NFTs: Are they the future of the music industry?
What unites electronic producers 3LAU and Steve Aoki with Nashville rockers Kings of Leon and alternative artist Grimes?
No, it's not a mind-bending collaborative single. Instead, together they've each earned millions in recent months by selling non-fungible tokens (NFTs), paid for in online crypto-currency.
This has sparked media and music industry buzz, but for many outside the bubble these terms still feel alien - causing eyes to glaze over in confusion.
In fact, non-fungible simply means unique. The token acts as a digital certificate of ownership for whatever the creator, in this case a musician, decides to put up for sale. This can be anything from a single traditional album, to a bundle including extras such as gig tickets and exclusive bonus tracks.
Fans buy NFTs through crypto-currency - online money that includes a record of who owns what, stored on a shared ledger known as the blockchain. The advantage for the artist is that they set the terms and can embed "smart contracts" that ensure a slice of any resale value.
Here comes the even stranger part: although each NFT sold is supposed to be one of a kind, its contents can still be shared, copied and sold to anyone further down the line. This means the NFT's value is defined in part by its scarcity - the lower the number, the higher the value, with the original copy often the most prized.
Anyone can own a print of the Mona Lisa, for example, but only one person can own the original hanging in the Louvre, even if it is seen by millions of people.
If the concept may seem odd right now, the financial bottom line is clear: there's potentially a lot of money to be made.
Grimes sold almost $6m (£4.2m) in NFTs in just 20 minutes; Steve Aoki sold a collection for about $4.25m (£3m); and Kings of Leon sold a batch for roughly $2m (£1,4m). 3LAU, an early crypto adopter, dwarfed all these by selling his NFT collection for $11.6m (£8.2m).
But can NFTs really work for all musicians and fans in a safe and sustainable way, or is it a hype bubble set to burst? Here we look at some of the main points.
Why are musicians getting involved with NFTs?
The music industry is in a state of flux. The demise of the CD and digital downloads in favour of online music streaming has significantly strangled profits - particularly for the artists themselves.
Last month, more than 150 musicians, including Paul McCartney, Kate Bush, Shy FX and Kano, wrote to UK Prime Minister Boris Johnson calling for updated legislation to protect artists better in the new landscape. They pointed out that "songwriters earn 50% of radio revenues, but only 15% in streaming".
Recognising the scale of the shift, the UK's Department of Culture, Media and Sport select committee has also been gathering evidence on how the billions of pounds generated by services like Spotify, Apple Music and Amazon Music Unlimited are distributed.
Singer Nadine Shah, whose latest album Kitchen Sink was named one of BBC 6Music's albums of the year, made headlines after telling the committee she had been forced to move back in with her parents because "earnings from my streaming are not significant enough to keep the wolf away from the door".
Prior to the pandemic, artists had increasingly relied on touring to break even. But with live music continuing to face an uncertain future, the potential of NFTs to supplement income holds huge appeal.
This is especially true because it offers artists the chance to bypass the swathe of label, distributor and publisher rights. "NFTs allow bands to cut out the expenses and the risks that result from so many intermediaries, and save time by selling directly to their fan base," says Carol Alexander, finance professor at the University of Sussex.
Linkin Park co-founder Mike Shinoda reflected this in a series of tweets after receiving a $10,000 (£7,000) bid for one of his NFTs. "Even if I upload the full version of the contained song to DSPs worldwide," he tweeted, "I would never get even close to $10,000, after fees by DSPs, label, marketing".
On top of the increased profit share, the artist also has the chance to direct where the money goes. Kings Of Leon's NFT haul saw $600,000 (£425,000) directly benefiting Live Nation's Crew Nation fund to support roadies during the pandemic, while Shinoda has similarly funnelled earnings to charities.
But even with all this potential, it's still technically nothing new - artists can just sell copies of their music as MP3s on their own website, without using NFTs.
Is this just a payday for established acts?
Since the value of an NFT depends in part on demand, acts with big followings stand a better chance of making more money, faster. This helps explain why heritage stars, such as the Rolling Stones and Janet Jackson, have announced ventures into NFTs that play on their cultural capital.
That's not to say smaller artists can't benefit from NFTs as a potential revenue stream, but the likelihood of success depends on loyalty from their fanbase and generating artificial interest in their tokens.
Marketplaces such as Open Sea are full of musicians, unknown in the traditional sense, advertising and selling work for thousands.
Singer Tobi Okandi from the band O Children says that while big artists are currently dominating the "low-hanging fruit" in the NFT market, he still sees a future.
"As an entirely independent musician, producer, artist and all-round creative I'm essentially building my future (and hopefully others') as an artist in tandem with its rise.
