How we monetize fandom in an increasingly online world is a question that doesn’t just exist in music, but also in sports. As such we can learn from each other. Brand new American football club Inter Miami just launched a video strategy that is all about engagement. Let’s see what they’re doing, how they do it, and what it means for those monetization strategies. But first
Some background into US sports on TV
In the US, sports on TV is having a hard time of it. Its ratings having been decreasing for years with a hard slump during the pandemic. Taking the Major League Baseball as a quick example this is what that decline looks like:
There are some signs that viewership for sports in the US will stabilize and, as The Hollywood Reporterrecently reported, TV networks on the one hand have too much money – roughly $140 billion – invested in sports over the course of the next 10 years. On the other hand, shrinking overall TV subscribers may make sports’ appointment viewing even more valuable. At the same time, shifting audiences will require changes in how live sports will be offered. There are already some examples that try to incorporate other franchises, such as Star Wars or Marvel, into the live broadcast. But other experiments are more interesting to analyse from a music perspective.
The Inter Miami case
A totally new football club dreamed up by David Beckham, perhaps it’s not strange that they also think about branding like Beckham. Last week, the club released an app, which they dub ‘an immersive fan video engagement experience.‘
Get ready for tonight's match by downloading the #InterMiamiCF’s app where you can livestream the game while video-chatting your family and friends!
Social engagement, focuses on being to share and like while staying with the live video of the game
Many of these elements resemble things that already exist in other live video spaces such as games like Fortnite, streaming services like Twitch, and SVOD services like Disney+. While I’m most excited about the watch party integration, it’s actually the combination of elements that music should look at when it comes to livestreaming, the total package that will help fuel a collective watching experience. This type of live and simulaneous watching is also YouTube‘s number one highlight from their recent Culture and Trends Report.
Inter Miami partnered with a company called StreamLayer on the app. Just last summer, they raised $4 million and their unique selling point is that they create overlays on any video stream. Their first focus is on mobile, because “the proclivity on mobile to interact is just dramatically higher,” as Head of Product Strategy Tim Ganschow told Forbes. The next step will focus on connected, or smart, TVs, which is also an exciting space for music.
Monetization strategies
Interaction and engagement are the key elements of this new football viewing experience. Those are two elements that musicians on Twitch or StageIt, for example, have also learned to utilize and control. However, the watch party element is something that can come in and make a big change for music livestreaming, especially when it comes to monetization. There could be, for example, ‘normal’ tickets, but also ‘watch-party’ tickets that allow you to set up a room with up to 8 friends. This wouldn’t be too dissimilar to group tickets for festivals.
Besides thinking about bringing in extra revenues through a variety of tickets, there are many more possibilities. Overlays present opportunities to show sponsors in a livestream without the need to cut out the live video. Or, it’s possible to do direct merch calls directly related to what’s happening in the livestream. Of course, the livestream itself would need to be unique and different to create interesting moments to print on a t-shirt or mint into an NFT and, most importantly, to warrant interest from fans.
In sum
We need to keep thinking about new ways to create more interactive and engaging livestreams. One way to do so is to look at what others do and develop. Just like StreamLayer looked at Twitch and tried to bring more engagement into sports livestreaming, so musicians, managers, labels, venues, and platforms can look at Inter Miami’s app and copy the watch party. Moreover, these types of developments will continue to give livestreaming a differentiating edge against in-person concerts. Novel ways to connect, interact and engage with fellow fans will be one way to keep people at home with their screen instead of in a venue or at a festival.
When a technology is new, it allows us to imagine all kinds of utopias. It also means we often don’t quite understand it yet. While I try to explain a little how zero-knowledge proofs work, I’ll also compose a utopia that will make even the most ardent Equitable Remuneration supporter come running for this utopian door.
Zero-knowledge, the shortest history
Zero-knowledge protocols are techniques that we can use to verify a message, ownership, data, etc. without revealing any residual data outside of that verification. In other words, one person, or computing system, convinces another person, or computing system, that what they say, or transmit, is true. One entity convinces another entity instead of sharing actual data in what can almost be thought of as a game. Take the Ali Baba and the cave explanation which showcases how the Prover can prove without revealing the secret and the verifier can trust through a simulation by prior agreement. The ‘zero-knowledge’ stems from the part where the secret isn’t revealed but the verification takes place nonetheless. Or take the ‘hats’ solution, which helps to explain how each question that has a yes/no answer can be brought back to a ‘graph three-coloring’ problem.
