At the start of 2021, when the letters “NFT” entered the family lexicon, the eye to expertise was largely on account of headline-grabbing, celebrity-driven mega drops. The urge for food for these high-dollar gross sales has subsided for probably the most half, and has been step by step changed by multiple-edition, PFP-type collections, which is driving down the common cost-per-edition and presumably recruiting extra collectors and followers into web3.
The Ethereum blockchain claimed solely ~50% share of the variety of music NFT drops within the second half of 2021, as alternate options like Tezos, Solana, Polygon, and Move garnered extra adoption. There have been two probably causes of this shift: First, Ethereum gasoline charges have been at instances prohibitively costly. This continues to be true at instances, as was demonstrated most lately with the BAYC sale in early May 2022. Secondly, Ethereum is presently an energy-intensive Proof-of-Work protocol, and artists and platforms who’ve concerns about the negative environmental impact of these kind of consensus mechanisms have been seeking to various, Proof-of-Stake consensus blockchains like Tezos.
Market competitors is heating up. Early within the yr, Nifty Gateway dominated with over 60% share of main music NFT income. By the tip of the yr, the chief (OpenSea) had solely 28% share of the first gross sales income we tracked, going through competitors from many new platforms like Royal, Sound, and Nina.
We tracked greater than 20 new Music-focused NFT platforms that launched within the second half of 2021 alone, and extra nonetheless have launched in 2022.
As these platforms launched with their very own distinctive promoting propositions, we discovered that artists continued to experiment with completely different types of utility for NFTs, delivered both on-chain (i.e. constructed into an NFT’s sensible contract, similar to NFT income splits or on-chain music storage) or off-chain (i.e. delivered and skilled exterior of blockchain-specific environments, similar to in-person occasions, bodily merch, and normal community-building).
The music itself is in fact a transparent beginning place for offering utility inside music NFTs. Because the NFT acts as a ledger and gives provable possession of the token, it might appeal to collectors and followers by endowing a way of private connection and/or social standing. Right here the emotional worth of the music is on the forefront of the first sale and nonetheless there’s some potential for future financial worth, similar to a secondary sale. That is what distinguishes an NFT from, say, a vinyl report: The sensible contracts used to construct NFTs enable creators the flexibility to supply followers extra advantages straight over time, in a modular style.
Rights-bearing NFTs — which permit the purchaser to make use of the music or have entry to tracks hooked up to music NFTs to supply remixes or different by-product works of their very own — have been gaining momentum. Platforms like Arpeggi Labs and tasks like omgkirby have taken numerous approaches in granting their NFT holders industrial rights (often in full) to take advantage of the artistic works embedded within the NFTs.
Embedding splits protocols into the NFT is primarily a utility for the music creators themselves, enabling streamlined income splits to the varied folks concerned with the making of the music, and with trackable and verifiable credit score hooked up. The rise of open splits protocols like 0xSplits and Slice have supplied the modular constructing blocks for NFT platforms (similar to Sound) to include splits as platform options.
However, we noticed quite a few examples of advantages being added to the worth of an NFT buy that requires administration and success exterior of the blockchain. They embody strategies of community-building, connecting to dwell experiences, merch, and philanthropic efforts.
Group-driven utilities that emerged from our analysis included on-line experiences like entry to non-public Discord servers; direct artist-fan interactions like VIP meet-and-greets; offline experiences like first dibs on live performance tickets; and governance rights similar to multisig pockets signing privileges. A number of startups like Unlock, Temple, Highlight, and Medallion have lately emerged with the specific deal with serving to artists launch NFT-gated on-line communities.
A recurring theme in quite a lot of music NFTs is unique entry to in-person live performance and competition experiences. Since a lot of the music NFT hype revolves across the idea of digital scarcity, the unique entry to an in-person occasion flows nicely from this concept of rarity and exclusivity. We categorized these kind of advantages into pre-event, during-event, and after-event utilities.
