How music NFTs empower creator economies – an overview of 5 music NFTs
by SeeDao NFT Club @Gink5814
1. Music NFT Overview
1.1 Industry Overview
The domestic music industry market has rebounded in the last year with the passing of the epidemic and the rise of short video platforms. 2021 China Musicians Report, written by the Communication University of China, shows that the proportion of musicians’ income in 2021 has decreased in lower and middle income and increased in higher income. 48.51% of musicians’ monthly income in 2021 is below 5,000 yuan, with 28.65% earning more than $10,000 per month with 3.41% earning more than $50,000 per month.
The report also shows that in 2021, 64.75% of musicians have uploaded short music videos, compared to 54.08% in 2020, an increase of 10% year-on-year. Among them, more than half of musicians have used the Jitterbug platform to spread their music, accounting for 55.21%. The communication effect of short video platforms, especially the Jitterbug platform, has been affirmed by musicians. In the choice of digital music platforms with the best promotion effect, musicians who chose Jitterbug accounted for 33.37%, ranking second only to Tencent Music.
In overseas music markets where streaming is predominant, the profit margins for streaming are low for 99% of artists, quite enough to discourage them.
“…… Achieving ~1 million UK streams per month on a consistent basis may be some guide, a minimum threshold for making a living from music, at least if UK streaming is supplemented by non-UK streaming and other revenue streams ….. .the number of artists achieving 1 million UK streams or more in October 2020 is 1,723 …… or 0.41% of all artists [in our database].”
– “Revenue for Music Creators in the Digital Age,” a 224-page report by the UK Intellectual Property Office (IPO)
After Defi Summer, the profile picture (PFP) avatar NFT circuit plummeted like a flat thunderstorm, and music NFTs became the next place where eyes converged. However, the social and financial value generated by the Music NFT series has yet to reach the same level of sustained success as their visual counterparts. The music NFT 2021 market cap is approximately $1.243 billion, compared to the avatar NFT market cap of roughly $10.4 billion.
1.2 Technical Background
Music NFTs are released and transferred on OpenSea, and the marketplace is created and owned by the platform. ZORA is an NFT marketplace protocol that is ever-lasting, composable, immutable, and accessible. ZORA V3 includes several new mechanisms that incentivize the platform on which the protocol is built, as well as a groundbreaking modular architectural design that allows for a permissionless system.
ZORA has a built-in promoter incentive mechanism that allows promoters to find an eventual buyer for NFTs. When issuing an NFT program, a share of the promoter incentive fee is set and to earn the promoter incentive, a user submits the wallet address in the user interface, and the platform generates a link. If that promoter finds a buyer, they earn that incentive. This powerful incentive mechanism allows developers and curators to integrate the ZORA protocol and directly capture the value they create.
2. Product introduction
Euterpe is the world’s first IP-driven, copyrighted NFT platform with an embedded SocialFi ecosystem. The team is committed to creating a professional B2C marketplace for high-quality IP NFT, free from copyright infringement and fraud. Euterpe will also embed the SocialFi ecosystem, turning passive fans into active stakeholders who are incentivized to contribute to the community through their efforts to contribute to the community. In the meta-universe, IP is everything. Euterpe started with music IP and expanded into a wide range of IP, including videos, games, books, concerts, celebrity peripherals, and more.
Jerry Liu (CEO), received his JSD. in intellectual property law from Stanford University and is currently a fellow at Stanford University’s Center for Internet and Society, former director of the Intellectual Property and Technology Law Programs at the University of San Francisco, and legal counsel to IP giants such as Disney, Warner, Microsoft, IFPI, and the Motion Picture Association.
Charles Cheng (CFO) is a graduate of Stanford Law School. Previously a partner at Amino Capital, he is an advising expert at Alumni Ventures Group, a Stanford Angels & Entrepreneurs member, and was named as one of Forbes China60 Outstanding Chinese in North America last year.
Lincoln Deng (CTO), PhD in scientific computing from Stanford, former founder of technology company Sally Inc, senior architect at ProPlus, and senior engineer at Synopsys.
Leon Xiu (CCO), prior to Euterpe, he was the Chinese Music Cooperation Director at Tencent Music Entertainment Group (TME), Music Copyright Director at ByteDance and Copyright and Legal Director at Sony Music.
