Music is part of my monthly budget. Pre-pandemic this included live music, some vinyls on the side, not to mention subscriptions to the streaming platforms. During the pandemic it’s been Bandcamp Fridays, NFTs, and monthly donations through Patreon to support the venues and communities that are the soul of New York City.
Music was a comfort in an otherwise difficult year; it’s a cruel irony that artists have captured so little of the value they create.
When we clear the woods, I have no doubt that some venues will be back, some won’t be so lucky. People will always make music, as we have since before there’s been language. Yet it is not hard to meet an artist today who has a bleak view on the future of music streaming technology.
Ownership for the Internet
So where do we go from here? It begins with how you own things on the internet. Technology made it possible to compress the infinite miracle of sound waves into bytes. The crypto movement is challenging this notion — that something as ephemeral or as easily portable as a file can also be owned, and that this ownership is valuable.
Take the electronic musician Jacques Greene, for example. “Another Girl,” his track from 2011 has 7 million plays on Spotify, netting him about $27,904 in royalties from the platform. Last week, he sold a mesmerizing audio loop and GIF called “Promise” for 13ETH ($16,037.32 USD). A six second AV loop bid upon for 24 hours brought in almost half the royalties of a song that people around the world may have played over the course of a decade.
Four Ethereum developers in 2018 authored the ERC-721 token standard, more commonly called Non-fungible Tokens, or NFTs. NFTs are provably scarce digital items, whether that be digital collectibles, tickets to an event, in-game items, or digital art.
So why not apply this to music? After all, the ownership data on Ethereum is what’s important. Couldn’t a song’s metadata also be cryptographically transformed into its constituent parts, and royalties paid out to the owner?
What does Euler’s Phi Function Have to Do with Music?
Three months ago, Treum created EulerBeats, which is 27 algorithmically generated art and music NFTs. With every future sale, the original LP holder gets a royalty of 8%, with another 2% going to Treum. In two weeks, the smart contracts paid out 912 ETH ($1,429,012) in royalties, automatically.
Unlike other NFTs where the metadata is hosted on a centralized web server, the metadata of the music and image is contained within the token implementation itself. This is important: if the EulerBeats website were to ever shut down, you would still be able run the art and beat generator script, stored on the Ethereum chain in perpetuity.
Don’t other NFTs pay out royalties?
Not necessarily. Right now, most NFTs are minted as ERC-721 tokens, which means that when an artist initially sells their work to a buyer, that will be the only time they receive money for the sale.
Zora is an NFT protocol for creators attempting to change this. Each artist that mints NFTs on the platform can set a “creator share” which is a percentage that they will receive for all future sales. This is a powerful concept akin to royalties in the music world, but automatic and auditable.
An improved standard for NFT royalties
There is one problem, though. Currently the method that Zora uses for paying creator shares is not reproducible on secondary markets. The creator share percentage is only paid out if the secondary sale also occurs on Zora.
Zach Burks and James Morgan authored EIP-2981 to create an ERC-721 Royalty Standard. The main motivation is to create a modified NFT standard so that NFTs created, purchased, or sold on one marketplace still pay out royalties regardless of the next marketplace it is sold on.
I expect that more marketplaces will begin adopting this standard, which is already backwards compatible with the dominant ERC-721 NFT standard.
Cool, but how does this all work with traditional Performing Rights Organizations?
In the year 2021, enterprising artists have already begun tokenizing audio files and selling them to fans as NFTs. We are also getting closer to a more universal royalties standard for these NFTs.
ConsenSys was selected last year by the Mechanical Licensing Collective (MLC), with the Harry Fox Agency, to modernize music royalties data and payments. The MLC portal launched in January and is still evolving. There are already roughly 48 million songs, and 9,400 music publishers on it.
We believe that as more music publishers and PROs begin to get comfortable with the benefits of Ethereum-based NFTs, we will start to see a convergence of these worlds over the next year.
Until then, if you’re an artist, and you think the current royalty system is broken, it doesn’t hurt to download MetaMask, and begin exploring what other musicians are doing in the NFT space.