- Pre-event contains free and/or VIP tickets; memorabilia similar to commemorative artwork, pictures, and lineup posters from prior reveals. An instance of this was the “golden ticket” bundle from Save Our Stages assortment from NIVA.
- Throughout-event utility contains backstage passes, token-gated VIP lounges, NFT galleries, and meet-and-greets, for instance these provided by B Real (of Cypress Hill).
- After occasion utilities embody commemorative artwork, NFTs that includes present highlights, which we noticed from artists like Don Diablo, Disco Biscuits, and the Dallas Symphony Orchestra.
Bodily + digital merch
Consistent with a typical framing within the music trade of NFTs as “digital collectibles” are the bodily and digital items packaged with many of those NFT gross sales. On this class we discovered examples of back-catalog help similar to archival footage and never-before-seen dwell units; present launch help like signed prints, CDs, and vinyl data; and future/pre-release help that present entry to unique previews through non-public communities or VIP chats (which additionally ties again to the community-building utility).
Philanthropy has persisted as one of the top use cases for music NFTs, as artists should use the expertise for good whereas addressing fan concerns about environmental and monetary prices. We discovered examples of this utility by way of 2021 and into 2022 together with:
- Billboard x Trae Tha Truth (Bitski), benefitting Angel by Nature
- iHeartRadio Festival (OneOf), benefitting the Right Here, Right Now Global Climate Alliance
- Diplo (Nifty Gateway), benefitting P.S. Arts, Arts for Learning (Miami) and Free Arts NYC
- Young & Sick (MakersPlace), benefitting Save Our Stages
Challenges and additional questions:
Whereas 2021 was a banner yr for music NFTs, this was solely a snapshot in time of what we see to be steady evolution of each the expertise itself and the way musical artists can be utilizing them.
In our report, we acknowledge and problem that many modifications are nonetheless crucial for music NFT expertise to persist, together with:
- The standardization of metadata in music NFTs throughout platforms. The present lack of requirements makes it difficult to search out, confirm, and interpret drops on a guide, case-by-case foundation and in addition creates a serious discoverability ache level for artists and followers.
- Transparency across the expectations vs actuality of what the market is doing. Particularly, we discovered prior model recognition and attain alone is an inadequate indicator for a profitable NFT drop. Relatively, different components such because the range and thoughtfulness of NFT utility, or the energy and frequency of preexisting interactions inside a fan group, could also be extra related predictors of success.
Extra broadly, web3 in-and-of-itself isn’t a silver-bullet answer to the issues that will face artists and the music trade at massive. What we see, although, is a robust instrument that 1000’s of artists, music manufacturers, and platforms are utilizing to discover new and artistic use circumstances, rapidly constructing and scaling on actions led by others earlier than them. Many have benefited in each financial and non-monetary methods, and have helped to onboard different artists, followers, and collectors into this new world.
At Water & Music, we’ll proceed to trace main music NFT gross sales and in addition discover secondary gross sales and different types of utility, to assist artists and entrepreneurs navigate and demystify the ever-changing panorama as finest we are able to in actual time.
About Water & Music
Water & Music is a e-newsletter and analysis DAO on a mission to empower the music trade with the information, community, and abilities to do extra progressive and progressive work with expertise. We accomplish this by way of a extremely social and cooperative strategy to intelligence — constructing dynamic, collaborative techniques for producing, exchanging, and distributing cutting-edge insights on rising music/tech tendencies.
Our membership is dwelling to 1,500+ professionals throughout music and leisure, spanning everybody from indie artists and startup founders to entrepreneurs, traders, and C-Suite executives at main music firms. In January 2022, we launched our $STREAM governance token for rewarding contributors to our collaborative analysis and editorial tasks, which is now within the arms of over 400 supporters in our group. What makes our work stand out is our relentless curiosity, our penchant for experimentation, our ardour for interdisciplinary considering, and our recognition of constructive critique as a driving drive of progress in music, tech, and tradition.