Earlier this year, a few users of Spotify’s Android app in the US noticed a new option to engage with their favorite artists. Right below the header and top song list of a few artists was a link to their NFT galleries!
Who could have seen that coming?
With the ability to scroll through artists’ NFT galleries and an option to visit their respective pages on OpenSea, that Spotify is looking to integrate with blockchain and NFTs to elevate its user experience. While its current experiment was limited to a select few artists, it created the scope for a revolutionary change in business models for both artists and the company.
It’s no surprise that Spotify is looking to integrate NFTs into its own services. This latest NFT trial comes on the heels of astounding sales for artists such as 3Lau, deadmau5, and popular rock band Kings of Leon.
3Lau, for instance, sold his album Ultraviolet as an NFT gallery and raked in over $11.6 million in sales. Deadmau5 has similar success with the technology, making $4 million through selling NFT collectibles. Kings of Leon created waves by releasing NFT versions of their latest album and donating more than USD 500,000 to workers at live events in the aftermath of COVID-19.
There are numerous advantages to artist NFTs that make the technology a blessing to them. Let’s dive into current trends and business models for companies such as Spotify and for artists, both popular and upcoming.
While fans have often enjoyed many ways to purchase and listen to their favorite artists, centralisation in the music industry is a major obstacle to the growth of artists themselves. In the beginning, this was due to the absolute dominance of production labels from big names such as Sony or Apple.
Any artist looking to showcase their work to the world had to go through these labels. In several instances, they would be forced to tailor their work to the whims of executives from the label – a severe limitation on their creativity. Furthermore, the earnings of artists versus labels were, and continue to be, severely disproportionate. This leaves artists with no other option but to generate revenues through live performances, tours and other efforts.
The advent of streaming labels seemed like a breath of fresh air for the industry and artists alike. With the ability to reach fans around the world, the streaming service option was also economical for audiences who could listen to multiple artists for a small monthly fee. Yet this model is still relatively underwhelming. A Spotify artist, for example, earns about 5 cents per stream. Yet, Spotify is a 43-billion-dollar company.
The disproportionate earning ratio between the service and a Spotify artist becomes apparent when the number of artists on the platform is examined. There are currently 7500 Spotify artists who earn an average of $100,000 per year from the platform. And that number applies to the big names in the industry.
An indie artist would certainly have to look at other avenues to earn a fair wage for their work.
NFT Galleries are a promising solution to a number of the above-mentioned problems. Decentralization, the main advantage of blockchain, has proven its value in the music industry as well!
Music NFTs allow artists to enjoy a wider reach and improve engagement with their fans in many ways. Given the unique nature of an NFT, an artist can not only generate revenue directly through selling it but can also program it to generate royalties for them when it is resold.
Furthermore, NFT galleries can include exclusive artwork, access to future tracks, access to live performances and so much more for fans. This helps artists build a community around their work in ways that product labels and streaming services cannot currently replicate. Artist NFTs also eliminates the need for a middleman, letting them enjoy their earnings and using them to create more work.
Some argue against NFTs, stating that the work can easily be copied and duplicated. That simply isn’t true, as the value of an NFT is not tied to the song or artwork it represents, but to the unique copy that only its owner possesses. For example, a signed photo from Mark Knopfler, legendary guitarist and Dire Straits frontman, can certainly be photocopied. But the original photo is sure to carry more value to fans and its owner alike.
Spotify’s NFT test is interesting for many reasons. It not only shows that NFTs are a valuable addition to the stagnant music industry but also demonstrates that the streaming service is looking to create more value for artist NFTs.
The company has made the laudable decision of not charging Spotify artists a commission on their NFT sales. This move indicates a farsighted approach to solving the current problems faced by Spotify artists across the world.
Supporting artists who wish to sell NFTs of their work while also remaining on the platform can work wonders in creating an industry that is profitable for both the company and the artist. It also creates the scope for new ways of engagement between Spotify artists and their fans.
We could potentially attend an NFT event dedicated to music that is backed by Spotify in the near future. But the service must remain cognizant of current challenges within the industry, and take steps to ensure a lucrative business model geared towards supporting creativity and its artists for its experiment to bear fruit.
Stay tuned to our blogs to learn about all the latest trends in the blockchain and NFT space!