Woody Mu (Strategic Partnerships), prior to Euterpe, he was the Chief Representative at Alibaba’s Entertainment US Office, Manager at Warner Bros. Tech Ops, and a mentor of Zhang Yimou and Chen Kaige.
Roland Vogl (Advisor), Executive Director of Codex, a Stanford legal technology incubator, and Executive Director of the Technology Law Program at Stanford Law School. Co-founder of Vator, Inc. and SIPX, Inc.
The Euterpe team consists of blockchain innovators and IP experts from Stanford University, Google, Meta, TME, ByteDance, Alibaba Entertainment, Sony Music, and Warner Bro.
The team has already secured over $7 million in early stage funding in early 2022, with a relatively high level of institutional attention from investors including Fenbushi Capital, Huobi Ventures, BingX Venture, HKICEx, UpHonest, Brightway Future, LD Capital, Titan Capital, and others.
Euterpe was Alpha tested in the first quarter of 2021 and has already partnered with over thirty record labels and thousands of songs. As of press time, Euterpe has not been officially launched. According to the official disclosure, for creators and copyright holders, the Euterpe platform casts and distributes NFT for the copyright of their works and dramatically increases the value of copyright by means of Stanford’s Nobel Prize-winning NFT auction, creating a channel for instant cash and expanding the influence of works through SocialFi. For investors, they can discover outstanding artists and their works through their vision and taste, and invest in copyright NFT, not only to get NFT value-added, but also to get more than ten times more stable copyright revenue than traditional streaming media such as Spotify and YouTube; for other fans, the platform provides various ways to participate (SocialFi), and while enjoying the works and promoting them, the Participants can receive generous rewards from the forum. The platform will feature three types of SocialFi mining.
Earning by Playing
Users can choose to participate in the play-as-mine mechanism and receive a certain amount of pass rewards based on their play time while playing their works.
Earning by Linking
Users who have downloaded a copy of the work will be given a link to the EUT community, which they can share on the EUT community or other media platforms, such as Twitter, Facebook or Telegram, and if other users download or watch the stream through this link, they will be rewarded with a Token.
Earning by Voting
The EUT community publishes a series of weekly rankings that aggregate the most valuable works in different genres (e.g. Top 100), which are voted on by artists, fans and other users in the community, and combine usage dimensions to determine the final ranking.
2.2 WRAPSOUND (WVRPS)
WarpSound is a subsidiary of Authentic Artists, aka WVRPS. WarpSound is an interactive, AI-powered cluster backed by a number of celebrities and established artists. Using cutting-edge deep learning, game engines and blockchain technology to produce new virtual artists, social music experiences and music collections for virtual worlds, WRAPSOUND’s goal is to help people reconnect with music.
CHRIS MCGARRY (Founder), Harvard and Stanford background, prior to launching Authentic Artists + WarpSound, Chris led music at Oculus VR, marketing for 10 #1 electronic and hip-hop albums, served on Google’s Corporate Partner Advisory Board, worked for Prince produced vinyl remixes, and was in charge of the stage show at Burning Man Festival.
ANDY POON (Lead Artist) is an Emmy Award winning art director and illustrator working in the animation, live action and toy industries, providing illustrations and leadership for Dragon Prince, Rick and Morty, Storyhawk, Monster High, Monster Machines, Arrow, The Flash and more.
JEFF NICHOLAS (Creative/Product Supervisor) has been in the business for over twenty years, exploring and working on topics that blend art, music and technology. Previously led music agency The Uprising Creative, was head of innovation for Live Nation, and directed music videos and VR experiences for artists such as Justin Timberlake, Rihanna, Coldplay, Major Lazer, Lil Wayne, and more.
TERRA NAOMI (Web3 Marketing Operations) has been building online communities since 2005, is the winner of the #1 Youtube Award for Best Music Video, a recording artist for Universal Music Publishing/Island Records, and a member of the Async Art Artist + Team.
Lindsey Byrnes (Head of Strategic Partnerships) was previously responsible for sales and marketing for Thrasher and Juxtapoz magazines, and then worked as a photographer and creative director until joining WVRPS.
On June 22, Authentic Artists, a metaverse music platform, announced the completion of a strategic funding round with participation from Warner Music Group, Crush Ventures, Crush Music, Nike RTFKT founder Steven Vasilev and The Sandbox co-founder Sebastien Borget.
