Music Education
Music Distribution 101: What it is and Why Artists Need It
Explore the basics of music distribution and why it's essential for any artist looking to succeed in the industry.
The Artist's Guide to Web3 and Music
A 2018 study revealed that out of the $42 billion generated in the music industry each year, only 12% of that goes to artists. This industry involves a very hands-on, extensive process resulting in an abundance of middle men, who each take a piece of the pie. Web3 (or blockchain) technology offers a route that renders some of these middlemen unnecessary (like CMO, PROs, and major streaming services). While artists who want less to do with administrative and marketing processes will still not see as big of revenue portions, overall Web3 lets musicians earn more fair percentages of profit off their art. Along with increased profit for artists, an aspect arguably just as important to Web3 music is a new potential to build engaged, community-oriented fan bases. To get a grip on how this really works, we need to take a few steps back.
What is the difference between Web2 and Web3?
Web2 refers to the internet that most of us use today. Companies offer services to everyday users in exchange for data and ownership of content.
Web3 is what many people see as the next iteration of the internet.
Web3's Core Goal: Decentralization
Decentralization means that more autonomy, transparency, and access is placed in the hands of everyday internet users instead of big corporations. Blockchain technology allows for efficient peer to peer transactions, cutting out an abundance of middle men (which there are many of in the music industry).
- Transaction information is encoded onto the blockchain in a way that allows for efficient data management, requiring little to no manual work from people.
- Smart contract metadata embedded in an NFT and stored on-chain lets creators continuously profit off their work as it is sold and resold.
- Intellectual Property (IP) Ownership allows for verifiable ownership of content, unlocking endless possibilities for creators to identify their fans and interact/reward them for supporting their content.
- Aligned with the vision of Web3, blockchain allows for decentralized, accessible pools of data not guarded by massive corporations, which everyday creators can utilize.
Issues within the Music Industry
Dated and Complicated Model
There are so many intermediaries within labels, publishing and collection organizations (PROs and CMOs). Artists get an unfair cut of revenue from their streams and overall profit from albums because labels, streaming services, and publishing/collection agencies each take a cut. The industry has operated in this way for so long that the process is firmly established and the players are resistant to change. There has been minimal effort or intention to use new technology that has potential to make processes more automated, simplified, and profitable for artists.
Difficulty making ends meet
Streaming royalties are usually not a primary source of income for artists. Here's why:
- The value of music is low as a result of all-access streaming subscriptions and fractional payouts per stream.
- Many middle-men from various services take their cut.
- Artists don’t receive streaming royalties until months after streams happen.
- Of the 1.7M Spotify artists with over 50 monthly listeners in 2020, the top .8% makes 90% of total Spotify royalties. Furthermore, only 13,400 (.2%) made over $50K. (Music Tech)
If an artist builds an audience big enough to make a living, they rely on lengthy tours, merch sales, and sync to make the majority of their money. Expenses from these ventures often are so substantial that it is difficult to profit.
Limited Fan Opportunities
Music purchasers are funneled into two general categories: one-size-fits-all streaming subscriptions, and merch/concert ticket buyers. There are many unique kinds of fans willing to pay different amounts for various kinds of experiences. These different fans usually aren’t given sufficient opportunities to support and connect with their favorite artists in Web2.
How Web3 Combats These Issues
Web3 technology gives artists direct pathways to their supporters through blockchain and smart contracts, allowing artists to take 80-95% of profit in instant transactions. Larger royalty cuts raise the intrinsic value of music, allowing more artists to make a living off of their art. While Web3 offers the technology to cut out many unnecessary profit collectors, there is gray-area surrounding collaboration with questions of copyright and legalities that innovators in the space are currently navigating.
The 1,000 True Fans model opens doors for creators to create organic, authentic art and make a living off of the support from true fans. This idea relies on direct support without labels and publishers taking the majority of the revenue. Giving value back to these fans in “utility” is essential in this model to develop community and longevity. Web3 offers the perfect opportunity to make a living with focus on quality of fan compared to the Web2 path of quantity.
With innovation being at the core of Web3, a hunger for novelty seems to seep into what music NFT collectors are looking for. Artists releasing in Web3 see NFTs as a “new creative canvas more open to blurring genre and experimentation compared to the traditional music industry” (Water and Music). This market for innovative ideas is not only conducive of refreshing music, but cutting-edge opportunities for fans and artists to connect and build community.
Examples of impactful fan-artist interactions in Web3:
1. The top bidder on 3LAU’s Ultraviolet NFT auction was given the chance to collaborate with him on a track. The other 32 winners won exclusive access to unreleased music and special edition vinyls.
1. Collectors of Miles Ryan Harris - Better With You 10 NFTs released on Sound xyz earned:
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- Access to a token-gated collectors page with access to unreleased music and content.
- A ‘Golden Egg’ is hidden randomly among one of the 10 NFTs, the winner earns a free 1/1 NFT chosen by the artist, a 1-1 zoom call with Miles where he previews upcoming releases, and a free mint of his next Sound xyz drop.
How to Get Involved in Web3
Before releasing your own NFT collection, it's essential to read, listen and make connections in the space. There is vast potential for creators to make money and connect with Web3 enthusiasts. Take the time to involve yourself, build community, and support others so your NFT release doesn’t fall under the radar. Venice does offer Web3 advisory to our premium services partners and occasionally to artists who are making themselves known in the Venice and Web3 Music community. Here are the best places to start getting involved:
Twitter
Twitter is the home base for a lot of Web3's community. A large portion of public Web3 music discourse exists through tweets and Twitter spaces. Here are a few Web3 community members you can check out on Twitter:
Blogs and Podcasts
There are many Web3 experts that are constantly thinking about and researching how the music industry can be built upon in Web3. Reading and listening to people who are well-versed on the topic is a fantastic way to understand this quickly evolving space. Here are some of our recommended blogs, podcasts, and platforms to help you get more familiar with Web3 and it's impact on the music industry.
Blogs
One Big Idea (Blog and Podcast)
Podcasts
Web3 Music Platforms
Sound xyz - Music NFT marketplace
Catalog - 1/1 Music NFT marketplace
Glass xyz - Music video NFT marketplace
Zora - Multimedia NFT marketplace
OpenSea - Prominent multimedia NFT secondary marketplace
Spinamp - Music NFT streaming service
Audius - Music NFT streaming service