“We’re obviously in an NFT bubble right now, but WMG has been working and investing in this space for some time,” says Oana Ruxandra, Digital Director of Warner Music Group and Executive Vice President of Business Development. “Digital collectibles have the potential to provide invaluable value to artists while allowing fans to engage with their favorite acts in new and exciting ways. We will continue to work closely with technology partners and artists to build and perform as this space continues to grow.
Several label executives agreed that NFTs would eventually become a standard part of artists’ exit strategy once the market fully developed, but they also noted that environmental concerns related to ‘knocking’ – or the creation – of NFT should be tackled before many artists. will feel comfortable releasing NFTs. (Ethereum, the blockchain that most NFTs are written on, is very inefficient and consumes as much energy as Ecuador on an annual basis.)
“I had to get the artists to take a step back and think, ‘Is this something I want to do?’ “A label source explains the environmental problems associated with NFTs.
This will likely change over time. A new version of Ethereum designed to be more energy efficient has been in development since 2019, with no firm date to become widely available. But other NFT platforms have found their own solutions. The very popular NBA Top Shot – which is based on the Flow blockchain created by Dapper Labs, a company in which Warner Music Group invested in 2019 – does not have the same models of energy consumption, which raises hopes for solutions to short term.
The potential around more efficient blockchain-based platforms like Flow has sparked substantial optimism from label sources. “Look at Flow as you would with iOS. Ethereum, like Android, ”one executive said, noting that soon developers will be creating tools and improving both blockchains in the same way that third-party developers have done for the Apple and Google operating systems that dominate mobile devices. for a decade.
“Whether it’s records, concert t-shirts, album covers or other merchandise, fans have always wanted to collect items that bring them closer to their favorite artists and music,” says Celine Joshua, Executive Vice President of Commercial and Artistic Strategy of Universal Music Group. “The change in culture, consumption habits and technology expressed through this new paradigm of [NFT] The property is another step forward in the historic progression of our artists and labels working together to harness digital transformation to create authentic art that can be collected by fans. “
The feeling across the business is that while NFTs are hot and exciting now, the market still has a long way to go. Until now, the music industry’s NFTs have been based on digital art, with a few pure music releases like those of 3LAU, a longtime supporter of the cryptocurrency that has earned $ 11.7 million. of dollars on an NFT from his three-year album. Ultraviolet, and Kings of Leon, who released their latest album When you see yourself, as a mediocre sales NFT, which several top brand executives have called a cautionary tale.
“What we’re seeing some artists and management teams doing is taking what they were already doing in their traditional business and just trying to apply it digitally, and it doesn’t work, it doesn’t connect,” notes a major source for the label, “And you saw that in Kings of Leon.” A source also quickly noted that fans shouldn’t expect every song to become an NFT.
Another executive compared the gap between the current NFT landscape and where they hope space ends up in the Gulf between Napster and Spotify. Both services allowed users to listen to music, but it wasn’t until Spotify arrived in the United States a decade after Napster that real revenue began to emerge from the format. “Something is definitely missing in the ecosystem, you’re going to see a huge change and we hope to lead some of it,” says the label’s source. “In fact, I don’t think what will work is what we see today.”
There is no guarantee that the moves that labels will make in the NFT market will bear fruit. NFTs from major artists like Kings of Leon and The Weeknd grossed around $ 2 million each, a small amount compared to the $ 11.7 million earned by 3LAU – an independent artist – for his album NFT. Early adopters and tag sources agree that the NFT market is in a bubble and the money 3LAU made is likely irreplaceable, meaning that a successful exit from the big NFT label to the future may bring in much less.
And there’s also the current NFT community to consider, which obviously doesn’t like traditional brokers. “I don’t think the people who collect them [NFTs] are going to buy them from a label, I will tell you, ”said 3LAU Billboard in an interview in March, noting that the NFT community is keen to support individual creators, not businesses. “If the label [NFTs] Without the artist’s permission, I don’t think the community is going to support it because the community is pretty hardcore. “
To this end, top label executives, who have apparently learned from the music industry’s past mistakes, are focusing on building “organic” audiences for NFTs, a crucial aspect of building a market. viable in the long term. Sources have pointed to the rush to live stream at the start of the pandemic last year as a cautionary tale for NFTs. “Forcing consumers to do whatever they think is not genuine is the exact problem we’ve had in the music industry for quite some time, the same with artists,” says a source at the label.
The labels target a range of different NFT consumers. Some are focusing on Gen Z, which natively understands and wants digital goods without physical components to accompany them – thanks to their familiarity with in-app purchases and games like Fortnite and Roblox. Others are designing educational tools for older demographic groups that require more explanation to fully capture the NFT landscape. Currency remains an issue as well, as most NFT markets do not accept credit cards, increasing the barrier to entry for many music fans.
Does the music industry need a centralized platform like NBA Top Shot – which works with credit cards and offers one place to get official NBA content – to solve some of these? problems? “Need? No. Would that help? Of course,” says one label source. Another label source says that any IP owner the size of a big label “should ask themselves, ‘Let’s create- we own and operate our market? “
Legally, agreements between artists and labels to sell NFTs are still being worked out on a case-by-case basis, sources say, but standard terms are being worked out. A source claims that while the labels have not taken legal action against NFT markets in the “rare cases” that a platform attempts to remove them from artist deals signed with them, they “are calling on all of these companies to do so. . they are aware that we will assert our rights when we need them and that they must come to us, ”says the source.
The “biggest question of the day,” as one tag source put it, is about controlling NFTs – how to remove an illegally downloaded NFT from a blockchain. “We have teams of people who are ready for the defense, but the point of the game right now is to be proactive and offensive and try to create value,” said the executive. “We’re spending more time trying to activate now than we are trying to stop.”