How To Make Serious Bank Selling NFTs In The Music Industry: A Clear Breakdown

The technical definition for NFTs: NFTs, or non-fungible tokens, are digital certificates that authenticate a claim of ownership to an asset, and allow it to be transferred or sold. The certificates are secured with blockchain technology similar to what enables Bitcoin and other cryptocurrencies.

The technical definition for blockchain: A blockchain is a decentralised alternative (think cryptocurrencies) to a central database (think traditional banks). Blockchains usually store information in encrypted form across a peer-to-peer network, which makes them very difficult to hack or tamper with. This in turn makes them useful for keeping important records.

The big difference between NFTs and cryptocurrencies is that currencies allow fungible trade, meaning anyone can create Bitcoins (called miners) that can be exchanged for other Bitcoins. NFTs are by definition non-fungible, meaning they can’t be copied. NFTs are designed to uniquely restrict and represent a unique claim on an asset.

And here’s where things get different. Often, NFTs are used to claim “ownership” of a digital asset that is otherwise completely copyable, pastable and shareable – such as an mp3, wav, or aiff file. 

What makes Blockchain better?: Blockchain supports immutability, which means that data once is written cannot be erased or replaced. Immutability means that no data tampering is possible within the network. Traditional databases (like those at some banks) don't exhibit immutability and hence are more prone to being manipulated by a rogue administrator or third-party hacks.

You know how you can purchase images from sites like Shutterstock? But most of the time, you have no idea who the artist is. You just know that you like that photo or picture and want to use a verified copy of it so you don’t run into trouble later. 

Like if you’re trying to sell t-shirts with a certain design that uses photos from Shutterstock, but then the original rights owner finds out that you didn’t buy a license for their photo.They have rights to come after you for improperly using their photo.

With an NFT, these tokens are tied to a certain limited number of digital copies for the art that verify the authenticity of the copy.. 

Think of when the Wu-Tang clan made their album, Once Upon A Time In Shaolin. They only created one copy to be sold to the highest bidder, which yielded them $2 million.

The winning bidder got to say they held a ‘priceless’ piece of art that no one else could claim. 

With the emerging technology of NFTs, artists are starting to leverage scarcity to sell digital rarities to their fans. 

And with the way streaming payouts operate today, it makes for a much quicker and efficient payment system for artists.

Right now the music industry has some significant barriers in the model it uses to pay artists. For instance, you probably stream your music on Spotify, YouTube, Apple Music, Deezer, Amazon Music, or a number of other streaming platforms. 

You either pay these services a monthly subscription fee, or use a free account and get served advertisements so that they can pay the artists royalties every time their song is streamed past 30 seconds. 

That money you pay them goes into a big pool called their gross revenue. Gross revenue means all the money that comes into a business before any expenses are taken out. 

The streaming platforms then have to take a percentage of their revenues or investments by stock owners and divide up the capital in a systematic way every time a song is played. 

For common music streaming royalty rates, you can use a streaming calculator to figure out numbers like how much you get paid for 1 million streams on Spotify (about $4K-$6K usually).

From the time it takes to stream a song until the time the artist actually gets paid for that song typically takes about 3 months. 

In the music industry, having cash on hand is imperative especially for indie artists who don’t make as much money as major labels. They need to be able to invest the money they make back into their business to have a solid chance of achieving their music goals. 

Enter NFTs...

Right now, the technology is not all the way there, but the way things are heading if you can use NFTs to verify the original copy of a song and use cryptocurrencies to payout artists, they could receive funds instantly whenever their song is streamed!

Companies like Audius are working on the technology.

Artists can use sites like Nifty Gateway to make NFTs. They handle all the technology behind making sure you’re presenting them with an original work to distribute to buyers. They liken themselves to a new eBay of sorts. 

You can apply for an account with them in about 10 minutes. 

They’ll ask for things like your social media links, portfolio, email, what style of project you’re looking to release, what your short and long term goals as an artist are, & also a personal video introducing yourself to their staff. 

The process does take time to ensure that only serious artists and creators are signing up. 

Another cool thing about NFTs is that the original creator can still make money from resales. Let’s say you sell only 1 original NFT for $10,000. And in the original contract you state you’ll receive 10% of all future sales in perpetuity. If the second owner sells it to someone else for $20,000, you’ll get paid $20,000 x .05 = $1,000. So on and so forth. 

Nifty Gateway takes 5% + 30 cents of all future sales to cover processing fees and growing their platform.

While all this is exciting news, the main thing to keep in mind is that demand drives up the price of NFTs. That’s it. 

If there’s not much demand for your product, then don’t expect to start cashing in on the new technology.

Aside from getting paid for streams or NFTs, musicians have a notoriously dilapidated business structure. 

We’ve had consultations and interactions with literally tens of thousands of artists. Virtually NONE of them have an optimized business structure the first time we talk to them.

Here’s a list of at least a few things you can choose from you should be selling ON YOUR OWN WEBSITE as an artist BESIDES just relying on streaming revenue to earn your music income:

• Songwriting services

• Personalized video messages

• Charging for features

• Soundpacks and drum kits

• Merchandise

• Virtual session work

• Display ads

• Affiliate products & services

• Virtual tip jars

• Concert tickets/tours