Music NFTs Become Latest Battleground Between Capitalists and Creators

In early 2017, after Trump was inaugurated, I wrote about Brian Eno’s new album Reflection. The LP was the latest effort in his generative music series, which began with his 1975 record, Discreet Music. Accompanying the release was an impassioned – and since deleted – Facebook post. In it, the seminal composer called for an end to the “knee jerk nationalism” that led us to grab “the nearest Trump-like object and hit the Establishment over the head with it.” Alongside his message, Reflection became an Eno-prescribed nostrum to supposedly antithetical identities, like Republicans vs. Democrats, capitalists vs. creators.

To create his generative systems – for Reflection and otherwise – Eno feeds sounds through algorithms in software of his own design – a practice not dissimilar to the generative systems musicians are creating for NFT projects. When Eno’s name recently surfaced in the web3 music world, though, it was to malign NFTs as “a way for artists to get a little piece of the action from global capitalism.” He continued, “How sweet, now artists can become little capitalist assholes as well.”

The relationship between capitalists and creators has always been fraught. As an institution, the music industry has rarely catered to the people that create most of its value: the artists. Bad contracts and false promises have skewed the power in favor of corporate interest, and the lionization of a few superstars obfuscates the full impact of the truth: that very few musicians can make a living through their art.

Steve Albini’s formative 1993 treatise, which outlines the flow of money through its value chain, should have been a revelation for the uninformed. The producer eviscerates the music industry, comparing it to a shit-filled trench whose wonky contract math – which he breaks down in detail – demonstrates “just how fucked [artists] are.”

Fast forward nearly 30 years to the height of the streaming era and things have only gotten worse. The streaming payout model is such that an artist makes very little money without a massive fan base, and the platforms’ interfaces are such that it’s impossible to build a fan base on the platforms themselves. The fallout from that paradox is reflected in the stats: 90% of albums are getting just 1% of streams. And 98.6% of Spotify’s artists are making just $36 per quarter.

Neil Young and Joni Mitchell’s vocal departure from Spotify to protest the anti-vax rhetoric of resident podcaster Joe Rogan pushed the platform to the fore of recent media headlines. Those in the know were quick to remind the world that there are, in the words of the New Yorker’s Alex Ross, plenty of other “reasons to abandon Spotify that have nothing to do with Joe Rogan.” This was just the “latest strain in the company’s complex and frequently troubled relationship with artists,” wrote Ben Sisario for the New York Times.

“It won’t be long before the news cycle moves past these two septuagenarians who took a noble stand as musicians,” said Andy Cush via Pitchfork. “But while they have the world’s attention, why not take a stand on behalf of musicians, too?”

Kay Hanley, Letters to Cleo bandleader and co-founder of lobbying group Songwriters of North America, wrote on Variety: "Now is our chance to seize the energy of a sideways moment and repurpose it to talk about the real problem: Spotify’s consistent pattern of exploitation, devaluation and disrespect of music creators.”

The real question is: how? Spotify was born from an already broken, exploitative system and conceived from the bones of piracy. The innovation of torrenting via peer-to-peer file sharing was a paradigm shift that people still welcome wholeheartedly. Suddenly, people had the ability to access all music for free within the comforts of home, and that level of convenience is not so easily surrendered. It fundamentally changed how our culture appraises music, and streaming – the industry’s bid to recapture some of the immense value being lost to platforms like Napster and The Pirate Bay – formally cemented the notion that music should be free or almost free.

Spotify cataloged and stored all those digital music files in a sexy, user-friendly package that could fit in your pocket. Daniel Ek and Co. were savvy enough to garner licensing deals from the major labels – who own sizable stakes in Spotify – and make the math work for their freemium business model. They were essentially competing with piracy, so in order to convert the pirates, they had to stay as cheap as possible, which meant margins were – and continue to be – razor thin. Because the labels have been intimately involved in the business since the outset, it also means that they, not the artists, are still dictating the terms. So streaming has ended up inheriting many of the same legacy economic structures that Steve Albini castigated in 1993.

And while Spotify deserves some amount of ill will, it’s unfair to single out the platform. Many of their largest competitors – Apple, Google, Amazon – are tech giants that can use their streaming arms as loss leaders. Profit margins are consequently less critical, so they can steer the race to the bottom. To keep up, Spotify has to leverage every possible opportunity to lower prices even further (e.g. get Spotify for free for three months), and each markdown disadvantages folks further down the value chain – where artists always seem to find themselves.