Each connector never attached to the same color on both endsThe solution is a secretThe verifier randomly selects one connector in each round of the game
This example comes from cryptographer Matthew Green who, in 2014, wrote a non-mathematical explanation of zero-knowledge proofs. In the end, the ‘game’ has to be played until the verifier is satisfied that the prover isn’t lying, or actually has the knowledge they claim to have. You can play around with this as the verifier in this interactive demonstration.
Privacy
If we think about our personal data and how it’s shared on the internet this can begin to have real-world impact. Instead of actually entering your password somewhere you prove you can enter without revealing information. This is where zero-knowledge protocols first played out. Instead of typing a combination of letters, numbers and symbols, you convince the other that you know the password without typing it. This sounds abstract, so let’s try to make it less abstract. Zero-knowledge protocols are cryptographic and we can turn to a paper called Applied Kid Cryptography, from 1999. In it, the authors take two kids playing Where’s Waldo where one, Alice, sees Waldo before Bob, the other. Alice then has to prove to Bob that she knows where Waldo is without showing him where he actually is. Their solution is to take a big piece of cardboard, much larger than the board, and to let Alice cut out where Waldo is when it covers the page. Then, Alice lets Bob look and he sees Waldo, but nothing else of the drawing. The secret of where Waldo is on the picture isn’t given, but Alice does show Waldo. In a very simplified way, this is what happens when two computers or programs ‘talk’ to each other in a zero-knowledge protocol. Anything more complicated than this example will require more than one verification to prove something to the verifier. So instead of entering a password zero-knowledge protocols simply rely on very different verification processes.
That utopian music service
There’s some real-world practices surrounding zero-knowledge protocols. Packy McCormick and Jill Carsonwrote about a few applications, specifically within blockchain tech, but also for cloud infrastructure. For blockchains, zero-knowledge protocols can lead to a drastic drop in computing power for each new transaction.
“Rather than verify the whole ledger, now you can just verify the proof. That proof will never be more than the size of a few tweets, meaning it can be done by anyone — even from a cell phone at your parents’ house.”
Packy McCormick & Jill Carson
Running with this idea of just needing to verify the proof we can make the move towards my music service utopia. It starts with all music stored within the cloud and accessible for everyone. So far, not so different from any streaming service we have today. However, plays are tracked by zero-knowledge protocols and attributed to the rightsholders directly within the same verification process. There’s no need for any intermediaries, so all rightsholders are always the artists involved. They all link up directly with the cloud to provide their music and they prove they’re the creator of said music through zero-knowledge protocols. No sensitive data exchanges hands and nobody gains access to even the metadata attached to the music.
Of course, the metadata is available to the listener, yet their transaction to gain access to the music remains anonymous. Through the music service they pay directly to the artist(s) they listen to and this payment isn’t part of a subscription but represents the value the listener places on the music at that time. It is, again, a zero-knowledge protocol, that determines this value. The artist or band can set the amount they want to receive for a play or a purchase and the listener can prove they want to pay this before they gain access. Conversely, any fan who wants to join to a community around their favorite artist can gain access by proving – convincing a verifier of – any numbers of things. From direct monetary contribution to the possession of social tokens to something as simple as knowledge about the artist or band.
In other words, a music industry built upon zero-knowledge protocols can become the most direct artist-to-fan and fan-to-artist service imaginable. It has the potential to cut out everything that potentially stands between those two. No more labels, no more collective rights organizations, only interactions verified and proved to convince both fan and artist they should connect.
Catalogue sales keep dominating the news, but would anyone actually invest directly in a musician or a band? What would the return need to be to get interest for this? And, can we move beyond investing related to future streaming revenues? Perhaps towards tokenized fandoms?
