How NFTs will Reshape a New Music Business.

Every day we hear more about how NFTs will change industries. Guess what? They already are, it is true!

Every day we hear more about how NFTs will change industries. Guess what? They already are, it is true!

I have been an executive in the music and entertainment business now for over 36 years, I have seen formats come and go, and contracts morph into 360-degree rights grabs. This isn’t just to maximize profits, it is more so to minimize risk.

“The use of NFTs is still in its very early phase and those who are prepared to capitalize of this wave will reap the rewards.”

The fundamental issue most new artists had was access to capital to see if their music could build an audience with the potential of turning a profit. Instead, they waited for a record label to sign them and advance them money. 

“NFTs now provide an alternative way of building an artists career.”

I have seen many numbers over the years regarding success and failure rates but one, in particular, stands out to me and that is that 96% of all music projects never recoup their initial investment, that is a staggering figure. There are a lot of great bands and artists that are never successful. It is due mainly to not having the right experienced team and strategy in place. When they achieve success, they usually generate great amounts of income. If they are signed to a record label that puts up risk capital in the form of an advance, you are only going to receive a small royalty and those who invested in your career, record company, publishers, etc., will reap the lion’s share from your works.

Read a great article about NFTs and Music Rights by Carly Kessler at Robins Kaplan LLP on Bloomberg Law.

Alternative forms of start-up investment, outside of established entertainment companies signing deals with artists, have been tried like angel investment but without experience, you will spend a lot more money-making mistakes than taking a path of lesser resistance. Discounting the work that established music companies can contribute and have done to develop relationships and promotional channels that accelerate a path to success is a folly. Artists should look at sweat equity as their investment while getting a venture up to speed. If they can do that without the establishment, once they start generating larger sums of money, they will be able to own their rights and will take the lion’s share, exactly what they have wanted all along.

The optimal combination for an artist teamed up with those providing startup capital would be to have their investment protected by industry professionals with the relationships to minimize the risk. This is where NFTs provide a transactional space where cryptocurrencies and smart contracts are key.

One of the main ways that the music biz will be reshaped is in the way artists fund their projects.

Artists no longer have to wait for the record label to sign them and guide them. One way will be by letting individuals and companies invest in their success, a form of crowdfunding. At face value, this sounds great but like any business, there needs to be experience in the industry and a structure for reporting and distributing investor royalties.

Another method is to issue NFTs to be purchased by early believers that will give them a song or album plus exclusive access and other benefits. This all sounds good but again, who monitors these agreements built into the smart contracts?

An NFT provides the ability for artists to be closer in touch with their real fans and use the analytics on purchases, sales, and transfers to gauge continued success. They can expand offerings as their profile grows and sell an array of other digital and physical items associated with the new NFT token.

All the functional and administrative sides of the business will be handled by aggregators, many of which are already retooling their businesses to handle NFTs and smart contracts.

What the blockchain does provide is accountability and traceability of smart contracts that will be validated as issues arise and as acts become successful and those who believed early in an artist will be rewarded.

If you are looking for help in navigating this complex world of crypto and NFTs, and looking to fund your career by selling NFTs, GCG is the partner you need to help you create and execute a strategy.