The Albini song remains the same. So how can an industry that has endured decades of resistance finally be forced to acquiesce? It’s hard not to be fatalistic.

“Is there any hope for a better music business?” asked Arcade Fire’s Will Butler in a recent piece for The Atlantic, responding to the Spotify imbroglio. “Solidarity is a tempting response to technological change, but my tired brain just can’t see the mechanism for it in this era…And in the end, technology will plow us over.”

Indeed, it’s become hard to trust those who peddle tech as cultural savior. But given all the hype around NFTs as a new source of revenue for musicians, it seems like an oversight that the articles above mention them a total of zero times.

NFT stands for non-fungible token and describes a unique digital asset whose ownership is tracked on a blockchain (like Ethereum). The asset represents a digital file of something – music, visual art, sports moments – that is one of a kind and, like a physical asset, can be bought and sold.

Last February, Jacques Greene minted and auctioned his single, “Promise,” (for 13 ETH, or about $34k as of this writing) as an NFT, in what then felt like an experimental application of the technology.

On January 20, less than one year later, Cooper Turley – one of web3’s most prominent characters and advocates – tweeted a map of the music NFT landscape, portraying an already overwhelming ecosystem of organizations across ticketing, streaming, collectibles, labels, and fanclubs. Myriad “bro I can’t believe you forgot about [insert music NFT platform]” followed in the comments, indicating the vastness of the opportunity embraced by web3 builders and believers.

And there are numbers to back this up. Since June 2020, there have been more than 1.6M Music NFTs sold, generating about $100M in sales. Catalog, a 1/1 NFT platform built atop Zora (an NFT Marketplace protocol for the Ethereum blockchain), has already generated $2M in sales since launching in March of 2021 – with an average sale price of $3707. (For context, that’s equivalent to about one million Spotify streams.)

The average drop on Sound.xyz, one of the newer music NFT platforms, is going for nearly $10,000. On February 6, the platform shared that it had onboarded 38 artists and paid out $400,000, and that number has since passed $600k – or approximately 150M streams.

Individual success stories abound, too. Haleek Maul, a Bajan rapper, has generated $226,800 in NFTs sales compared to just $178 in annualized Spotify earnings over the same time span. The indie artist RAC tweeted that he made more in one NFT drop than in his entire 15-year music career.

When considering creator earnings per platform, Ethereum outpaced web2 giants like Patreon, with $3.5 billion, just behind behemoths like Etsy and Youtube Music. With that much traction, why aren’t more artists embracing NFTs? Why aren’t distinguished journalists including them as viable alternatives in their streaming takedowns?

Stigma is at least one reason. The NFT’s turbulent tenure has been gold rush-esque and filled with grifters, as web3 newcomers like Ozzy Osbourne accidentally incite phishing scams and multimillion dollar auctions perpetuate a one percenter mentality. There are more existential concerns as well, from unnecessary environmental strain to lack of inclusion to the gradual co-option by corporate giants. More pragmatically, NFTs are also expensive and there’s a lot of friction in onboarding. Fan sentiment reflects these realities.

In music, perhaps most regrettable was the near-inconceivable fiasco surrounding HitPiece, a new NFT platform that scraped Spotify’s catalog for track information and appeared to start auctioning off NFTs without artist permission.

“Things like HitPiece are making it very hard to advocate for web3 solutions in music outside the space,” the electronic artist Maelstrom told me. The France-based producer and RAAR label founder was part of the first wave of artists releasing on Catalog's launch. “It's still difficult to explain to a majority of the people who have been following my work on the rave/vinyl side of things, but I'm not hopeless and there's still lots that can be done.”

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That work is happening in great earnest. Crypto communities have always marched with confidence into turbid legal waters, building quickly as the specter of government regulation looms in the shadows. The gold rush mindset is one motivator, but even as scammers and treasure seekers abound, many are doing the work because it offers hope for a more equitable future.

“I don’t think many people want to admit this,” LA-based artist Carter Reeves shared with me, “but the driving factor [to sell an NFT] was the fact that I had been a struggling musician for years, and I’d put in what I thought was a massive effort into my career and wasn’t seeing the benefit.” Another independent artist, who chose to remain anonymous, used the proceeds from an NFT sale to purchase PR they couldn’t otherwise afford, enabling them to grow their community.

