Over the last decade,
But music artists have gotten the short end of the stick, eking out a living from the fractions of pennies earned from streaming platform royalties, even overall industry revenue grew 18.5% to $25.9 billion in 2021, according to the music industry’s global representative body.
The arrival of Web3 could balance the scales in favor of artists.
Drawing from technologies like the blockchain, social tokens, and NFTs, a number of startups are seeking to change the industry by giving artists more control and money from their music, while also letting fans share in any financial upside from supporting an artist early in their career.
Insider identified seven Web3 music startups that are developing products in areas like decentralized music streaming, royalties sharing, and one-of-one music NFTs.
They have collectively raised tens of millions of dollars in funding from leading VC firms like a16z, Animoca Brands, and Founders Fund, as well as A-list musicians like Jason Derulo, Katy Perry, and The Chainsmokers.
On Audius, artists can upload their music for free, without going through intermediaries like distributors, which often act as gatekeepers to platforms like Spotify. Users can also listen to tracks at no cost. All the while, everyone is earning crypto money in the form of its $AUDIO tokens.
While the platform features lots of indie and up-and-coming artists, users can also find big names like Skrillex, Dillon Francis, and Diplo. It has now reached more than 100,000 artists and more than 4.5 million active monthly users.
The platform is not controlled by any one particular entity, instead it is community-owned. Token holders can cast votes on proposals on how to manage Audius.
Roneil Rumburg, cofounder and CEO, said companies that were traditionally community oriented, like SoundCloud, eventually succumbed to pressures from investors and the need to serve corporate interests, and started charging for things like uploads.
He and Forrest Browning, cofounder and chief product officer, decided to set up Audius as a decentralized, owner-less platform because they believed no company should be in control of the artist-fan relationship.
“It sounds kind of Marxist,” said Rumburg. “This idea that the means of distribution, in this case, should be in the hands of the people who actually use them.”
The platform uses blockchain technology to align the incentives of the three players in this ecosystem: node operators, artists, and fans. Node operators must stake $AUDIO tokens in order to run the nodes that host Audius’s content, and in return earn token rewards.
Artists can earn tokens based on things like the number of streams they’ve accumulated, follower count, and how many times they’ve reposted other artists’ songs. Users are rewarded based on their activity, such as how often they listen on Audius.
Audius doesn’t take a cut of token transactions: 90% goes to artists and 10% to the node operators. In fact, the startup says it doesn’t make money at all from the activities it facilitates.
“Audius does capture value as a network,” said Rumburg. “It’s just going to the folks that are using and operating the network, rather than to our company.”
Browning said Audius’ 0% take rate helps it onboard artists onto the platform. “We’re not sitting here trying to think about product features to increase the cut that Audius is making,” he said.
To operate, Audius has so far raised $13.6 million from VCs including crypto fund Pantera Capital and prominent artists like Jason Derulo, Katy Perry, and Steve Aoki. The money was raised in the form of $AUDIO tokens, which Audius treats as an endowment for its non-profit Audius.org foundation, to be used to grow the network.
Investors themselves can earn tokens like everyone else by being active participants in Audius, such as by running nodes.
Rumburg said Audius is developing tools that allow artists to use the following they have on Audius to earn money. Audius already allows artists to share their songs from Audius to TikTok, a partnership inked last August, according to Rolling Stone.
“We really see the goal for Audius being to create this direct connection and interaction between artists and fans, and ultimately for that to be the underpinning of a new music economy,” said Rumburg.
Catalog is a music NFT marketplace that lets artists sell one of one records of their music. Unlike most other NFTs, which can come in series of thousands, NFTs sold on Catalog are issued as single, unique items, of which there are no other copies. “We consider it the canonical version of your work online,” Michael McKain, Catalog’s cofounder, told Insider.
While it caters to independent musicians, artists like Pussy Riot, Vic Mensa, and Boyz Noize have “pressed” records on Catalog. The company has so far facilitated $2.7 million in sales, according to Forbes.
“When you’re collecting a piece of work on Catalog, you’re basically saying, ‘This piece of music, I found emotionally resonant, I see value in owning it’,” said McKain.
The company is attempting to move away from the “all you can eat buffet model” of today’s music industry, where music is valued based on the number of plays it gets.
“That’s a very narrow way of looking at music. We don’t value paintings by the number of times you look at them,” said McKain. “Some of the most influential music in our lives is music that you might not have on repeat every day or play in the background all day.”
Artists selling records on the platform receive 100% of record sales, plus a share of any secondary sales, which they can set themselves. They can also choose to accept any offer at any time during an auction, which allows them to effectively choose their buyer, and can embed special perks in their NFTs, like concert passes or access to early releases.
The startup, founded in 2020, has so far raised $7.2 million in seed funding from VCs including 1confirmation, the crypto-focused fund backed by Peter Thiel and Mark Cuban.
Started by electronic music DJ and producer Justin Blau, known as 3lau, Royal lets users own NFTs of an artist’s streaming royalties earned from a song.
Each NFT can also include extra perks, like guest list passes and exclusive mixes.
“You’re putting time and effort and money into an artist anyway, whether you’re buying an asset on Royal or not,” Blau told Insider. “We just give you the ability to both connect with the artist and to potentially experience upside.”
Artists including Diplo, Nas, and Vérité have auctioned song royalties on the platform, with Vérité’s drop selling out in seconds and raising approximately $90,000.
They are among a slew of artists looking for new ways to get their music in front of fans, without having to contend with the “algorithmic gating” of streaming platforms.
“It’s really about giving artists a toolkit, almost like a tech stack, to be able to do whatever they want to do. And even if artists are signed to major labels, whatever ownership they maintain, they can still share it with their fans,” said Blau.
The startup has raised $71 million from Web3 heavyweight venture capital firms including a16z and Paradigm, as well as prominent music artists like The Chainsmokers and Kygo.
RCRDSHP allows users to purchase digital collectibles released by artists in the form of virtual cards. Sold in packs, these collectibles include playable music, but can also include video content, production tutorials, or in-real-life perks, such as concert passes.
The startup initially wanted to feature “moments” from concerts, like the Dapper Labs-created NBA Top Shot collectibles. However, founder and CEO Obie Fernandez told Insider he pivoted to artist and music collectibles once faced with the maze-like complexity of music events licensing rights.
Each collectible is assigned a corresponding token coin value, denominated in RCRDSHP’s own SOUND token, which is designed to trade at parity with the US dollar. This allows owners to “burn” a collectible they might not be interested in and receive the corresponding coin amount, which they can use to purchase new collectibles.
In order to release collectibles, artists must take from a pre-assigned amount of coins they receive upon onboarding to create their cards. The only way for artists to earn more coins is to have fans stake the cards they bought, which generates coins for the artist.
“We’re aligning incentives so that the artist is incentivized to go to their fans and say, ‘Hey, here’s an artist card I’m giving to you as a gift, go stake it for me on RCRDSHP, because this is going to generate some money for you and whoever stakes the most for me, I’m going to invite to a trip to Vegas with me or I’m going to send you a vinyl’,” said Fernandez.
RCRDSHP also features a leaderboard that ranks who generated the most coins for their favorite artists, which lets users compete for who’s the biggest fan, said Fernandez.
The startup counts 27,000 registered users and a couple of thousand monthly active users, according to Fernandez. It has raised $5 million from investors including Dapper Labs and Founders Fund.
As a DJ and producer himself, Fernandez said the music industry’s “hyper-capitalistic machine” pumps out unlimited quantities of music, which results in it being treated as a “throwaway, passive thing.”
“If you want to make something that’s not pop music, you’re limited to doing it in your off hours or being wealthy or having patrons. To me, philosophically, that’s terrible for humanity. Call it cultural destruction,” he said.
Artists like Snoop Dogg, NOTD and TOKiMONSTA have released music on Sound, which lets users own NFTs of an artist’s songs.
The platform also features an earnings leaderboard that shows how much each artist has earned, as well a collector’s leaderboard showing who has spent the most.
NFT holders can make a public comment on the song listing’s page, similar to the comment feature on SoundCloud. When a holder sells their NFT, the new owner can rewrite the original comment.
Every song also comes with a “golden egg” hidden on a randomly selected timestamp. If a user leaves their comment where the golden egg is located, their NFT is updated to a one of one edition, with extra perks thrown in by the artist such as the track’s stems or production feedback for aspiring musicians.
Founder David Greenstein told Coindesk in December that Sound is aimed at the artists that “aren’t making sustainable careers”. According to Spotify’s own data, 16,500 artists made $50,000 or more in 2021, out of an estimated 200,000 artists on the platform.
The startup, founded in 2021, raised $5 million from VCs including a16z and Atelier Ventures.
As Bored Apes Yacht Club NFTs fetched ever higher prices at auctions last year, SoundMint’s cofounders looked at music and realized that it, too, could be created using a generative approach.
Working with electronic music act KLOUD, they created 5,000 unique music NFTs, each compiled with different compositional elements like bass lines, drums, and leads. The NFT drop fetched around $2.5 million in eth, and paved the way for the creation of SoundMint and a $1.7 million seed funding round led by Animoca Brands.
Artists releasing tracks on SoundMint approach the creation process differently, according to Andre Benz, one of SoundMint’s cofounders. Instead of producing songs for Spotify or radio, in a format that is recognizable by fans, they instead work on creating unique stems, each 25- to 45-seconds long, and outsource the mixing and mastering to an algorithm.
“Mixing and mastering is the longest part, because you’re nitpicking on tiny little details over and over again. It’s almost like you’re letting that weight off your shoulders, and sometimes it could be variations that you would never have thought of,” said Benz.
YellowHeart is a music NFT platform with three components: music collectibles, such as albums in NFT format; community tokens, which are free NFTs given out during live events; and NFT ticketing.
Only users who have purchased an NFT are able to listen to it, via YellowHeart’s app, due to how the metadata is structured in the NFTs. The company developed its own blockchain wallet, which company founder and CEO Josh Katz said is the only one on the market able to play media, but in theory any wallet with media playing capabilities can play YellowHeart NFTs.
Katz said he decided to introduce this ownership verification process to protect copyright holders. Currently, most NFT data is stored on IPFS, or interplanetary file sharing system. Given the open and permissionless nature of blockchain, any one person could find a given music NFT and download it.
As a platform, YellowHeart takes 10% of revenue from NFT sales, while artists retain 90%. Katz said this allows artists to sell a lot less content to make the same amount of money as they would via streaming platforms.
“We’re trying to create a do-it-yourself platform for peer-to-peer content, where artists can come on, set up an account, mint music, fan tokens, and tickets, and sell them to their fans,” said Katz.
“Now the artist can have a career because not only are they getting paid 90% of the money on the first sale, but they’re getting a royalty on the second, the third, and subsequent sales. It allows people to actually live and have a career,” he added.
The startup has raised $3.7 million from Live Nation Entertainment.