Non-fungible tokens (NFTs) are all the rage in the music industry right now.
DJs like 3LAU and Steve Aoki have sold theirs for seven-figure sums. Kings Of Leon just racked up around $2 million selling them bundled with their new album. And, ever the auteur, Grimes recently sold a bunch of NFT-affiliated artwork for around $6 million in just 20 minutes.
The dirty little secret of these types of transactions? People are buying unique digital collectibles – but they typically aren’t buying underlying copyrights. And considering most digital art (including music) can be easily replicated with a swipe of an iPhone, questions are getting louder over the uniqueness of the assets those splashing large sums on NFTs are actually securing.
As Pitchfork described it earlier this month: “Born out of the visual art world, NFTs create a sense of scarcity that’s inherently artificial – the token is rare, not the artwork itself.”
That all may be about to change.
Bluebox uses the blockchain to record full or fractional ownership of recorded music and/or publishing copyrights, and splits royalty payments accordingly. Ditto believes the platform will lead to “higher collection rates [while] massively reducing the loss of earnings currently experienced by artists”.
NFTs are the final piece of this puzzle. This Thursday (March 18), UK artist Big Zuu is selling 75% of the rights to a song on his forthcoming album, divided up into several different chunks and wrapped up into NFTs.
Another Ditto-affiliated act, Taylor Bennett – brother of Chancelor ‘Chance The Rapper’ Bennett – is selling 75% of the rights to one of his upcoming recordings, also through separate NFTs.
Both artists are holding on to 25% of their respective copyrights.
According to Ditto Music co-founder and CEO, Lee Parsons, where this gets interesting is after these NFT sales have been completed. Because it means multiple people will be able to automatically collect digital royalties from their share of this music, via Bluebox.
“This year Bluebox is launching both a copyright exchange and an IRO ‘initial release offering’ platform,” he explains. “Similar to sites like Polkastarter or Coinlist – where blockchain projects harness power of community to fund initial offerings – Bluebox IRO will let artists pre-sell music to a community who will then be able to own a piece of their art, as an NFT.”
For shrewd collectors, this creates the opportunity to buy “shares” in an artist’s work before it’s even been released – also creating an alternative source of funding for the artists themselves.
“To the best of our knowledge, this is the first true music copyright NFT.”
Lee Parsons, Bluebox / Ditto
NFTs, says Parsons, are the missing component to make this process run smoothly.
“To the best of our knowledge, this is the first true music copyright NFT,” says Parsons of the upcoming sales from Big Zuu and Taylor Bennett. “As a true copyright NFT, both the creators of these copyrights and their NFT investors will be paid monthly royalties from streaming stores via a Bluebox wallet.
“Right now this is only possible on Bluebox’s architecture. The NFTs will also be eligible to trade on the upcoming Bluebox NFT exchange.”
According to Parsons, this is just the start of Bluebox’s potential.
“What we’ve created here is ultimately a way for thousands of fans to invest into music as an asset,” he says. “I look at what 3LAU just achieved with NFTs, thanks to a clearly dedicated fanbase; if his fans are paying millions to own an exclusive copy of his music, how much would they be willing to spend to actually own a piece of his catalog?”
Adds Parsons: “There are a lot of headlines swirling out there about NFTs right now, but at their core, they’re really just tokenized assets.
“We expect you’ll see more tokenized assets like [house] properties entering the market soon. Realistically, you will soon be able to trade your music copyright NFT – so long as it’s worth enough – for a piece of property. That eventuality is a lot closer than people think.”
“if 3LAU’s fans are paying millions to own an exclusive copy of his music, I wonder how much would they be willing to spend to actually own a piece of his catalog?”
Bluebox has been built on the R3 Corda blockchain, which has gained a reputation for being the blockchain trusted by some of the world’s biggest banks, having partnered with customers including Microsoft, Natwest and HSBC.
MBW has heard from sources in the blockchain world that R3 is an investor in Bluebox, having joined a seven-figure round in the platform last year alongside Kosmos Capital. Parsons won’t comment on that suggestion, but does confirm that this investment round gave Bluebox a $20 million pre-launch valuation.
The way Parsons tells it, the combination of Bluebox and NFTs could spark a copyright sale revolution amongst fans, who will be able to buy pieces of songs and recordings before their favourite artist hits the big time – and then reap the rewards of this investment down the line.
He claims that, at the moment, such an “ecosystem” can only be realized on Bluebox as the platform can handle not just the copyright-associated NFT, but also the subsequent royalty payment flow. He suggests this combination could also see Bluebox quickly become an important technology in big-money acquisitions of proven evergreen copyrights in the future.
“This is the end of major record labels, publishing rights organizations, and the music industry as we know it.”
Taylor Bennett, artist and manager
Why though, do such transactions need to rely on blockchain and NFTs, rather than trusted and traditional ‘Fiat’ currencies?
Replies Parson: “In one word, liquidity. Buying a copyright is very difficult. You have to know where to buy it; you need to spend thousands on legal fees, and you certainly can’t buy it in small parts.
“By contrast, NFTs and blockchain make the asset liquid and easily tradable. It therefore provides the ability for an instant transfer of ownership – a true first for the music industry.”
Taylor Bennett, who is selling 75% of his recorded music copyright this week via a Bluebox NFT, goes even further: “This is the end of major record labels, publishing rights organizations, and the music industry as we know it.”
In the future, Parsons says he is particularly excited about the application of Bluebox and NFTs with Opulous, which the team behind Ditto launched last month.
Opulous is a decentralised finance (DeFi) platform that enables artists to secure loans against their past streaming revenues, with the copyrights they own held as collateral.
Artists and other investors can also pay into Opulous’ Music Copyright Pools (from which loan capital is taken), and are told they can earn 10% per annum on any contributions they make.
“The Bluebox copyright management platform was already providing the backbones for the loan process in Opulous,” explains Parsons. “Now, the platforms are even more integrated.
“Using Bluebox and NFTs, any non-music person can buy a piece of a copyright and then use that asset’s monthly earnings to either earn interest [via the Copyright Pools], or get an instant loan.”
He adds: “Opulous and Bluebox are very much intertwined into the vision we have for the next decade in the music industry. And it’s a vision in which NFTs promise to play an important role.”Music Business Worldwide