It’s still Hipgnosis that dominates the market news, just recently with their annual report stating that net revenue increased by 66%. Something that MBW learned from the report was that 60.2% of the Hipgnosis catalogue consists of songs older than 10 years. There’s more to the catalogue playing field than just Hipgnosis, with Universal Music‘s acquisition of Bob Dylan’s catalogue back in December particularly eye-catching. More recently, ReservoiracquiredTommy Boy‘s catalogue of songs. All of those catalogues share the common trait of consisting mainly of songs older than 10 years. This makes sense, because those songs have all proven their value and with music’s nostalgia factor will likely hold on to their value or grow it. This is much more difficult to prove or predict for new songs, let alone with the music of artists operating in more niche genres.
Are musicians creators?
First, we need to define what we’re talking about when I say creator here. I like to follow the following definition from eMarketer which they put forward in 2019:
Creators: People or entities that develop original video content for digital properties, and who consider creating that content to be their career or livelihood.
Swap video for audio, and that’s a decent definition of any musician or band. It’s necessary anyway to stretch this creator definition. At Snapchat, for example, creators include people who create AR features.
Looking at musicians as creators, however, puts them in what I’ll call the Daniel Ek corner of needing to create regular output to satisfy the various platforms and their algorithms. This is a very (very) different mindset than the traditional music release strategy of record in studio, release single – single – album, tour, record, and start again. Instead, the creator mindset requires a strategy of audio and video with a big storytelling element that will further strengthen the bond between artist and fan.
Investing in royalties
The easy route to investing in a musician is to invest in future royalties. Quite similar to how a major fund like Hipgnosis works, it’s possible for individuals to invest based on future royalties. There’s a reason Hipgnosis and others are investing hard and growing fast: royalties seem a certain investment. Streaming revenues continue to grow and even if streaming services will be replaced by another mode of consumption, people will still want to listen to their favorite songs.
There’s myriad ways to invest in artists by buying a future share of their royalties. Examples are Songvest and Royalty Exchange, which are basically a marketplaces for trading royalties.
my screenshot
The three benefits for investing in music like this are clear from the screenshot. It’s seen as a safe bet. Moreover, it’s seen as easy investing because music as an asset operates outside of the regular marketplace and its volatility (it’s an uncorrelated asset) and it requires no effort for income generation (royalty distribution is mostly an automated process).
But it’s not just about the investor, it’s also about the fan. Other platforms focus more on fans, for example, helping their favorite musicians or bands create new music. It’s like crowdfunding with monetary benefits for the fans putting in the money. AmplifyX is one platform that allows this type of support and transition.
my screenshot
The details of the investment and the return are as follows:
deal terms Keithian offer on AmplifyX
This type of transaction resembles more regular financial structures. It works, basically, as a guaranteed return on investment. But that’s not how fandom necessarily works. For fans value can be measured in different ways.
Other models of investment and return
Fans are happy to help musicians they love achieve their dream album or global tour. Fans are also happy to help by taking out a subscription, especially if that comes with perks such as access to the artist, limited edition merch, etc. In a way that’s also investing but I would argue that these direct-to-fan monetization models are a small first step towards larger questions around ownership and collaboration. If we look at where we are in the development of the internet as a technology and its impact on our lives those same questions pop up.
Jeremiah Owyang tends to focus on that final stages of this map: modern wellbeing. But it’s interesting to see how he sees the ‘now’ era as the collaborative economy. The facilitator for pushing this economy forward is Web3.
A community doesn’t have to be big, it can be one artist and some friends or one band and 20 fans. However small or big the community, what’s important is that the model of investment becomes almost reciprocal. Hipgnosis is looking for ROI, but fans are not necessarily interested in purely monetary returns. They would, however, enjoy claiming some form of ownership over what they love. This can express itself in the form of song ownership with the benefit of future royalty revenues. It can also express itself as a form of patronage, where the fan funds the creation of the artist not for monetary reward but different rewards such as insights into the creative process. It’s when this investment becomes collaborative that value needs another revision in its definition. Tokens allow for this because they represent value but do so mainly within a community. All actions to build on that value thus strengthen the community. That’s an ideal worth investing in.
Inspiration for this piece came from this panel discussion on investing in creators.
Music rights holders get paid astonishing amounts of money, but most artists cannot make a living from their art. All the major DSPs love throwing around the big numbers they pay out to ‘the industry.’ Yet, most artists cannot rely on them to put food on their plate. There are, however, many methods that allow musicians to step away from over-reliance on big tech companies or major labels. Most of them involve community, and more specifically community-building.
