This is the first in a special four-part Forkast.News series. Part 2 explores K-pop’s new token economy and Part 3 looks at how the NFT platform brings musicians into the crypto world.
In recent years, technology has dealt musicians a crushing blow, with music streaming having brought down the unit price of musical works to near-zero. However, many believe another technology — blockchain, and specifically non-fungible tokens — could come to the rescue.
“NFTs could bring back the value of music once again,” Pochang Wu, a co-founder of Taiwan-based NFT platform OURSONG and the main vocalist in rock band Echo, told Forkast.News in an interview.
OURSONG, launched in 2019 and dedicated to digital collectibles for music, started life as a research project two years earlier within KKBOX, a major music streaming service in East and Southeast Asia.
Wu said that Chris Lin, another co-founder of OURSONG who’s also a co-founder of KKBOX, felt “a bit guilty that he was part of the movement that’s made music valueless,” so in 2017, they started to explore how blockchain technology could make music rare and tradable in the digital world and create a new form of digital collectibles for music.
“At that time we were like, ‘How are we going to create a unique container, and how will this container be visualized? And how can this container provide a user experience that is akin to that of buying vinyl or buying a CD or buying a cassette tape?,’” Terence Leong, another co-founder of OURSONG, told Forkast.News.
“It’s very simple because when you can do that, you can potentially take the music industry not back, but forward, in a retrospective kind of way, where we can actually go back to having a unit price for music,” said Leong, who has 25 years of experience working as a composer and a music producer at labels including Sony Music, EMI Music and Universal Music.
The business of music streaming “scaled tremendously over the last decade and a half, and the unit price of a song is minimal,” Leong said.
Spotify, for instance, generally pays between US$0.003 and $0.005 per stream, according to a report by Insider and Wall Street Journal article. Apple Music pays US$0.01 per stream, according to the Journal report.
The numbers stand in stark contrast to those in the industry about two decades ago. Leong said that in 1999, the recorded music industry was a US$33 billion market, and that record companies and artists were able to make money from sales of music “because you had a substantial margin.”
Some artists have pushed back against streaming platforms. As early as in 2014, American singer Taylor Swift pulled her entire discography off Spotify in protest.
“Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for,” Swift wrote in a commentary in the Wall Street Journal that year.
Hanjin Tan, a 45-year-old Singaporean singer-songwriter and music producer based in Hong Kong, shares similar views. He has made his songs into NFTs over the past few months and has sold limited-edition music NFTs for 7 BinanceCoin (US$2,204) each.
“When you subscribe to a [music streaming] platform, you get a buffet of whatever you want to listen to,” Tan told Forkast.News.
Tan said that he had noticed an income gap in the music industry, especially among Chinese performers.
In China, for instance, about 52% of musicians didn’t earn anything from music in 2020, and around 24% derived less than 5% of their income from music, according to a survey conducted by a research team at the Communication University of China.
“That’s unacceptable, so I’ve been trying to find a way out of this issue,” Tan said. “I’ve been looking at young musicians, and there’s not a lot of new blood. It’s simply because they can’t survive. For the guys who are hot right now, they basically just made it by the skin of their teeth.”
Leong said: “If you’re that No. 1 hit song on the streaming platform, you’ll make a lot of money. But I think for a lot of independent musicians, streaming money is not enough because you need volume.”
A Taiwanese creative industry veteran who has worked at Universal Music in New York told Forkast.News that NFTs could often break the limit of prices for items such as books and CDs, which were expected to lie within a certain range. Loyal fans could be willing to pay more for NFTs than what they would normally pay for physical albums, the industry veteran said.
Ownership vs. usage
In the past, collection and usage were pegged together, Wu said. That meant if people wanted to listen to music, they would have to buy physical albums and play them. “If I didn’t own it, then I couldn’t use or listen to it,” he said.
“But now it’s different. Even since the digital world prevails, we sort of split these two things and only need to pay a usage fee [to streaming services] to listen to music without really owning it,” Wu added.
However, Wu said that the industry had started to see a growing number of collections. In 2019, sales of vinyl — mainly for collecting — surpassed sales of CDs, according to Wu.
“The reason why you buy vinyl was mainly to collect it, and most of the time you still listen to music on streaming services,” Wu said, adding that if that idea were valid, then it would be natural to apply the same idea to NFT adoption.
For artists, the wide circulation brought by music streaming has caused their incomes to shrink, but Wu said: “NFTs could bring back the sense of collection, which could possibly make up the gains we had sacrificed for the intention of making our songs widely heard [by the boost from music streaming].”
“It’d be an ideal world for me if I could have people who like my music collect my works [through NFTs] and at the same time have my music widely circulated nearly for free [through music streaming],” he added.
Leong echoed that sentiment, saying: “We believe that NFT is just the beginning of the assetization of the Internet,” he wrote in a blog post in May.
“Whether it is a piece of content, individual thought, an online experience or footprints of our engagement, blockchain technology’s emphasis on immutable records and distributed ledger is exactly its most valuable promise to the future and mankind,” Leong wrote. “It is the world’s biggest database built for the people and rightfully, to be controlled by the people and not Elon Musk’s Twitter.”
Building patron communities
Tan said NFTs were a good way to rebuild the patron-musician relationships that prevailed in pre-Modern Europe, like the relationships that composers such as Mozart and Beethoven had with their patrons.
“What [NFTs] do is allow musicians to explore different ways of monetization with higher margins,” Leong said.
For example, he said, if a musician had 100 fans that were willing to spend US$10, that could generate a total of US$1,000, whereas if those same 100 fans kept listening to the musician’s songs on streaming platforms over and over again, the amount of money that could be generated would be much less.
“[With NFTs] you’re able to find niche fan communities and be able to monetize from that.” Leong said. “It’s very important for independent creators. You’re able to take your content and sell it to the people that care about it enough … It’s not just like giving them an MP3 that you can find online anyway, but it’s giving them something that’s unique.”
OURSONG has explored many ways to offer perks to fans who buy digital collectibles. For many projects on OURSONG, buyers can access exclusive chat groups to connect with like-minded people.
“I’ve seen it in some cases where the artist engages with her fan club fans in there,” Leong said “They kind of become your ‘army.’ I mean, that’s how BTS has gone global. It’s like a really strong fan support.”
BTS is a seven-member K-pop boy band that debuted in 2013 and has taken the world by storm over the past few years with its powerful fan clubs.
By doing that, creators essentially filter out paying and non-paying listeners.
“You filter out the consumers who are willing to pay, and you put them in a place where they can be with others who are willing to pay, and the quality of engagement is much richer,” Leong said.
The recent NFT hype has helped OURSONG secure strong growth. From April 20 to the end of June, the total transactions on its platform surged tenfold year on year to the equivalent of approximately US$100,000, according to Wu.
“[NFTs] could create a lasting, new revenue stream for creators,” he said.
“It’s a chance where your work can make some money and pay rent instead of you sitting down and waiting for the next project,” Tan said. “Because artists are not releasing albums, and venues are not opening anytime soon. Streaming is not going to give you any money.”
See related article: Beyond NFT’s hype: Artists and crypto experts take a hard look at NFTs