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A Field Guide to Music’s Potential Crypto Boom. Part 2. Letting artists peek under the hood. It’s also not just about payment rails. “That’s like saying the Internet is only good for email,” says Grammy-winning artist RAC, who’s been a crypto fan for years now. “Currency is just one tiny little aspect of it… It’s about changing how we interact in a business setting.” Contracts and other sensitive information pertaining to an artist’s career could be stored on a blockchain. As Katz explains, the modern creator expects more from the people and teams responsible for handling and promoting their music. Transparency has become a hot-button word in recent years as more and more artists have opted for going indie out of distrust of major music companies. “As a modern day creator, I’m going to expect a full sense of transparency,” Katz says. “I’m going to want to know that no central agency or organization can manipulate that information, so there has to be a sense of the irrefutable, transparent, and immutable.” Thanks to that, a lot of indie players are starting to play with blockchain applications. “If they start having success with it and unlock certain benefits to creators, then the majors may want to replicate that and lean in for the sake of being competitive — but in our view, this is probably a 2023 conversation,” Katz says. Blockchain could help artists finally understand where and how their money comes in. Imagine a neatly organized portal that automatically updates all of an artist’s revenue streams — merch, touring, licensing, streaming royalties, performance royalties. That doesn’t currently exist, thanks to the complications within multi-ownership of music works. But it could be five years or so down the line — or shorter, with blockchain adoption. “You have 12 different revenue streams, you open up one portal, and, boom, there they all are in real time,” Katz says enthusiastically. “They’re completely reliable and nobody could have messed with them. That’s your entire world. But in order for that to happen, we’re looking at a scenario where literally every single player within your ecosystem — your music publisher, your record label, Spotify — at one particular point, turns on one light switch and all of them jump on this one framework. That’s why it’s challenging. If two of the 10 people you’re dealing with jump on but the other eight don’t, you’re going to have partial information. People want to do it, and creators will start demanding it. It’s really just a conversation of sequencing and timing.” Allowing fans to invest in artists directly. So, what’s first then? Katz and Senderoff argue that the easiest on-ramp for crypto to be understood and blockchain to be utilized for mass adoption is through digital collectibles and NFTs, which really just hold assets and information despite being depicted as a “token.” NFTs are special because “they cannot be copied and are easily tradable,” explains Vasja Veber, CEO of a start-up called Viberate, a fan-assisted music analytics platform. Senderoff adds that the auditability is worth praising as well: If a fan buys art via a NFT, they know it’s authentic because they can see where it came from and how many owners it’s had so far. NFTs are about “getting to own or access things that I, the fan, otherwise wouldn’t,” explains Katz. “I’m getting to be a part of something that has a sense of scarcity around it, a sense of exclusivity — whether it’s a piece that I own and can wear as a social badge of honor to demonstrate my fandom, or it’s an access pass or passport into a set of exclusive experiences.” With NFTs, the music industry could even create a kind of merch royalty. Because of the smart contracts and rules that can be coded into a NFT, the original creator of whatever art or asset is stored on it can get paid a piece of the value that was exchanged, “which is a massive benefit for creators,” says Katz. He urges people to think of a band t-shirt, which is normally bought through a one-time, direct-to-consumer payment. After that exchange, the original creator doesn’t see a dime. “But imagine I created something with my name or likeness on it — or with my creativity in it — and I got a piece any time it exchanged hands. That calls for a much more expansive, more long-term career.” NFTs are already starting to become more popular amongst artists, particularly in the EDM community. Deadmau5 partnered with Worldwide Asset eXchange (WAX) in December to release their own limited series of NFTs carrying digital collectibles. Outside of the electronic world, Portugal. The Man seems to be the first mainstream act to create its own NFT. The band launched its $PTM coin in January to give fans access to an archive of live footage and outtakes that will be regularly updated. RAC’s adventures in crypto started in digital collectibles with what he refers to as “audiovisual dioramas.” In applying scarcity to these art pieces — by creating a fixed amount of numbered collectibles — he says the market determines the value, which he believes is better than Spotify determining the value. “I think it’s a profound change, and it’s one that I welcome,” he says. He adds that he’s “tired of trying to get on playlists on Spotify” as a crucial step to earning a living. The first NFT that RAC created broke the record on a platform called Super Rare; it held a 30-second loop that sold for $26,000. “There’s something to this,” he says. “There’s something to applying markets to culture and art.” He adds: “This thing could keep getting traded into oblivion for the rest of my life and I’ll keep getting 10 percent.” While he’s seen some high price tags in the digital collectible world, he says it runs on a spectrum — like trading baseball cards versus buying the Mona Lisa. When RAC had just finished his third LP and was figuring out how to release it, there were plans to make vinyl but not cassettes. He decided to partner with a crypto-driven marketplace called Zora to create a $TAPE token that was linked to a limited-edition cassette tape. They created 100 tapes, the starting price was $20, and people could buy and sell these tokens that represented the physical product. If a purchaser decided to redeem their token, they were sent a cassette in the mail, and the quantity then dropped from 100 to 99, for instance. “On the first day, we went from $20 to $950.” A couple of months later, even if it was for a brief moment of time, $TAPE was valued at $4,800, which made it the most expensive cassette tape in history. “When you let markets determine the value of things, you get closer to what they’re really worth,” he says. “And I’m not going to sit here and say the cassette’s worth $950. It kind of fell back down when some people at the top were like, ‘Oh, I’d rather get some money instead of a cassette, so they sold it and the price went down, back up, and then eventually settled around $200. At the time, I was like, ‘Okay, $200 for a cassette tape. Maybe that is the value of it.’ If I came out and said, ‘Hey guys, I’m selling a cassette for $200,’ people would be like, ‘You’re insane. How dare you?’ But that’s what the market decided.” Veber says that, in theory, an artist could also transfer the copyrights for their discography onto a NFT. Whoever then owned the token could collect royalties for the underlying tracks. “This could streamline the transfer and trading with catalogs between publishers or even enable artists to crowdfund their production by issuing NFTs that random people could buy,” explains Veber. “The artist would get the money for the new album and token-holders could then recoup their investment and make profit from royalties.” But again, the mainstream scene is years away from that, given the complexities of music belonging to multiple rights-holders. “The only way it can be done sooner is if the artist is fully independent and completely owns one hundred percent of their publishing and there are no other parties,” says Senderoff. Albums and songs are often created by multiple songwriters and producers. When one other party with different representation enters the mix, that calls for mass adoption and the use of an interledger. As for literally investing in an artist à la buying stock in a company, Katz says that will only happen if and when major music companies are willing to take at least a piece of what they own and put it into the marketplace. Right now, Katz points out, catalog sales are red-hot and the value of copyrights is too high for that to happen. So, yes, NFTs can technically be tied this to music rights, but music rights are incredibly encumbered. On the other hand, if you’re an artist who’s created a pair of digital sunglasses that your fans can wear as filters on Snapchat or Instagram, and you’re selling those for one of your artist tokens, which cost five dollars to buy at the beginning, the process is far less complicated. “You created something that doesn’t need to be physically distributed or physically created,” says Katz. “Nobody else has their hands into the pot of that asset. There’s no record label or publisher trying to get money from that. They can’t. You created a completely new asset class that you’re now monetizing. And because of crypto getting paid directly.”