The big girls
So YouTube paid out $4 billion to music rights holders in 2020 and Spotify, by Music Ally’s calculations paid out more than $5 billion in the same period. In the US, in the first 6 months of 2020, the biggest streaming services together made up more than 85% of total revenues for recorded music. And during the recent DCMS hearings on the streaming economy in the UK, YouTube defended itself by stating that “record labels agree that it is possible we will become the music industry’s number one source of revenue by 2025.” That seems to be a good thing for YouTube more than anyone else as it probably means that even more than 2 billion people will be coming to the service “to experience music each month.”
A major argument that came out of those same DCMS hearings was to ‘simply’ grow the overall pie being paid out by the streaming services. BPI‘s Geoff Taylor, for example put forth that “[t]he total amount coming into the industry should be substantially higher and that would benefit everybody in the chain.” During the hearings, a counterargument surfaced, through BMG, that “the status quo gives the impression it was designed for the convenience of industry players, rather than with a view to the perceptions of artists and fans.” BMG used this point to set up their defence of user-centric payment systems. However, it also paves the way for another argument altogether, something BMG hinted at too in further evidence they presented: the importance of monetizing the artist-fan relationship more directly. And that should be done by building a community.
Focus on community
We’re not new to the idea of community as an important element in artists building out a living for themselves. Just last Tuesday Bas argued that “the one strategy that I feel almost any artist can apply is that of building a community of fans that can sustain you.” This related to DAOs and in my own article about why fans should want to buy NFTs one of the key arguments was that these tokens represent an opportunity for two-way communication between artist and fan. But there’s more to community-building than future-forward web3 technologies. What first of all needs to happen is a shift in mindset. One of the things that struck me in a recent podcast recording for The Daily Indie[in Dutch] is that so few artists actually experimented with building community during the pandemic.
Of course, Patreon, OnlyFansand their like saw fast growth during the pandemic. All the musicians who set up a subscription model or turned to monetize their livestreaming efforts did an amazing job. But for each one of those, there’s plenty others who still rely on their single-single-album release strategy. Why not flip it around? Take Dutch artist POSTIE who is social media first and recorded music second. He posts a video every Sunday and then after a while releases those songs as an album. Another way of putting this is that he doesn’t use social media to drive streams, but streaming services to drive followers.
Image by Alina Grubnyak via Unsplash
The community builders
Let me highlight two people who give some excellent advice on community building. First up is Anna Grigoryan, who writes a newsletter called Community Weekly in which she presents and explains tools to build community. My favorite advice of hers is to find your community mission. That’s where it starts. With the question of who you’re doing what you’re doing for. And then following that question with how you add value for those people. I would also add, that quickly after that, you should ask how your fans, your community, can add value for you. Anna is also very open about her own struggles in building a community around her newsletter. I find this very helpful when thinking about the communities I’m involved with for example.
This is where my next community builder comes in: Jen Lee. I came across her as the community manager from the Means of Creation fans Discord. First thing that happened when I joined the group was that I got a personal note welcoming me and encouraging me to post in a channel. She’s just been interviewed by Peter Yang and that message to me is pure strategy. In the interview Jen puts forward the following idea:
Like building a product, an online community needs to:
1. Exceed user expectations by personally welcoming new members.
2. Overcome the cold start problem by seeding the community with great content.
3. Deliver great UX by focusing the conversation on a few channels.
From these two community builders you have the starting gear to step into the studio. Whether you’ll focus on one of the subcriptions services (Patreon, OnlyFans, etc.), one of the social media (IGTikTok, etc.), the community platforms (Discord, Geneva, etc.), or turn your hand to web3 protocols (DAOs, NFTs, etc.) the basics are the same.
The Call-to-action
It’s as simple and easy as can be:
If you’re an artist start experimenting with community building. Do it now and be open with and towards your fans for feedback and interaction.
If you’re not an artist yourself, you’ll know them. Help them out by giving them these building blocks.
Together, we can make sure that the focus of the music industry starts to inch away from the shouting big numbers and boasting massive usage stats. Instead, we’ll focus on creating communities where artists and fans exchange value.
We don’t hear about the livestreams that don’t go well so much. However, technology breaks down and breaks down quite often. This can happen to an artist playing a Twitch show for 50 people, but also to Glastonbury and Driift working on one of the biggest livestream events of the year.
