Web3 Entrepreneurship in music industry: the complete guide
This week I've been interested in Web3 in the music industry. I looked at many resources and came across WaterAndMusic, an independent newsletter, and research DAO. I learned many things I wanted to share with you today.
The music industry in Web3 is more exciting and diverse than ever. New platforms are launching every week to help artists leverage NFTs, social tokens and DAO infrastructure to create new business models around creativity and fan engagement.
1 - Understanding the challenges of the traditional music industry
As a creative economy, the music industry faces the same dilemmas as video creation platforms, social platforms, and other industries. First of all, the biggest problem of the traditional music industry is that musicians and ordinary users depend too much on intermediaries, which leads to very low revenues.
However, this concerns the streaming model common to traditional music platforms. Streaming media is the common mode adopted by traditional music platforms. It works in such a way that if musicians publish music on web2.0 platforms like Spotify, Apple Music, and QQ Music, they receive a fixed amount of revenue.
This model is quite criticized by the artists themselves. First, the revenue from a single play of the work is exceedingly low. The creator may earn about $5 after a song has been played 1,000 times; moreover, most of this revenue will go to the music platform and the record company. What creators can and will get is very meager.
In the music industry, much of the revenue generated by musical works are received by third-party companies, such as record labels, streaming platforms, agencies, etc. Music creators end up getting a small amount of revenue from listening to their music in the end. Musicians who don't have a large fan base can hardly live off these revenues. This is obviously detrimental to music creation and innovation.
If you want to know more about the problems of the music industry, I share with you a top article on the subject: The Music Industry Has 99 Problems. And They Are...
What Web3 brings to the music industry
From Web1 to Web3, we have seen three phases: observe, create and own. For the music industry, we can say that Web3 will be an arena where creators will try to own the content of oligarchs. Whether they are songwriters, writers, or artists, they will all be able to earn a place in the arena and receive direct income from their work through tokens and contracts.
In the Web3 revolution, the music industry must abandon the unreasonable system of revenue distribution and get rid of the control of the middleman who extracts value from the production of works. True creators should not be exploited by middlemen who negotiate exchanges but should receive the vast majority of the value generated by the work. Audius, a decentralized Web3 streaming media platform, was born with this idea in mind.
Compared to traditional music platforms such as Spotify, Audius is a simpler music aggregation platform where all music data is stored on the IPFS network, and where the token economy and community play a role in keeping the system stable. Audius said it would allocate 90% of the platform's revenue to creators, 10% as rewards for node operators, and the platform itself will not take a penny.
Musical works will have value in the digital world. In a computer, a musical composition is ultimately just a sequence of 0s and 1s that can be easily copied. This allows piracy to progress and the value of musical works cannot be fully realized. The ability to convert them into NFT or tokens can solve this problem. Thus, creators can connect with fans directly through music NFTs, and fans can support musicians by subscribing to their music NFTs. In a way, this model shows a pure relationship between musicians and fans that is characteristic of SocialFi. Pianist and MintSongs are such Web 3.0 music platforms.
Web3 music platforms associate NFTs of music created by musicians with the copyrights of musical works. Users who purchase music NFTs can obtain all or part of the copyright in the works and may receive certain dividends from subsequent earnings on the work. Some platforms even allow NFT holders to modify the content of musical works. This model gives the music distributed by NFTs a more intuitive commercial value, in addition to its collectible value. The copyright providers of traditional music platforms are replaced here by NFTs and smart contracts, and the value of music copyrights can flow more easily. Royal, Opulous, and Melos are representatives of these Web 3.0 music platforms.
The different actors of the music industry in the web3: