Cryptocurrencies and blockchain have the potential to fully revolutionize the music industry, making it finally profitable for small independent creators. Historically, it was ruled by big recording companies with huge fees from artists (up to 80-90%) and restricted their creative freedom.
But crypto technology is fully capable of reclaiming independent artists' power. Fans can directly support their favorite creators. Artists can create their independent workflow where they don’t need any third-party investors that limit their artistic power. Want to find out how crypto can help modern music artists to promote their songs? Check this article!
Cryptocurrencies and Their Potential in the Music Industry
A musician can create their new song as an NFT token and sell partial ownership over the piece of art. They can use fan engagement/reward systems similar to Patreon, where a fan regularly donates to the artist in exchange for an exclusive content. If you are a music artist, try Kickstarter, Indiegogo, or BaseNote.
Transparent and direct artist-fan interaction strengthens the mental connection, building a solid fan base. Musicians can add their music to decentralized streaming services like Musicoin, Opus, or Audius and get paid decently: those services take small fees or don’t have them at all. So, artists get a fair payment for their songs due to the royalties prescribed in pre-defined smart contracts. It’s a far more fair revenue distribution rather than with a label contract.
Tokenization of Music Assets
As I already said, tokenization is a pretty interesting concept that could be profitable both for artists and fans. Creators can easily monetize different aspects of their work: they can sell their songs as a token with and without royalty rights. Pick your tokenization strategy wisely to get the most benefit from it. Here is your short instruction to tokenize the song:
- Determine monetization and tokenization strategy. Choose the pieces of art which you want to tokenize, the percentage, and the type of future owner.
- Select the blockchain platform to tokenize assets.
- Create digital tokens.
- Establish a smart contract.
- Sell or exchange your tokens with the audience.
- Engage with token holders and promote your art, so their token can become even more valuable.
- Maintain regulatory compliance.
Let’s imagine that the new artist posts that they release a new single and tokenize it in the amount of 1000 NFT with royalty rights. So, each user who bought the token owns 1/1000 of the song. This artist went viral overnight, and the song brings the creator $10 000 in less than a month just from blockchain streaming apps. So, each fan gets $10 as revenue at the end of the month just because they own the portion of the song.
Blockchain streaming services are another powerful tool for creators. Artists can earn money online, without sharing it with a label. You, as a creator, can also create your merchandise and sell it in physical and digital forms. When your fan buys some cool T-shirts, they also can get the NFT of those pieces of an outfit.
If someone wants to use your song in their art (sample it in their song, use it in the film, etc.) they can buy NFT with licensing rights. That way you can sell your art directly to interested parties, bypassing intermediaries.
Decentralized Royalty Payments and Smart Contracts
The music industry is unpredictable for artists in terms of revenue. Not only is it hard to predict if your song went viral. But it’s even harder to find out the portion that labels take from you at the end. Decentralized royalty payments make this process a little more predictable.
Once you sign a smart contract with the decentralized streaming platform or label, you’ll get to know the revenue portion for each party. No one can change it unilaterally. You need to sign another smart contract and store it on the blockchain to implement changes. Those contracts help you automate tracking, calculating, and distributing funds fairly. You can even get real-time payments if you prescribe it in the smart contract. So, you don’t need to wait up to 6-12 months to invest revenue in your art, as it happens in the more traditional music business.
Moreover, with crypto, artists can get direct microtransactions from their fans. It is a great relief for the young artist who tries to monetize music just to live their lives on that money. Creatives from, let’s set as an example, Denmark can get fast and direct donations from their fans for the USA and UK. They can buy an artist’s song on decentralized streaming, and the artist will get their portion of the revenue.
If you are interested in monetizing your music that way, I recommend you test Ujo Music, Audius, Mycelia, or Opulous. They are great platforms that help empower young artists and give them a fair share of revenue, so creators can invest more in their art.
Fan Engagement and Crypto-based Rewards
There is no successful artist without a fanbase. They are the fuel that gives you the strength to run faster than others. Thus, I emphasize their importance in every part of this article. And here I want to take an even more deep dive into this topic.
Crypto technologies can enhance the fan experience. They can witness how their purchases or donations help you, which creates an almost family-like bond. So, while you provide classic engagement strategies like events, merch, and exclusive content for the most loyal fans, they would see it like family bonding.
You can even create your cryptocurrency. Distribute those coins or fan tokens for various activities. Once fans gather some tokens they can exchange those coins for exclusive perks. Yes, it’s the gamification of the fan experience.
Fans can even fund your projects, such as music videos. And you, as an artist, can report how you spend every penny of those investments if contractors support crypto as a payment option for their services. With specific tools, they can follow how their coins flow between various wallets. Take a closer look at Viberate. It’s a blockchain-based platform that connects artists, venues, management, and fans. You should also check Steemit, a decentralized social media, where users can upvote and tip artists’ content with a native cryptocurrency called STEEM.
Overcoming Challenges and Adoption Hurdles
Crypto adoption in the music industry may take longer than in traditional so-called “boring” industries like finance or banking. The music business has even more money-related restrictions. Many people will use fiat no matter what simply because it's simpler and proven by years of work.
Crypto also has a lack of regulatory landscape. So the absence of a proper taxation mechanism can become a red flag for some artists. You should also consider the market fragmentation: crypto is already a highly fragmented industry. There are thousands of currencies and dozens of services for any need. Artists and fans may need to navigate multiple platforms and wallets just to keep in touch. Those interoperability and fragmentation issues can scare off many people.
And last, but not least, the challenge is the security concerns. In the fiat world, almost any money-related interaction is protected by the government. But with crypto, you are the only one responsible for your money. If some crypto platform unexpectedly fails (like if someone hacks them), artists may not get their money.
To overcome those challenges, creators should take over the initiative and express themselves not only as “people of art” but “people of business as well”. They should maintain a crypto awareness in their audience and set business standards that benefit creators and their fanbase. And who knows better about artists' needs than the artists themselves?
Future Trends and Opportunities
Creators and their management should push regulatory boundaries, which will help to make this industry accessible to anyone. Artists are the soft power, who can change mass perception in almost any question. And the finance industry is no exception.
So, artists who understand the potential of inevitable crypto adoption will benefit the most. They could become pioneers in tokenization, digital collectibles, and decentralized funding. They can gamify the fan experience, making it even more fun. It will strengthen their reputation as innovative creators, which help them increase their fan base simply due to this type of reputation.
Blockchain can revolutionize the music industry that we have never seen before. Artists can gamify the fan experience by providing exclusive benefits to the most loyal listeners. It could be free merch, discounts, greet-and-meet sessions, etc.
You can take donations from fans to spend on making various art: music, graphics, and videos. You can get paid by blockchain streaming services, where you’ll always get a pre-described fair share of revenue (bigger than in most classic labels). The smart contract will calculate the shares of each involved party and show those results in the revenue tracker.
Some artists may even share the rights to their songs by making NFTs. If the creator sets an equivalent property right, including getting royalties from blockchain streamings, each owner gets its fair share of the crypto revenue.
Considering that crypto is a relatively new industry, you can still become a tech pioneer by implementing those measures into your art. Want to explore even more crypto possibilities? Stay tuned to the Defiway updates by subscribing to our socials where we share the latest crypto news with you!