Glastonbury’s Live at Worthy Farm event included lots of great artists and a special appearance by The Smile, the new band including Thom Yorke and Jonny Greenwood. Lots of people, who had bought tickets, couldn’t make it into the livestream. The problem was that lots of the unique ticket codes were flagged as invalid. After almost two hours the solution was to remove the paywall to the event. And since the event was live-to-tape instead of actually live, viewers were also able to rewind for example.
And while individual cases can be just that, an individual’s connection that is problematic, lag created by some error on a laptop or phone, etc. the technological problems are always below the surface.
It’s just too busy
The most common trope surrounding the failure of livestreaming is to do with traffic. Servers need to handle a lot of people entering a virtual door and getting their ticket verified. Two major examples come with Justin Bieber‘s New Year’s Eve livestream and Marc Anthony‘s ‘Una Noche’ livestream from 17 April. The former’s livestream overloaded because 1.2 million T-Mobile users showed up having mostly bought their tickets on the last day. The company hosting the livestream, VenewLive isn’t new to big number of visitors having been set up by a combination of HYBE, Universal, and Kiswe. But just like you have to wait at an arena sometimes, so servers can overload due to high demand. Similarly, with Una Noche, demand seemed to outstretch capacity. In a great article in Billboard, there are two stories: 1) again, lots of people bought tickets at the last moment causing server undercapacity; 2) too many people used the same codes causing the system to crash. Either way, it has led the livestream platform Maestro to change its policy and only host shows that run through their own ticketing platform.
The fix
There’s an easy answer to this problem: a cap on tickets sold. StageIt‘s Stephen White told me that they actively encourage artists and bands to put a maximum amount of tickets per show. This allows for good preparation in terms of what kind of server capacity will allow shows to run smoothly. Of course, it also creates a sense of scarcity. And, indeed, StageIt sees a more even tickets-sold ratio across the period that those tickets are on sale and less last-minute buying then reported for Bieber and Anthony.
Another option is to scale your server capacity, which means you probably have to work with one of the major cloud services such as AWS or Google Cloud. These companies have vast options available to scale server capacity. AWS has an auto-scaling functionality, while Google Cloud allows for automatic load balancing to allow for heavy, unexpected, traffic. The problem here, of course, is that this doesn’t come cheap. The more power and capacity you use, the more you pay. Whether the ticket prices will still cover this is something you want to know in advance and not be faced with last minute or even the day after.
A third option is to use an existing platform that knows how to deal with audiences at scale. Dedicated music livestreaming platforms like VenewLive, StageIt and Maestro – and their are dozens more – are great in terms of offering specific functionalities, such as integrated merch sales, and closed, ticketed, environments. Platforms like YouTube and Twitch already have so much traffic moving through them that any spike from even the largest livestreams won’t impact the overall computational capacity too significantly. They also have other advantages such as different direct payment options, suc as tipping and channel subscriptions. Of course, this is different than buying a ticket, but for artists who aren’t at the level of Marc Anthony or Billie Eilish it might make sense to drive users not to a ticket but to another method of payment. Going back to StageIt, they find that most artists get the highest return not with a set ticket price but with a pay-what-you-can model.
We won’t shake off these issues
I’m a strong believer that livestreaming is here to stay, especially if done well. By that, I mean that the experience of a livestream should be different from that of a gig in a venue. Instead of just pointing cameras at a stage, livestreams should offer viewers a unique experience that feels like it’s made just for them instead of for hundreds of people at once. To achieve this, it makes a lot of sense to use a different platform than YouTube or Twitch, to partner with a provider that makes it their business to create something bespoke. Take to Twitch for a quick and dirty livestream of you or your band in the studio, but make sure to create something with added value if you ask people to pay for a ticket.
The livestream-specific platforms may be more limited in terms of capacity and potentially have other technical limitations. However, these issues will remain as long as livestream. Best thing to do then, is to try and stay in control – as evidenced by Maestro’s reaction to the failed Marc Anthony livestream – and to prepare well. The latter probably means you want to cap your crowd so you know exactly how much server capacity you require. And, finally, let’s make sure we talk about the failures and learn from them. Not all news about livestreams has to be rosy, it’s also okay to tell the world something went wrong.
