With all the excitement surrounding blockchain and token economies (tokenization) – there is a unique angle and market which receives minimal coverage—helping independent music artists unlock new financing opportunities, without having to sacrifice their ownership rights and contract rights, including control of future royalties to intermediaries and recording companies.
Token economies recognize and reward fans for coming to the stage and utilizing services. On this stage, an artist is able to sell tokens to fans directly in order to raise funds for creative projects. By leveraging and utilizing smart contracts, artists are then able to receive immediate payouts and monies generated from the song, rather than waiting months or even years to see their hard work paid off.
In The Digital Age, What’s The Stage Fright About?
It’s straight up tough for Indie artists. The main focus for a musician is ultimately to make great music and be a great live performer. However, in today’s digital age, in order to be a successful independent artists (“Indie”), it’s difficult to rise above the noise and be recognized by recording companies. It’s no longer about having an impressive portfolio and streaming numbers—it’s about being heard and the brand strategy.
Educating Yourself On Promotion, Social Media, and Numbers
In a previous interview I had with Matthew Sorum, the drummer for The Velvet Revolver and former drummer for Guns N’ Roses, he told me that in order to be successful, artists need to “educate [themselves] on everything [they] need to know in the digital world—how to promote yourself, your music, and be a real contender in your social aspects.”
“The first question recording companies ask is what [their] social media numbers are. It’s not about the music anymore, which is what bothers me about the ‘new’ music industry,” said Sorum.
To truly reach scale and optimize time, artists need capital to build a strong network and to have a competent team around them. One path of achieving this is getting into an agreement with a record label. In exchange for a percentage of future royalties, publishing, touring, and merchandise revenue, and potentially creative control (based on the contract terms), record labels provide the necessary financing for a project, and the promotional muscle for better placement opportunities in order to cut through the noise (and of course maximize the return on their investment).
But while this may be “okay” for some artists, it is a career killer for many smaller indie artists. Why? They may lack the traction, recognition, legal knowledge, and numbers that may provide them with leverage in any negotiation.
Consequently, smaller artists may unknowingly enter predatory agreements, or give up full creative control. For many promising musicians, the logistical side of the business douses the flames of passion and creativity, and bad contracts become extremely destructive.
Enter ‘Smart Contracts’
Music labels provide value in many ways, but they also can be intermediaries that take advantage of young musicians that have limited leverage or business knowledge. For resource constrained musicians, decentralization and tokenization may help finance their independent projects by harnessing the greatest power of all—the bond between artist and fan.
This is why smart contracts are the way to go. It removes the intermediary from the equation, connecting the artist with the fan, directly.
Tokenization Can Harness The Bond Between Artist and Fan to Unlock New Financing Opportunities For Resource Constrained Musicians
Tokenization is the process of converting intellectual property (e.g. rights to a song) into digital tokens with an underlying value. Similar in how owning shares of a stock grant you ownership rights in a company, tokens can allow a person to share a “piece” or percentage of a song’s rights, while receiving money accrued from it. Payments pushed through tokens are facilitated through secure and transparent smart contracts that are built atop the blockchain.
Secure P2P Transactions
The advent of blockchain allows for secure peer-to-peer (P2P) transactions without the need of intermediaries such as banks, publishing services, or music labels facilitating the transaction. By having this digital ledger which is self-governing, it makes the potential for fraudulent transactions or predatory negotiations less likely to occur. At the end of the day, it’s all about transparency.
“Tokenization allows fans to be active participants in an artist’s creative work and share in the success of a project,” said A-Rayz, one of the first tokenized hip-hop producers. “With this new model of vested fan interest in the success of a song, smaller independent artists can unlock new opportunities for fan relationships, brand evangelism, and marketing — with their fans essentially leading the charge as street teams.”
Crowdfunding In A New Era
Through tokenization, artists are able to crowdfund their projects by issuing and selling tokens to fans who passionately believe in the artist’s creative work (think of Kickstarter). This money enables an artist to record, mix/master, pay for music videos, cover touring and other expenses associated with the creation. By owning tokens, fans share in the success of their favorite artists—talk about a new level of support. If the song does really well and generates a lot of money, the fan receives a proportional payout.
Traditional Distribution Model For Artists—Music Labels
Tokenized Model With Blockchain