NFTs could level the playing field in music market

Industry

Published: 03 May. 2022, 17:55 Updated: 03 May. 2022, 19:38

NFTs could level the playing field in music market

Screen capture of the Catalog website, an NFT music platform [CATALOG]

Non-fungible tokens (NFT) have found their way into the music business.

Purchasing music NFTs is different from simply downloading songs or purchasing an album. Unlike CDs, NFTs cannot be replicated and are unique digital assets.

Buyers can obtain ownership of the music when they purchase the NFT, which can be proven by blockchain technology.

The emergence of NFT music may resolve issues in the music market, such as the domination of it by a few services and the unfair distribution of royalties.

For the past decade, the music market has been controlled by streaming services. People now mostly listen to music from their digital devices instead of buying physical media.

Due to the expansion of these services, only a few songs are dominating the entire market, according to "Rokonomics," written by American economist Alan Krueger.

As music tends to follow the so-called 80/20 rule — the Pareto principle — only 20 percent of songs are responsible for 80 percent of sales.

Very few musicians actually profit from their efforts. Only a handful of music companies and music streaming services have enough power in the market, which prevents less-well-known artists from gaining popularity.

This also causes a disparity in the distribution of music royalties. Musicians generally end up earning 10 percent of the entire copyright fee, while most goes to others, such as music companies or platforms.

The existence of NFTs helps musicians monetize their work and earn much higher profits.

In the NFT-based Web 3.0, singers can earn 100 percent of the profit unlike in the Web 2.0 environment.

Web 3.0 is the idea of a decentralized internet that provides more personalized services based on the blockchain and digital tokens, while Web 2.0 refers to the current internet, which has more emphasis on user-generated content based on websites.

Haleek Maul, an American rapper, pocketed approximately 1,273 times more through Catalog, an NFT music marketplace, than profits earned from Spotify, according to Xangle.

But the value of music NFTs is beyond just profits. It serves as a means to directly connect with fans and artists. Those who own the NFT may be offered discounted concert tickets or fan meeting opportunities.

Many artists in Korea and around the globe have already started to produce and sell music through NFTs. Snoop Dogg, an American rapper, released "Bac On Death Row" as an NFT on Feb. 9.

Korean singer SE7EN released new songs as NFTs in July last year, and big music companies such as HYBE announced plans to start an NFT business last November.

More than 100 NFT music projects are underway. Decentralized autonomous organizations (DAO) have formed to make investments in music NFTs.

Web 2.0 music streaming services are also turning to NFTs. Spotify posted job openings to add Web 3.0 experts to its workforce in February. YouTube has also hinted at getting involved in the NFT business by allowing creators to "capitalize on emerging technologies like NFTs."

The author is Yoon Jun-tak, CEO of Able Labs. Translation by the Korea JoongAng Daily staff.