Changing the economics of the music industry with NFTs
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Before we begin, a disclaimer – nothing here is financial advice. We’re analyzing projects that we find interesting in the hope that you’ll enjoy learning about them as well. With that, let’s dive in.
The music industry has always been a tough business for artists. While record labels and industry middlemen capture a considerable amount of value, most musicians struggle to make a living. While great for fans, streaming services like Spotify and Apple Music have only shifted this power balance further away from artists.
That’s why so many builders are excited about the potential for NFTs to shift the economics of the music industry in favor of artists. It’s also why Sound.xyz was started.
The Benefits of Music NFTs
The current economic structure of music streaming makes it hard for artists to capture the value that their music generates. This chart breaks down how much artists earn from each platform:
Some streaming companies are even trying to lower artist payouts. As it stands right now, to earn a livable wage in the US, artists need to generate just over 20 million streams, on average. Although achievable by some, the vast majority of musicians never reach these numbers.
Music NFTs allow artists to turn their songs into scarce digital assets and sell them directly to fans. By capitalizing on the quality of their fanbases instead of the number of their streams, musicians can use music NFTs to capture the full worth of their creations. Aside from the potential economic benefits of this technology, there are many other use-cases that music NFTs enable that were previously inaccessible.
Fans Can Invest in Their Favorite Artists
By purchasing a music NFT early in an artist's career, fans get the opportunity to financially benefit from an artist’s rise in popularity. As the artist blows up, so does the value of their NFTs.
Building Strong Communities
When fans purchase music NFTs, they get to feel like they are part of something bigger than just listening on Spotify by themselves. As artists become more popular, fans build up reputations as tastemakers. In return, artists can build their social graphs through the on-chain activity from their fanbase – all without music industry gatekeepers.
New Creative Avenues
With the introduction of blockchain technology, artists now have a whole new set of tools that can enable fans to interact with their music. For example, the art that accompanies a music NFT could change with each listen or unlock access to exclusive b-sides. The possibilities are endless.
What is Sound.xyz?
Sound.xyz is a platform that allows artists to mint their songs as NFTs and sell them directly to their fans. By selling songs as NFTs, Sound.xyz lets artists to capture more value from their music and build stronger connections with fans.
Backed by investors like a16z, 21 Savage, and Packy McCormick, the Sound.xyz team sets out to explore the question – “What would happen if we gave fans the agency and ability to decide what music is worth to them, in the open market?”
The Next Generation of Music Consumption
Sound.xyz offers a number of unique features that change the experience of music consumption, including:
One of the cornerstone features of Sound.xyz is Listening Parties. Artists debut a song on Sound.xyz by hosting a listening party for all their fans during which fans can purchase limited edition NFTs of the newly released song.
Audiences and the Comment Wall
When fans purchase an NFT, they join the “audience” along with other NFT holders. The earlier a fan buys in, the more prominently their profile pic gets displayed in the audience. NFT holders also have the opportunity to leave their mark by commenting on a specific timestamp of a song.
Trending Artists vs Trending Collectors
Sound.xyz not only tracks the hottest NFT drops, but also highlights the most prolific collectors. Music connoisseurs can now show off their music taste to everyone in the community, based on their position on the leaderboard.
The Golden Egg
One lucky holder of a particular NFT will win the “golden egg”, a 1 of 1 NFT with original artwork hand-picked by the artist. The golden egg can also contain additional add-ons like merch, concert tickets, or song notes.
Music NFTs are still early, and it isn’t yet clear whether they will unlock the ability for emerging artists to build a livelihood.
However, Sound.xyz seems to be thoughtfully approaching the space by curating quality musicians and creating special experiences for fans who want to engage with artists on a deeper level.
Sound.xyz recently eclipsed $1M earned by artists. If they can continue to scale, there’s no telling what kind of impact this company could have on the economics and experience of music consumption.
Want to Learn More?
Join the Sound.xyz community on discord to learn about new drops.
Read through the company’s Mirror posts to learn about the platform and the team behind it.
Participate in a listening party and maybe even invest in a music NFT from an artist you want to support.
Wed. Apr 13, 9:00 AM PT
From DeFi to blockchain gaming, tokens are a fundamental component of nearly every web3 project. Whether you're investing in cypto or looking to build a project of your own it's critical to understand how tokens govern user behavior.
Join Invisible College faculty member, Rockwell Shah as he explains the basics of tokenomics and provides an evaluation framework that you can use to evaluate web3 projects.
This event is open to the public. To join, register here.
Other projects we’re exploring
Rally – A platform for creators and their communities to launch their own social tokens.
CowSwap – A decentralized exchange with a novel approach to save users on gas, slippage, and protocol fees.
Juno – A blockchain in the Cosmos ecosystem that enables developers to create smart contracts that are interoperable between blockchains on Cosmos.
Invisible College Recommended Reads
Why Web3 Matters | 3-minute read
A post by Chris Dixon explains how web3 offers a fundamentally different approach to the relationship between users and companies.
Tips for creators getting into crypto | 12-minute read
In this piece, Patrick Rivera outlines how creators should think about using crypto to support their work.
Squad Wealth | 9-minute read
A canonical post that explores how DAOs and crypto enable groups of people to band together to create prosperity for one another.
Magic Eden is live!
As of today, you can now buy and sell Decentraliens on the secondary market using Magic Eden.
To learn about who’s holding Decentraliens and how the IC treasury will approach selling check out our Secondary Market Strategy document.
Trait Rarity on the Website
To explore more about the rarity of each Decentralien trait, visit the new rarity page we posted on the Invisible College website.
🧠 Web3 Learning Events
Tokenomics 102: How to Make Money – Mon (3/21) @ 2 pm PT (Discord)
Designing a Crypto Wallet (Episode 3) – Tues (3/22) @ 6 pm PT (Twitch)
How to start a DAO w/ Yury Lifshits – Wed (3/23) @ 12 pm PT (Twitter Spaces)
Why care about crypto? w/ Tom White – Thurs (3/24) @ 1 pm PT (Discord)
🙌 Community Events
Town Hall – Thurs (3/24) @ 9 am PT (Discord)
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Great top notch article, very well written.