With all due respect to artists like Neil Young, Joni Mitchell, and Brian Eno, they have the luxury of both eschewing NFTs and removing music from streaming platforms. But when those streaming platforms are systematically devaluing music by charging $9.99/month to access every song in the world and telling artists “it’s this or nothing,” the 98.6% need to get creative or die.

The rise of web2 creator platforms like Patreon – now a multibillion dollar company – illustrates creators’ embrace of alternative means. The same rationale applies to the dash toward NFTs. “I saw it as a way to make money – not in a wealth grabbing way, but in an equitable way,” Reeves told me. He sold his first NFT – a track from his old band, Aer – on Catalog to Cooper Turley for 1 ETH. In less than two days, Reeves sold his track for the equivalent of nearly one million streams.

It’s a great story, but the context behind what exactly Turley bought from Reeves is both what makes it exciting – and differentiated from Patreon – as well as what elucidates the long journey NFTs have toward large scale adoption.

On Patreon, fans pay for premium content and perks – like limited edition merch, early access, and interactions. People like the music and/or admire the maker, so they pay for the extras – not the music. It requires artists to create consistent content outside of their music because of streaming platforms’ devaluation of the music itself.

In theory, NFTs can represent an original piece of actual music – in addition to perks. When fans purchase a music NFT, they’re buying an asset that can increase in value, for both themselves and the artist; success becomes relational. And because each NFT typically includes a creator share – a percentage that goes back to the artist every time the NFT is resold – the artist will continue to earn forever. The blockchain’s ledger validates and automates these transactions, in theory negating the need for any “bad contracts” or “false promises.” In reality, though, it’s more complicated.

Music ownership was complex enough before NFTs entered the arena: every sound recording has multiple copyrights, and each distinct use – playing a song, making a copy of a it, broadcasting it, and playing it in sync to visual content – could require multiple licenses from various entities that own different pieces of these copyrights. Now consider layering in the tenuous framework for digital ownership – in short, there’s no such thing as legal property in a digital file.

By engaging in a contract, though, two parties can still agree that digital ownership of something exists, and that’s the kind of relationship that platforms like Catalog facilitate. But simply creating an entry on the blockchain doesn’t actually confer ownership of the original work – that needs to be verified in the analog world.

This is especially true when an NFT is packaged with intellectual property and/or future royalties generated by IP. Last April, pop artist VÉRITÉ became the first artist to auction master recording rights in perpetuity. And in February she sold 39% of all future streaming royalties for her song, “He’s Not You,” across 505 people on the new NFT platform, Royal, raising $90k in the process.

Royal is built on music co-ownership, where artists and fans share future royalties (the NFTs on Catalog and Sound don’t currently include royalties or any IP). Fractional, community-based ownership via NFTs is an exciting idea, but the subject is hotly debated, as any token that implies rights to future profits has a higher chance of violating securities laws – a potentially critical concern for NFTs’ future.

Understandably, in an attempt to reduce friction and complexity, NFT marketplaces are oversimplifying contracts, skimping on “how owners of mass-scale royalty investment NFTs will actually be paid their fair share of revenue” – like payment frequency, types of acceptable cryptocurrencies, who covers gas fees, etc.

The perks that artists are packaging with their NFTs are another example. In his latest drop, Reeves is including extras like VIP access to his Discord, a couple “incredibly cringy unreleased merch ideas,” and “15 minute FaceTime (if that’s something you’re into…?).” On her Royal drop, VÉRITÉ also offered experiential add-ons, like five 1:1 video chats with her.

But there’s rarely anything baked into the NFT contract that determines how or when – or even if – these extras will be furnished. In impressive detail, the music research DAO, Water and Music, detailed these many gaps “between the understanding of legal ownership in music copyrights and recorded ownership on a blockchain.” And this is just in the US – forget about trying to parse discrepancies between the concepts of “ownership” and “copyright” across different countries.

But the good faith that web3 actors are willing to embrace is what’s worth writing home about. It’s why Turley called buying music NFTs a “spiritual experience.” The mere act of buying someone’s art – regardless of any legally defined, technical notions of ownership – and sharing in its success brings the buyer closer to the artist.

