Track Insights: New Possibilities Brought by Music NFTs
August 25, 2022

This report belongs to AC Capital Research’s Track Insights series. Unlike the micro projects reports (Starshark, Stpen), Track Insights focuses on the underlying business logic and trends, challenges, limitations and opportunities.

  • The Evolution of the Music Industry
  • Reshaping the Music Industry Chain
  • Analysis of the Business Model of Music Streaming Media
  • Music Streaming Imbalance
  • The Dilemma of Musicians
  • New Era: A New Era of Community-Owned Ecosystems
  • New Technology: NFT Brings a New Shift in Digital Ownership
  • New Experience: NFT Makes Music an Investable Property
  • Changes in Musicians
  • Landscape
  • Prospect Analysis
  • Market challenges

1.Dilemma: The Positive and Negative Side of the Streaming Media Era

  • Copyright management bodies, such as the China Music Copyright Association.
  • Content producers, consisting of record companies and independent musicians, etc.
  • Content distributors, consisting of digital music platforms and others.
  • Content consumers, i.e. users.
  • Copyright chain: In the copyright chain, record companies or independent musicians sell music rights to platform providers, films and TV shows, etc., so that music works become consumer products in circulation. Music copyright holders mainly include various copyright management agencies and agents, while digital music platforms become the main force in the music distribution side.
  • Product chain: In the product chain, record companies lead songwriters, singers and other musicians to form professional music production teams or independent musicians to produce music products, which are eventually consumed by users through streaming content distribution platforms. Music content producers include independent musicians, songwriters, music studios, etc., while music recording parties are mainly record companies.
  • The free value-added mode represented by spotify provides users with free on-demand + paid value-added services, with ads in the audio for free users, while paid users can enjoy ad-free, offline playing and other value-added services.
  • The limited free value-added mode represented by Pandora is more similar to Internet radio, where users can listen to music in the song list for free, but cannot play it on demand, the number of songs to play or skip and the frequency of listening to the same artist are all limited.
  • A vertical pay model represented by AppleMusic, where users must pay to use it after a three-month trial period.
  • The soft bundled payment model represented by Amazon Prime Music, where the music service is offered as an add-on to the Amazon Prime membership service.

2.Changes: New Era, New Technology, New Experience

Changes in musicians

3. Racetrack: full analysis of music NFT

Racetrack map

  • Avatars :Wobblebug、World of Music、DirtyBird Art
  • Community/social:Friends with Benefits、Chillpil、Metabeat
  • Creators Tools:Manifold Studio、Melodity、Unblocked
  • Editions:RCRDSHP、 Sound、Pianity
  • Generative:SoundMint、 Pixelbands、 EulerBeats
  • Grants :Ocean Floor Music、Six、Audio Grants
  • Labels:Spinnin’ Records、Monstercat、SoundMint
  • Marketplace: Opensea、Rarible 、Catelog
  • Research : NFT NOW、Water&Music、Dopr
  • Royalty:Royal、Decent、Opulous
  • Streaming/radio:Audius、ROCKI、Resonate
  • Ticketing:GET Protocol、Centaurify、 YellowHeart

Prospect Analysis

  • Change of business model: The success of musicians is inseparable from the support of fans. It is the strong consumptive power of fans that drives the growth of artists and brings fans into the community. Music NFTs play an advanced business model of fans sharing revenue to persistently attract more users accept the form of music NFT.
  • Change of ownership : The consumption of music NFTs not only gives us the right to listen to songs, but also brings us the transformation of scarce digital ownership. At present, music NFTs have brought a full range of changes in personal use rights, NFT transfer rights, royalty income rights, and commercial use rights.
  • Income shift for creators : Why get paid once if you can get paid forever? Creators can set creator share and get commissions for subsequent secondary sales through NFT. In the era of Web2, copyright is sold to a company; In the era of Web3, copyright is sold directly to users (collectors).

Market challenges

  • Price fluctuations: hot secondary market, endless new projects and new gameplay, volatile market and price.
  • Lack of financial oversight and accountability: NFTs may be a digital project. When NFTs involve the assignment of copyright, there is a direct collision with the legal boundaries of the physical world. Regulators will adopt or adapt laws to address new forms of ownership under physical world policies.
  • Hack : Decentralized music platform Audius was hacked, losing $6 million worth of AUDIO tokens.
  • New piracy and infringement issues : HitPiece, a music NFT marketplace, has come under fire for selling music assets without artists’ permissions. The NFT copyright ecosystem is still far from the complex global music copyright ecosystem.
  • Niche Markets : Buyers of music NFTs tend to come from “niche, super-rich crypto communities”. People who are familiar with how crypto works and have enough cryptocurrencies are not the broader audience of music listening.

4. Conclusion

This article is for informational purposes only. It is not offered or intended to be used as investment or other advice.