New venture lets fans invest in music through NFTs
For so long if you wanted to invest in music, you needed to fork over millions to purchase an artist’s catalogue to reap the rewards of getting paid every time a song is played.
But EDM artist Justin Blau and JD Ross, a co-founder of home-buying startup Opendoor, are looking to change that and make investing in music accessible to everyone, using blockchain technology.
The duo is launching a new platform Oct. 21 called Royal, which will sell rights to songs through nonfungible tokens (NFTs). The objective: give fans a chance to earn money alongside their favorite artists while disrupting how music is owned.
“It’s inevitable that the public wants to invest in music – they just haven’t had the means to,” Blau told Yahoo Finance. “So in developing Royal, we thought, how do we democratize investing in a new asset class.”
Before NFTs, investing in music publishing rights was virtually impossible, unless you had millions, limiting investors to mostly music labels, hedge funds and accredited investors (individuals with a net worth of more than $1 million). It meant buying a catalogue of an established artist – like Tina Turner, who just sold her catalogue for $50 million. Now with platforms like Royal and NFTs, people can invest in individual songs rather than an entire album and even fractions of a song.
Royal will divide portions of a song’s royalties into fractions and sell them as NFTs, making it much more affordable for everyday investors.
“Imagine you buy a vinyl and there are only 100 vinyls of the album. In owning the tangible piece of art you also participate in the upside of the royalties of the song,” says Blau. “We like to call it a rights assignment for buying art.”
The idea is to invest in an artist early on and earn royalties as the artist grows in popularity by allowing them to cash in on streaming revenue rights for songs.
“I thought it would be great if fans could co-own music with their favorite artists,” Blau told Yahoo Finance. “Ultimately fans are the ones making artists popular… so why not allow fans to participate in the upside of an artist’s career as they grow,” he says.
A community effect
Blau says the business model also creates a community effect that’s hard to replicate. He argues music fosters an emotional connection with the listener — they stream it, they share the song with friends, they add it to playlists and they make dances to it on Tiktok. The fans are the driving force behind a song’s popularity, but they don’t have any ownership or receive any value beyond the emotional connection. When an artist shares their royalties with supporters on Royal, they’re making that relationship even more valuable for the fan who will have financial incentive to stream and promote that song even more, says Blau.
Blau, known in the music industry as 3LAU, is releasing a song Friday called “Worst Case,” which will be his first song co-owned with fans. He’s giving away 50% of his streaming royalties to 333 winners, who will get paid every time the song is streamed. Soon after, Royal will host a series of live drops with an exclusive curated selection of artists before eventually opening up the platform to more artists next year.
Disrupting the music industry?
Spotify disrupted the way music is distributed and listened to when it launched in 2006. Now Blau is looking to disrupt the way music is owned, aiming to redefine what it means to own a song. He believes blockchain technology will change all aspects of the music industry, especially royalties. Blau envisions a future where it means actual ownership in a song’s master revenue rights, enabling artists to disintermediate the music industry, capturing value alongside their fans.
“Using NFTs and all types of blockchain technology to disseminate ownership and disintermediate middle men in the music industry is incredibly powerful and inevitably going to happen in the future,” Blau says. “We’re excited to build a layer on top of the existing music industry.” (Non-fungible tokens are unique digital assets that are linked to the blockchain. NFTs can represent virtually any digital asset, including artwork, music or film, virtual items, and audio files.)
Cryptocurrency investment firm Paradigm is also a believer, co-leading a $16 million seed round in Royal with Founders Fund. “Crypto changes the game for creators. They can go direct to fans, no intermediaries or labels needed. Conversely, fans can invest in their favorite creators. Investing and culture are melding into one,” said Fred Ehrsam, co-founder and managing partner at Paradigm and Coinbase co-founder.
Artists who have been beholden to labels stand to benefit too. For decades, artists have entered into unfavorable contracts. On average, artists only receive a small percentage of the revenue their music generates. They also lose control of a lot of decisions made about their music. Blau says by allowing artists to sell rights to their music directly to fans, they can decide how much they want to sell and for how much, while keeping control over what happens with their songs.
Royal will feature songs from emerging independent artists as well as big stars represented by labels. “We’d definitely love to work with emerging artists to connect directly with fans on Royal and jumpstart their careers...just as much as artists working with labels enjoy that same connection,” Blau says.
Similar to NFT offerings on platforms like OpenSea, Royal users will be alerted of a launch ahead of time and be able to purchase limited-edition tokens of song copyrights, which they will be able to trade on Royal and other platforms. Royal is using Ethereum to start, but has plans to incorporate multiple chains in the future.
The NFT market has been red hot, with investors dumping hundreds of millions of dollars worth of cryptocurrencies into digital art, while artists cozy up to using the blockchain to monetize their music. Canadian musician (and former girlfriend of Elon Musk) Grimes and rockers Kings of Leon have auctioned off their music as tokens. Blau, an early investor in NFTs, sold the world’s first-ever tokenized album, which grossed $11.7 million in under 24 hours and briefly held the record for the most expensive single non-fungible token ever sold.
Royal isn’t the first of its kind. Royalty Exchange, an online marketplace for buying and selling royalties, started selling publishing rights to music as NFTs in June.
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