“The most interesting aspect of this has been how releasing music turned out to nurture relationships and interactions that would never have happened in the web2 world,” said Maelstrom, who’s met myriad collectors and artists through his NFT experience.

Indeed, web3 enables connection in ways web2 simply doesn't. On major social platforms like Instagram, for instance, creators of all types, from gamers to musicians to tattoo artists, have to play a zero-sum game that pits them against one another for the prize of our attention.

The web2 creator economy is marked by the incentivization of over-supply: there are always creators willing to create content, and algorithmic feeds that are always ready to serve up a steady stream of alternative creators if we don’t play the game.

It’s that ruthlessness that's bringing artists to web3, in spite of all of the aforementioned concerns. Accessibility and speculation are ongoing issues that should continue to be monitored, but the fact that people are willing to pay thousands of dollars for an NFT is clearly a sign that there’s an unmet demand for listeners to support the artists they love. It’s evidence there’s then been a missing connective tissue.

The participatory spirit being championed by web3 folks has also made its way into the artistic process of NFT creation. “What's interesting is how the blockchain isn't only used for engineering scarcity, but as part of the creative process itself, in an interactive way,” said Maelstrom.

For instance, the producer Timbaland is releasing music stems – the isolated vocals, drums, bass, samples of a track – as NFTs that grant access to a web-based mixing app, on which owners can remix the stems into their own creations. Numerous artists are treating NFT ownership as a path to governance and access in collection-specific DAOs, where artist-to-fan relationships transform from broadcast to omnidirectional. And generative music NFT platforms like EulerBeats are enabling complex, interactive gamification architectures that reimagine how people interact with, own, and benefit from music.

These creators are invoking the same experimental ethos for which Brian Eno himself is celebrated – the generative nature even shares a similar mechanism: feeding information through algorithms that produce unpredictable results. “Once I have the system up and running I spend a long time – many days and weeks in fact – seeing what it does and fine-tuning the materials and sets of rules that run the algorithms,” Eno wrote when Reflection arrived. “It’s a lot like gardening: you plant the seeds and then you keep tending to them until you get a garden you like."

The NFT space has weeds. But the reason it’s still moving toward equitability is because of the gardeners. People like Reeves – who’s using his Discord, Crane Road Surf Club, to help people set up wallets and onboard to web3 – and VÉRITÉ, who continues to be a pioneer in the NFT space as an advocate and educator.

“We're in a bubble of people who care about digital ownership,” VÉRITÉ told me, “but there's still a mass reconditioning that needs to take place.”

What’s hopeful is that every artist I spoke with was eager to answer questions about the promise and the faults of NFTs. Web3 encourages dissent, and the ecosystem’s collective decision making frameworks enable that dissent to manifest as improvement – dissimilar to web2's monolithic, top-down approach to organizing.

That said, web2’s got scale and convenience in spades. Even beyond onboarding and financial friction, music NFT platforms are inadvertently acting as gatekeepers, ensuring they can support dozens of artists before turning to the millions that still need it. And when they do scale, developing community-driven mechanisms for curation and discovery – roles handled largely by algorithms in platforms like Spotify – will become paramount. The anonymous fraud that permissionless blockchains make possible also needs to be reckoned with. Reconditioning web2 folks to web3 principles will take a long time if the alternative is costly, difficult, and corrupt – regardless of the good intentions.

It also remains to be seen whether things like NFTs will even work by foisting legacy systems onto a web3 framework. Right now, the absence of clear legal frameworks is enabling both innovators and cheats, adding to the sense of confusion. The level of information asymmetry is loud and clear in another of Eno’s thoughts regarding NFTs: “If I had primarily wanted to make money I would have had a different career as a different kind of person.”

Pursuing NFTs as an income source doesn’t imply that artists are primarily in it for the money. Artists live in a capitalist world, too. There are always going to be those who make more, and there are always going to be shitty actors, but if we can decrease the chasm of inequity – if through web3 more artists are making a sustainable living than they were before – isn’t that worth pursuing?

“I choose to interfere and guide,” Eno said about his generative process in a 2005 interview. “Although I don't interfere with the completion of a system, if the end result is not good, I'll ditch it and do something else."

That’s just what the gardeners are doing.

MacEagon Voyce has written for Vice, Nerdist and several other publications. He lives in London with his wife.