2.3 AM DAO
AM DAO is a cultural DAO organization that aims to help more new artistic and musical creators migrate to the Web3 world and nurture and incubate artistic and musical works in the Web3 world, blurring the boundaries between fans, investors and artists, and building a common artistic and musical utopia for DAO members.
PinkPing (Founder) is a Psychedelic Artist and a world traveler with in-depth research on music, bar culture and museums around the world. He has rich resources in the art, music and entertainment industry, strong resource integration ability, and unique insights into the commercialization of art and music.
JUNYI (Founder, Chief Artist) is a master of the Royal College of Art, an emerging artist of Starbucks Generation Z, a young artist of Dior, a pioneer creator of digital art, and a creator of monsters, life science, occult, and cutting-edge technology.
Remix (Co-founder) has been working in the financial and medical industry for 6 years, senior product architect for several well-known platforms, experience in smart city product design and planning and big data industry, loves remixing and light sound, music player, serial entrepreneur.
Lawrence (Co-founder) graduated from Leeds, majoring in Graphic Design, specializing in poster UI, microfilm production, 3D animation, etc. He likes fashion art, costume painting, and loves music, and is studying the history of modern music development.
Vic (Co-founder) Financial industry product team, currently Crypto industry release projects, successfully released a number of DEFI, Gamefi and other types of projects, mainly responsible for project management and promotion.
Will (Co-founder) has a Master’s degree in International Business Law from the United States, and was responsible for IPO cross-border financing at a Beijing law firm, as well as co-founder and legal affairs of a VR&AI digital therapy startup in Hangzhou, investment and financing, and international marketing. Currently, he is an attorney at all in web3 and a former guitarist in a rock band.
Catalog is a digital record store and music community for fans to listen to, discover and directly support their favorite music. Artists receive immediate access to 100% of record sales revenue, as well as an optional share of secondary market resales, without having to relinquish their copyrights. Fans can create a permanent connection with the artist by collecting the work on the Catalog and can share in their success together.
By releasing Catalog Record, it represents a Genesis version of the artist’s work online. They are unique, 1/1 record versions that exist forever on the Internet, independent of any one platform, and provide a programmable canvas for artists and fans to build a new world of music ownership.
In late June 2021, Catalog closed a $2.2 million funding program led by 1confirmation, primarily for the expansion of the team. Prior to the financing, the team grew from 3 to 5 members, and information about the team members was not disclosed.
Royal is a music investment platform that allows artists to use the platform to sell their songs and fans to buy ownership of them and receive royalty income from their purchases, resulting in a win-win situation for both parties. It seeks to give artists and fans more open access to investment opportunities within the traditional recording industry that are limited to specific groups, such as private equity firms, hedge funds and record labels.
Justin Blau AKA 3LAU (Founder & CEO), an early crypto adopter and blockchain advocate, began his involvement in NFT in 2018. In March 2021, 3LAU sold the world’s first digitally tokenized album, generating a record-breaking $11.7 million in revenue, and his total NFT sales for the past year exceeded $20 million.
JD Ross (Co-Founder) Prior to this, JD co-founded Opendoor ($OPEN) and was a general partner at Atomic, a venture studio that co-founded a number of startups including Hims & Hers, Bungalow, Butter, Homebound, Villa OpenStore, and others.
In August 2021, Royal announced a $16 million seed round led by Paradigm and Silicon Valley’s top investor Peter Thiel’s Founders Fund. In November of the same year, Royal again announced that it had closed a $55 million funding round with participation from a16z, Coinbase Ventures and Paradigm, The Chainsmokers, Nas, Logic&Kygo and others. Heavyweight institutions and many European and American musicians participated, and the funds will be used to invest in the development of its ecosystem.
3. Distribution of rights and interests
This section compares Euterpe, WVRPS, AM DAO, Catalog, and Royal regarding copyright.
The artist or record label who chooses Euterpe debuts their work to the EUT community and launches a crowdfunding campaign, distributing it to NFT for early creative funding and giving away some of their copyright to early fans. The artist and the fan jointly own the copyright of the artwork, while the platform does not, and NFT holders are allocated digital rights revenue and a portion of the mining rewards based on their share of the copyright.
WVRPS holders are granted a free license to use the artwork and music associated with your WVRP for personal or commercial use. the WVRPS team does not limit the commercial benefits holders can earn from commercializing the WVRP. And you can use WVRPS music as source material for secondary creations, for which WVRPS does not charge a fee, and only needs to mark the source of the samples. However, the IP of images other than music may not be modified by the holder for commercial use.
