The Benefits of NFTs and Web3 for Musicians

For decades, artists and musicians have gotten the short end of the stick, struggling against outdated gatekeeping models, unfair compensation, inefficient payment structures, and barriers inhibiting meaningful connections with their audiences. Flash forward to today, 2022: a world where NFTs provide alternatives for creators who want to connect directly with their fans and get fairly compensated for their work. The token economy, smart contracts, and the rising Web3 environment are transforming the art and music world for the benefit of creators everywhere. Let’s explore this new creative world.

The Stifling of Artists and Musicians

Art and music are spaces where individuals can express themselves and showcase unique creative talents. They’re also spaces where creators have been trapped within broken systems for a long time. Like the art industry, the music industry puts the control in the hands of a few gatekeepers who determine who gets to be seen and heard, when and how they can be accessed, and sometimes even what they can create.

Record labels and streaming services have a crippling grip on their artists, controlling the release of new music and taking a massive cut on sales. A musician in the US only earns between $20,000 and $25,000 annually for their music, and 61% of musicians say they don’t earn enough from their music to meet basic living expenses.

This is clear when looking at streaming service payout figures. In order to earn $1, a musician needs 143 streams of a song on Apple Music, 229 streams on Spotify, 250 on Amazon Music, and 305 on Soundcloud. Fine artists aren’t necessarily doing any better. Our recent report on “Making a Living as An Artist” found that only 49% of artists surveyed can earn a steady income through their art, citing “generating consistent and stable income” as the biggest challenge they face.

Given this, many creators turn to digital channels to help them showcase and distribute their art — and it’s within these digital channels that technological innovations are creating a more equitable and accessible future for creators.

NFTs and Web3’s Benefits for Creators

What can NFTs do for artists and musicians? Plenty. And despite the market downturn, they’re already positively impacting creators in several ways.

Access, Gatekeeping, and Patronage

The biggest barrier between creators and their fans are the gatekeepers, those who have historically deemed what is worthy of showcasing via traditional channels. However, with the rise in technology over the past few decades, there’s more democratization of the arts overall as creatives use websites, digital platforms, and social media to get the word out about their work. NFTs, take that one step further: creators can now mint and monetize their work and transact directly with fans.

Alongside online galleries and marketplaces for artists is the rise in NFT marketplaces for musicians.

One of those is Sound.xyz, a Web3-based platform “driven by the relationship between listeners and artists,” recently raised $5 million in seed funding. Another platform is Royal, which not only lets fans directly support their favorite musicians but allows them to share in royalties as well.

Royalties

While musicians have been able to generate royalty payments from their work (though when and how much is another discussion), visual artists can’t because there are no existing US federal laws on the topic, and resale royalty laws vary from state to state — and are often not enforced.

The first case of this to attract major media attention was in 1973, when artist Robert Rauschenberg sold a painting for $900, only to see the collector resell it for $85,000 at a Sotheby’s auction, with the artist having no right to resale earnings. That changes with NFTs, where smart contracts can include royalty payments for subsequent sales of the work so that when an artist’s work increases in value as their career progresses, they can be rightly compensated for it.

Creative and Career Freedom

Creating NFTs and interacting directly with an audience gives creators more freedom to create the art and music they want instead of having to cater to a brand, corporate patron, or label. There's an audience out there for everyone, and with more creative freedom, artists and musicians will be able to find theirs more easily. Not having to be beholden to sponsors and corporate patrons means that artists and musicians also have more control over their career trajectories.

Web3 Benefits

The advent of Web3 will be much better for musicians and artists in terms of earning potential than Web2. a16z’s recent research found that Web3 platforms that support NFT sales and direct fan interaction are paying substantially more to makers at an average rate of $174,000 per creator. This is compared to $0.10 per user on Meta, $636 per artist on Spotify, and $405 per channel on YouTube.

Every day new platforms are being built within the Web3 space to better support creators and change the model so that an artist and their audiences are in touch with one another. Artists can drop new music anytime they want, and it goes directly to fans who can support their favorite artists by buying their new music.

The Future of Artist Creation

In the near future, will creators get paid what they're worth, do the work they want, and be fairly compensated for it? Yes, as the art and music worlds move towards the increased access, connections, and opportunities facilitated by Web3 innovations. The idea of more meaningful creative work — and creators actually earning a living by making it — is swiftly becoming a reality.