"The thing no one gets about NFTs - for musicians or otherwise - is that the true value of an NFT lies less in music or artworks but simply in power. Essentially NFTs open up a new perceived route of uniqueness and ownership," he says.
Technology, culture and music writer Jean-Hugues Kabuiku rejects the idea that NFTs are the solution for artists looking to reassert value over their work.
He says spending energy on NFTs, rather than working towards a more holistic way to fix the imbalance between the industry, artists and consumers by pushing for "a rental union to build mutual-aid between artists" is "truly baffling to witness".
Who's buying NFTs?
Just as the biggest acts stand to make the most from NFTs, so the most connected crypto investors tend to dominate the purchases of high-profile collections.
Cooper Turley, a 25-year-old from Los Angeles, who handles crypto strategy at music streaming/sharing platform Audius, invested in NFTs from Grimes and Shinoda. He happens to be friends with Tim Kang, a 28-year-old software engineer who made his wealth in crypto-currency Ethereum. So far he's spent $2m (£1.4m) on NFTs, including $333,333 (£235,000) on 3LAU's multi-million dollar sale.
Jimi Frew, co-founder of Blockchain Music, who delivered music producer deadmau5's first digital collectibles told Billboard: "90 per cent of them are very wealthy crypto holders. That leaves out the fans that can't afford these high-ticket items."
This has led to accusations of assetisation - a term coined by authors Kean Burch and Fabien Muneisa who say technology is shifting the focus from the value of art itself, in this case music, to prioritising financial ownership.
What about the average music fan?
Fortunately, some NFT entry points exist for the everyday listener outside the millionaire club.
Kings Of Leon made headlines by giving fans the chance to buy their latest album When You See Yourself as an NFT. Alongside the digital download, the $50 (£35) token included a moving album cover and a limited-edition physical vinyl. An additional super token option teased the chance to win a "golden ticket" of VIP concert seats and other perks.
Music fan and journalist Jamie Parmenter took the plunge and made the standard token his first NFT purchase. He told the BBC the process currently feels "too cumbersome and time-consuming to appeal to the average music fan".
"In today's society of instant gratification and consumption, having to transfer monies into crypto-currency then log into different online wallets and accounts for different fees and processes is too expensive and complicated for many," he says.
This includes unexpected transaction or "gas" fees to cover the computer processing power. Combined, these additional costs meant that while the original NFT fee stood at around £48, the total ended up around £100.
Parmenter says that while Yellowheart, the company that set up the Kings Of Leon NFT purchase, did try to make the process easier with some guides and a Discord message board, there was still a lot of confusion and frustration.
"It's nobody's fault; the industry is still young. Everyone - both consumers and marketers - are still learning."
But practicalities of purchase aside, there are also security concerns for the consumer. If a server hosting a marketplace goes down for instance, the NFT is lost forever, and the legal framework remains in its infancy. Some critics have also stressed the huge environmental impact of all the computer processing power.
NFTs - what's their future?
So why bother with the hassle of 'certificates of ownership' when the music itself can be copied?
There are already structures available for fans to directly support artists. Some bands, such as While She Sleeps, have introduced a more traditional tiered subscription model to enhance the fan experience, akin to Radiohead's decision to offer their In Rainbows album to fans on a pay-what-you-like basis online in 2007.
"There are thousands of other solutions to 'cut the middle man'," says Kabuiku.
"The question we need to ask ourselves is how are we going to support people to make music and prepare ourselves for a world where only the wealthy can participate in culture?"
There are signs some music fans may be turning against the influence of NFTs.
UK band Glass Animals announced they would be scrapping NFT collectables and replacing them with a physical collectable baseball card after a backlash from fans.
Parmenter says that, as a music fan, he can see how NFTs "are not going to be for everyone. Not everybody sees value in digital assets and many would rather pay for something physical".
"The great thing about the Kings Of Leon NFT was that it was the best of both worlds: you got the NFT and a physical product - a special vinyl edition version of their latest album."
Looking ahead, Parmenter believes the future of NFTs depends on the technology being adapted and improved.
"There is potential for NFTs to be more accepted in the future if they are used to benefit both artists and fans. This could just be a transition phase like we've seen in the music industry time and time again. When MP3s first came along there were people saying they'd never buy or use them. The same with streaming and look at the streaming industry now.
"The industry is at a crossroads at the moment and there are myriad directions it can go, especially digitally. Many artists want to be represented more for their work, whether it be financially or creatively.
"Royalties are big news at the moment and how to pay them quicker and fairer. Crypto-currency, and the blockchain have the potential to solve this problem". NFTs may also play a part, but only superficially, since regardless of hype, they do not achieve anything that cannot already be done with existing systems.
"This technology is still in its very early stages, but the potential is there. It just has to be adopted and improved."