Earlier this year, when music NFTs entered hype-stage, one of the promises was a fairer distribution of revenues to artists. The hype came from big sales with 3LAU, Grimes, and even Kings of Leon. However, none of those NFT auctions actually included ownership. The best known example of copyright exchanging hands as part of an NFT sale was with Jacques Greene, and he actually had to sidestep the NFT to make that happen. At that point, I became skeptical of the role NFTs could play in broadening the possibilities for artists to earn revenues or broaden their income streams. Of course, as part of a smart contract attached to the NFT a certain percentage of future sales can revert back to the original creator of the NFT (which isn’t even necessarily the artist). That’s great, and I can see the benefits in that. Every time an NFT gets resold, the original creator keeps getting a kickback. Assuming the asset appreciates in value over time, that’s a good deal. And yet, that’s just one small piece of the copyright puzzle. What can NFTs, and blockchains more generally, mean to different copyrights? We enter a world controlled by collective management organizations (CMOs), and those have their own set of important problems.
Simply put NFTs offer two roads, a two-pronged fork if you will, to advance discussions about copyright and improve the way artists benefit and earn revenue from their work:
A world without copyright as we know it. No CMOs. Instead, everything is organized through blockchains. I’ll explain why this is a realistic possibility by drawing on the theories of economist Carlota Perez.
A world where NFTs and blockchains get incorporated into the existing copyright structures. For this we need metadata and the first indicators are out there that this will be developed.
Blockchain-controlled copyright
Imagine a world that has done away with traditional financial systems and which has instead replaced those with decentralized financial systems based around blockchains. This is a world where, for example, the Ethereum blockchain has fulfilled its potential, where it has become a store upon which and through which people build applications and provide access to them. The revolution of the blockchain and the associated NFT has reached both maturity and mainstream. If we look at Carlota Perez’s theory of how technological revolutions happen we’re at an interesting juncture right now. Looking at blockchain through Perez’s wave of surges [also related to the Gartner Hype Cycle], there’s the explosive growth surge, which characterizes itself by opportunity, innovation and new modes of behavior. In this surge, there’s a need for new infrastructure and for shifts in paradigms. In this phase there’s a lot of speculation which in turn drives the economic growth of the new technology. In a sense, blockchain has been through this phase, while as a smaller-scale technology NFTs are right on top of this surge.
The second phase Perez describes is the golden age. This is where the boom becomes long-lasting and where we can speak of a mode of growth. Perez characterizes this as follows:
“each technological revolution brings with it, not only a full revamping of the productive structure but eventually also a transformation of the institutions of governance, of society and even of ideologies and culture.”
Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (2004), p.31
Interestingly, Perez published her book on this idea shortly after the ‘dot-com bubble’ burst. This bursting bubble and the subsequent long-lasting boom of internet culture, finance, and governance is part of a trend that occurs every 50 to 60 years according to Perez. If we see ‘blockchain’ as the next, or current, mode of growth, this cycle is quickening. And to understand the realistic nature of a near future regulated through blockchains we do need to see this revolution as a mode of growth. When it comes to copyright, though, we are at the very early stages of creating new infrastructure. In the intro I mentioned the Jacques Greene NFT which included the publishing rights to the underlying song. While Greene organized this transaction outside of the NFT, Bluebox is looking to incorporate various aspects of copyright into the NFT smart contract. The idea behind Bluebox is to create 100 NFTs per song, each representing 1% of the underlying copyrights. The artist can then decide how many of these NFTs and thus how much of their intellectual property they want to sell. In the same breadth, any fan, or investor, can decide to become owner of one to several percent of a song. Bluebox is built on the R3 Corda network and currently is a kind of walled garden. In other words, it has the ability to both sell the copyright and organize the flow of royalties, as per Lee Parsons, CEO of Ditto and co-founder of Bluebox, in MBW last month.
As the Corda network opens up to more public blockchains, such as Ethereum, it will be interesting to see if, and how, there can be a mix of NFTs from one blockchain-based marketplace to the next. It’s important, however, that there’s an example of what it means for copyrights to be organized through a decentralized database. It’s one step towards a better infrastructure, more inclusive governance and a more artist-driven royalty structure.
