What if 2022 isn’t the year of Music NFTs
And why infrastructure development is critical.
It’s hard to move in the innovative side of the music industry at moment without having it rammed down your throat that this coming year NFTs are going to be everything. In fact, even outside of music it’s increasingly becoming the rallying call of Crypto Twitter. Music NFTs are going to “have their year” in 2022.
But what if they don’t.
The Music NFT bear case
The internet runs on attention and NFTs have had more than their fair share over the past 12 months. As relatively illiquid assets, with seemingly random value accrual, NFTs have been a great source for column inches and FOMO while riding on the back of this bull market. However, as with the ICO boom in 2017, a more than significant amount of rationale attributed to their value proposition is based on future what-could-be’s rather than productive value, now.
Outside of support towards an up-and-coming artist, key utility currently rests in member-club benefits or potential resale value. The latter of which puts NFTs firmly in the ponzinomics crypto meme du jour (although there are some arguments as to why that isn’t a bad thing). Of course there are some projects also pushing democratised finance linked to royalty payments, but in reality these initiatives are either using NFT hype to sell crowd funding Securities contracts, or just flatly ignoring Securities regulation. Neither of which is particularly interesting in the overall scheme of things.
NFTs are very centralised currently, especially in their creation. Despite Ujo enabling splits as part of very early NFT / crypto payment for music testing back in 2019, this is still rare as a feature within an NFT drop. And even where splits are enabled, it is, by requirement, a very simple and approximated, indelible, division between a few entities. While this may be sufficient for other implementations of NFTs, such as digital art or essays, it is not going to cut it when considering the majority of value that flows through the music industry.
Music creation is a process that often involves multiple parties, with contribution ranging from writing, performance, production, management. And the release of music will in most cases involve further contributors such as promoters, distributors, music supervisors, licensing bodies accountants, eccetera.
Now of course, some peoples’ goal within web3 & music is to disintermediate 3rd parties and incentivise competition within the service stack. However, these are jobs that will still need to be done, and will still need to be paid. Specifically, speaking from a position of past work I’ve done to try and improve the digital music industry for songwriters, there currently exists a major gap in the attribution and payment for writers in the design of NFTs. It can be argued that the streaming industry left songwriters behind and the current direction of NFTs seem to be going a similar path.
I’ve argued in the past that NFTs and crypto in general provide a solution space for creators seeking increased financial independence from the increasingly unsuitable and zero-sum royalty compensated environment for new creators. Currently though, experimentation is only really possible for a very select few artists, those who operate on an entirely individual basis, or have managed to convince contributors to their art that they will be compensated subsequently. The latter of which is of course fairly antithetical to the point of this whole thing.
To cycle back to the initial claim that Music NFTs will “have their year” in 2022, the bear case against this is that yes, it’s likely that experimentation and interest will continue to increase, but the ceiling on engagement from a consumer and creator perspective is relatively low while infrastructure is in the position it is now.
What can be done to turn bear into bull?
To break out of niche and novelty there are some significant steps that need to be taken.
In my The Crypto Music Industry essay I spoke about how development generally builds in waves of innovation, where the potential is defined by a function of engagement, funding, and available infrastructure.
There will no doubt be a fair amount of experimentation around turning NFTs into productive assets in the coming year, Sound for instance has announced its “season 1” this last week where it will empower and encourage creators releasing through the platform to tie new utility to the NFTs they release. The digital rights that perform the best through this testing period will aid the space in finding dominant models going forwards.
Rights is going to be the trigger through this next year and beyond to build this thing into something bigger.
An NFT is predominantly a vehicle in which to sell rights. From a usefulness of NFTs perspective, the design space is completely open and only experimentation will show what works and what doesn’t.
However, equally, or possibly more, important, is the role that rights play on the supply-side of NFTs. To the point above about building a system that credits and rewards multiple contributors to an NFT, we need infrastructure on which this can be done. For clarity, this is not an easy task. The current digital (& analogue) music industry has valiantly struggled to build a comprehensive view of the ownership and rights picture that underpins music, and there is no silver bullet within web3 that suddenly makes that easier; we spent a long time trying at JAAK. But something needs to exist to open up the potential ceiling on this emerging industry.
Metadata standardisation, identity and reputation mechanics, protocol standardisation and interoperability, are further examples of current and future challenges that are standing in the way of faster progress. These are problems that sit between projects that are building in this space; questions around standardisation, tooling, and infrastructure.
Meeting the infrastructure challenge
Infrastructure is hard to build and takes a coordinated effort to pull off. Specifically, there is rarely a defined and immediate customer to sell to and the initial reward for effort is hard to quantify. But development of infrastructure is also essential to unlock potential future utility.
One positive we can look to though is the way that the Crypto community has managed to scope, fund, and build infrastructure over the past 10 years. The Ethereum Foundation and GitCoin being key examples of organisations that have helped to push forward public works building through the waves of hype and “winter”.
The Music industry, though, is relatively small; the Crypto Music industry as a subset of the Music industry is smaller still. And so it’s hard to see a similar public infrastructure focussed organisation emerging organically to focus on the challenges at hand. Building useful and interesting product is hard enough for teams engaged in the space.
Maybe it’s on us to proactively drive that forward.