AM DAO, on the other hand, is more radical in choosing to cooperate with public goods artists in terms of copyright. AM DAO incubates art projects using the CC0 standard, where both the creator and DAO give up all their rights to build on the basis of public goods. More often, they seek to cash in through peripheral derivatives, offline performance spaces, etc.
Catalog Records released by Catalog itself is a 1/1 on-chain record, combining music and smart contracts through blockchain technology, and artists enjoy a share of royalties when NFT changes hands in the secondary market according to the share set at the time of release. However, Catalog, as the platform, does not have a clear allocation of rights for artists or collectors. The actual implementation and legal protection of the so-called “programmable canvas” remains to be examined, as shown in the chart below.
Catalog artists offer to provide tickets for live performances
Catalog’s Official Commitment Guidance for Artists
In addition, Catalog has also developed BPM 2.0, a chatbot that allows users to play music from Catalog Zora and Sound.xyz on demand in Discord.
The Royal NFT release does not change the intricacies of music rights in the traditional recording industry, but rather endorses the NFT through streaming royalty sharing. Artists who choose Royal to distribute NFT through Royal will sign a contract that specifies that the different rarities of the LDAs will own the streaming royalty share of the music single, as shown in the chart below.
Big Boi ‘Kill Jill (Feat. Killer Mike & Jeezy) split into details
Nas – Rare Score Details
4. Economic Model
The economic model of the music NFT circuit is very clear: artists give up their share of the rights, and then mint NFTs and distribute them after confirming the rights through smart contracts or laws. Fans collect NFTs out of their love for their idols and their expectation of the future value of their works. The platform simplifies the threshold of music NFT distribution by providing copyright and supporting legal services for a certain fee as revenue.
Among the five products presented in this paper, the economic model that shines the brightest is Euterpe. 3 kinds of SoicalFi are added to extend the product chain beyond the simple NFT distribution logic described above. The two consumption behaviors of ordinary consumers, playing and sharing, are incorporated into the product ecosystem, and through the voting mining method, the top gems are selected for pass-through among the mixed UGC content. The flywheel effect that this economic model can bring is obvious: the pass economy stimulates content consumers to participate in copyright auctions, artists and fans to comment and vote to increase the voice of outstanding works, and fans to share to increase the number of streams, which ultimately stimulates the pass economy.
The traditional Web2 streaming platform Tidal has more than 10 times the number of visitors as audius.co sound.xyz.
Music NFT App Emanate Apple Appstore Total downloads 1k+
The current focus in the music and Web3 space is on small-scale solutions for artists and their fans, which require only simple documentation to help people navigate new modes of support and interaction. If an artist can make enough money to support themselves and their artwork through NFT sales, that’s a win.
However, the complex structure of music IP does not provide the framework for a simple solution. This tension between the simplicity to which artists aspire and the complex systems in which their art is embedded leads us to two dangerous phenomena in modern musical NFT:
1. simple language replaces the precise and comprehensive description of rights that NFT contracts are supposed to contain.
2. there is a distinct lack of specificity in these contracts regarding when the NFT is a speculative tool and when it is a marketing tool.
Quoted in Defining Ownership of Music NFTs, from the Digital to the Physical World – Water & Music
In the context of the growing popularity of the music NFT circuit, Euterpe protects the interests of creators and pass holders from a copyright perspective, and the team has the strength to create an effective copyright protection mechanism to avoid copyright infringement and establish a compliance route to achieve compliant operation of the platform. AM DAO, on the other hand, has chosen another direction, working with artworks in the public domain to avoid the risk of copyright infringement. By simplifying its business logic and using the streaming play share as NFT endorsement, Royal has not actually changed the traditional business model. It will take time to verify whether Catalog as a platform is truly capable of helping and regulating creators and whether content consumers can deliver on the full promise of creators.
Music NFT should be more widely available in the increasingly rich Web3 world of the future. Once users have ownership of a piece of music, they will spontaneously want to use it in different scenarios in the metaverse. For example, listening to it with friends in the metaverse, showing it off after winning a game, displaying it on their personal pages as a symbol of their hardcore fandom, and so on. In addition to the NFT, the project should also consider how to make the music more widely available.