The need for Metadata
I get that a fully-fledged decentralized system for copyrights might seem far away, even if we see the current NFT hype as a small part of the boom of blockchain. So what would it mean for NFTs to be incorporated into current structures and systems? Most importantly, this would require metadata. And this recent announcement from OpenSea made me hopeful that this isn’t actually too far away from happening.
⚙️ You can attach entire web apps to your NFTs on OpenSea!
First and foremost, this new set of metadata allows NFT creators to make much more dynamic digital assets. However, the addition of more metadata fields within the code of the NFT also opens up a route for tokens to be matched with broader copyrights and licensing organizations. I recently wrote about how certain independent management entities (IMEs) are working with blockchains to prevent unallocated royalties. If we take this use of blockchains one step further we can envision a shared database of contracts that will allow songs to be tracked throughout its various usages: in-store, through DSPs, sync, remix, etc., etc. Somewhere there needs to be a piece of metadata that is shareable and verifiable each time a song is used.
Some IP lawyers have argued that to allow security in this chain of sharing and verification only the original copyright owner – they of the intellectual property (IP) – should be allowed to mint an NFT. So far, however, NFTs are closer to other collectibles and, for example, photos. Both of those allow someone who doesn’t own the IP to create a variation of it, like a card or a print, and earn revenues from this. This is one reason why music-related NFTs haven’t yet included transfers of copyright ownership. Music is already made available as a digital copy and has a set of complicated rights attached to it to make sure that rights owners get paid when one of those digital copies is used.
Which brings me back to the issue of the metadata. Tracking a digital copy is difficult, especially if not all elements where its used work on the blockchain. This is why Bluebox works so far, because it operates as a walled garden where it can control and track and verify. A next step could be to move music-related NFTs into a license such as the one attached to Cryptokitties. Dapper Labs introduced the NFT license which allows owners of to “commercialize your own merchandise, provided that you aren’t earning more than $100,000 in revenue each year from doing so.” While this sounds good, much of it rests on using other marketplaces that can “cryptographically verify that you are the owner.” And while this Dapper Labs NFT License allows some form of monetization through merchandise, when we look at YellowHeart’s, the marketplace known for the Kings of Leon and XXXtentacion NFT sales, terms of service simply do not allow for commercial use outside of reselling the NFT through a marketplace that allows for cryptographical verification.
If, then, the fully decentralized system for copyrights rests on the broader adoption of blockchains into the world of financial transactions, or even see it supplant those centralized world, it might be easier to find ways to track copyrights through metadata attached to smart contracts related to NFTs. If we look at Perez’s lifecycle of a technological revolution again, we can imagine further integration into the existing infrastructure for copyright management in the second phase.
Perez, Technological Revolutions, p. 30
Supplanting the current ecosystem of copyright management will not follow until the blockchain revolution is towards the end of phase three. At that point, the full spectrum of the market will have adopted the technology and that will allow tracking of IP and allocation of royalties wherever that IP is used. There is no walled garden, instead there is full interoperability. For now, though, we need to be happy that we can look at integrating metadata into any future NFT sale that will allow it to be tracked within the current system, which is organized by CMOs and challenged by IMEs. The latter will prove essential in the adoption and integration of the metadata. They will also help push innovations in the infrastructure necessary to help rights owners follow usage and chase revenues.
Some time after
By looking at blockchains as a technological revolution in the sense of economist Carlota Perez I was able to position NFTs as still an early new product as part of phase one. In itself, NFTs are seeing their own little boom-bust-plateau cycle. In the broader scheme of the revolution NFTs will allow – some time after – to first see an integration with existing copyright structures and then a completely new system: a world without copyright. The former will help artists and rights holders to better track and monetize their assets through the inclusion of metadata that is accepted and verifiable by an increasingly broader set of organizations. The latter currently seems like a blue-sky-idea but actually runs parallel to the future as a decentralized database where copyright might not exist anymore and instead a different type of royalty structure has emerged. This structure should be more artist-driven as it puts more power into the hands of the original owner of the IP owing to the fact that they can always maintain control of how much of their IP they sell off in the first place. Whole new markets will evolve from this, but looking at Perez’s cycle this is still a couple of decades away. In the meantime, it’s important to question the ownership structures related to NFTs as this goes through its own hype phase.
