Music’s Web3 Era: How Blockchain Redefines Streaming Economics and Elevates Fan Engagement
Combining Web3 with music enhances artists' earning potential and fosters new opportunities for fan involvement and creative collaboration.
In UETH’s fifth Weekly Workshop, we spoke with SANSound founders, Devin Marty and DJ Kaku who dropped knowledge on:
How streaming services have made it more difficult for artists to make a living from their music than ever.
Why SANSound embraced blockchain technology to empower independent musicians and help them engage with their fanbase.
How proprietary technology helps SANSound bridge users from a Web2 to Web3 experience, revolutionizing music interaction and revenue models.
Streaming's Double-Edged Sword: The Impact of Digital Platforms on Music Creators
The advent of music streaming services like Spotify, Apple Music, and Amazon Music has revolutionized how listeners access music, offering an extensive catalog of songs at their fingertips. While this subscription model benefits consumers, it presents challenges for music creators. In the music industry, artists have historically faced numerous gatekeepers, such as record labels, streaming services, algorithms, venue owners, media, award committees, talent agents, A&R, managers, and promoters, who play a significant role in an artist's success.
Devin Marty, co-founder of SANSound, highlights the "centralized control" in the industry and the layers of stakeholders involved in artist development. This complex structure makes music distribution challenging, requiring more effort from fans to support artists and creating obstacles for artists to connect directly with fans.
DJ Kaku, co-founder of SANSound, emphasizes the difficulties of monetizing music through streaming services. Unlike the era of physical music sales, where artists could earn substantial revenue from CD sales, the current streaming model offers minimal financial returns. Back in the day of physical music, you could release a record and people would buy your CD, Kaku explained. “You could earn decent money that way,” he said. “But artists don’t make money off music anymore.”
Kaku points out that artists now primarily generate income from live shows, underscoring a paradox: artists need to release music on streaming platforms for visibility and to secure live performances, yet these platforms do not provide significant financial benefits. This dynamic reflects the shifting landscape of the music industry, where artists must navigate complex channels to achieve success and financial stability.
Web3 Offers Fresh Opportunities for Artist Earning Potential
Spotify's average payout of $0.004 per stream means an artist can earn about $4,000 from 1 million streams. However, Spotify doesn't pay artists directly; it pays 'rights holders' who then distribute the funds. These royalties are split into two categories: Recording and Publishing. The distribution of these funds involves various stakeholders, including but not limited to record labels, management, songwriters, publishing rights owners, distributors, collaborators, and lawyers. The actual earnings an artist receives depend on their specific contract with the rights holder.
Source: Music in Web3 (INC4)
Consequently, even with substantial streaming numbers, an artist's income can be surprisingly low. For instance, "Weird Al" Yankovic might have earned just $12 from 80 million streams in 2023, barely enough for “a nice sandwich.” Similarly, Snoop Dogg's 1 billion streams could have netted him less than $45K, illustrating the complex and often meager financial returns for artists in the current streaming economy. Spotify’s "Loud and Clear” video explains how the money flows.
Web3 artists are tapping into the significant earning potential offered by a dedicated fanbase, exemplified by the "100 true fans" concept. An artist selling their NFTs to dozens of fans can earn the same revenue equivalent as tens of thousands of streams. Chicago rapper Ibn Inglor, for instance, successfully raised $92,000 by selling NFTs, which included shares in his album's royalties, to his fervent followers. This financial gain, however, is just part of the appeal. These artists are also cultivating tight-knit communities, primarily on platforms like Discord. In these spaces, fans transcend traditional roles, actively contributing to and influencing the creative process. This model not only fosters a deeper artist-fan connection but also creates a collaborative environment where fans are directly invested in the artist's success, both emotionally and financially.
Motivated by the transformative power of blockchain in the music industry, Devin and Kaku founded SANSound, a music-centric ecosystem designed to empower artists and bridge the gap between them and their fans. SANSound is dedicated to nurturing collaborative music creation and harnessing the community's collective creativity, reshaping the traditional artist-audience relationship.
Blockchain Empowers Artists To Build Their Own Trading Routes
Web3 offers creators unparalleled opportunities to directly connect with their fans, recognize their loyalty, lessen dependency on middlemen, and enhance their streaming revenues. Devin succinctly captures the essence of Web3 for artists: "Don’t build your trading route on another country’s plot of land, especially if they’re obsessed with gold." This analogy highlights the vital need for artists to own their platforms, breaking free from traditional dependencies.
Kaku sees blockchain as a game-changer, uniquely integrating artist support and fan engagement in ways unachievable in Web2. With blockchain, artists can distinctly identify their supporters, "You can literally see who is supporting you," as Kaku puts it. This visibility allows artists to directly reward their most loyal fans with benefits such as NFTs, airdrops, early track access, concert tickets, or fan reputation points, with increased engagement unlocking further perks.
Kaku's own journey as a DJ into the Web3 realm revealed the transformative potential of blockchain in redefining artist-fan relationships. “In Web3, you really get to know your fans personally, it's a completely different experience,” he observes. “Web2 is a one-way street, while Web3 offers a two-way interaction." Web3 breaks down geographical and financial barriers, enabling direct, meaningful interactions and transactions between artists and fans worldwide. Kaku also advocates the "build in public" method, encouraging fan involvement in the creative process, thereby not only aiding artists but also empowering fans, shifting their role from passive consumers to active contributors.
Bridging Web2 and Web3: Build Within the System, Not Against It
For those building projects that bridge Web2 and Web3, Devin advocates for user-friendly, intuitive solutions to ease the transition to the new digital landscape. He advises, "Web3 initiatives should extend and enhance Web2 foundations, steering clear of overly intricate, blockchain-focused complexities. Opt for introducing Web3 through well-known mediums." This philosophy is embodied in SANSound's design of SANWEAR headphones, crafted with inclusivity at its core. These headphones are made to ensure that music lovers of all tech backgrounds can relish a rich, immersive audio experience. Devin's approach to integrating Web3 with familiar Web2 elements is a call for thoughtful innovation, one that honors and leverages existing technological frameworks.
In the rapidly evolving music NFT arena, projects like SANSound play a crucial role, blending Web3 innovations with established music industry practices. This trend represents a significant shift driven by NFT and blockchain technologies, aiming to empower artists, engage audiences more deeply, and revolutionize the economics of music creation and distribution. These projects are collectively forging a new path in the Web3 music industry, altering traditional artist-fan dynamics and inviting listeners to become more than just passive consumers, but active, engaged participants in a thriving musical community.
Source: Music NFT Landscape (Coopahtroopa)
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Want to learn more about music NFTs? Check out how web3 technology is reshaping the music industry landscape: