NFTs have taken this year by storm. From memes to digital birkin bags, anything seems to be possible in the future of the creator economy. But before you drop everything to buy, or sell, your first NFT, let’s get down to the basics of the emerging industry.
The transition from digital sales to streaming as the primary means of consuming music is one that placed a huge financial challenge on recording artists, forcing them to rely on release packages, merchandise, and touring as their primary source of income. While Spotify, Apple Music, and Tidal users may enjoy having unlimited access to their favorite band or musician’s latest release, even artists with hundreds of thousands of monthly listeners struggle to generate any significant profits. Thus, creative communities are prioritizing ownership over multiple revenue streams, with NFTs emerging as a major source of their earnings.
To put it bluntly, NFTs (or non-fungible tokens) are the embodiment of scarcity being the basis of value. When an artist develops a product—whether it be a single, an album bundle, or some sort of digital-physical package of music—and then places it exclusively on an NFT marketplace, they have limited their pool of potential consumers while increasing their product’s rarity. Anyone who has ever bought a limited-edition item knows that this creates a sense of urgency for potential consumers in their pursuit of the product. That’s why brands like Kings of Leon and solo acts like DeadMau5 are generating thousands of dollars by selling even just one NFT.
But a multi-thousand dollar purchase may not be the most attainable for fans paying $9.99 a month on a streaming service subscription, and especially not for students paying half of that price. Consequently, artists are phasing out a huge portion of their listeners in favor of a percentage willing to spend these premium prices. Purists and critics may condemn this as a form of elitism or simply selling out. From the outsider’s perspective, it seems like those selling NFTs care more about profits than the majority of their fanbase. Such criticism would have merit if the majority of one’s content was produced as an NFT, but given that the marketplace is in its infancy, such a drastic transition is unlikely for the foreseeable future. NFTs will not replace the releasing of mass-market content any time soon; thus, they should be seen as supplemental sources of income.
That being said, figuring out whether or not releasing NFTs will work for you is a difficult consideration. Here are some things to keep in mind:
NFTs are best for established artists who have a product they can market based on its exclusivity - If you are an artist who wants to release an album, it has to have some sort of unique appeal. Are the songs unavailable on streaming services or as physical copies? Is there a merchandise bundle attached? Are you releasing physical artwork or prioritizing concert ticket sales? Are you releasing recordings from live performances alongside your NFTs like other popular artists?
NFT marketplaces have a degree of limitation. If you have listed an NFT on a marketplace like Opensea.io, do not expect that you can list the exact same NFT on the Mintable.app. When speaking with Chad Horton, owner of Rapzilla.com, he shared a comparable example: “if you look at it in music terms, you don’t want to have your song only on Spotify or Apple Music because consumers want to consume wherever they want to, and you want to be able to have your product distributed to every platform possible. [Marketplace limitation] will make artists either have to dedicate to one place or list content on a bunch of different marketplaces.” Along with this, NFTs are limited by their purchase method. Only buyers who have cryptocurrency will be able to purchase NFTs, so those who are too unaware or afraid of crypto will stray away from buying them.
Building a committed fanbase is your most stable source of income. This should be a consideration regardless of your numbers. If you have not done the work to create a loyal fanbase that is dedicated to your content—even the subpar stuff—then an NFT is useless for you. Why would a stranger consider spending extra money on your content?
Consider other established loyalty-based systems - How many YouTubers have you heard plugging their Patreon in a video? On Patreon, fans can directly offer money to their favorite artists who can then establish tiers and exclusive content based on their level of support. This is just one example of the many loyalty-based systems out in the market. If you are a debut artist or creator who has yet to build both a strong and stable enough fanbase for a significant NFT revenue stream: get better equipment, learn more about music, invest in higher quality artwork for covers, and become as financially literate as possible.
Watch, carefully - The NFT marketplace system is in its infancy and is only now getting attention alongside the cryptocurrency and investment crazes that have gone on in the past year. The movement that emerged to make both the GameStop and AMC stocks skyrocket was an incredible display of what organized groups can do when they are properly mobilized. But people are fickle. Those instances were momentary surges leading to huge returns in the short-term, and no further beyond that extent. You have to watch and learn in order to have a successful career as any type of creative, so watch carefully. Observe how NFT marketplaces respond to the surge in interest. See how artists continue using NFTs to generate hundreds, thousands , and even millions of dollars in income. Witness how labels and streaming services respond to the potential shift in the industry. Then, when you decide that the time is right for you and your brand, make sure to ask yourself whether or not the moment feels right for pulling the trigger on uploading an NFT to any given marketplace.