How fractionalized music NFTs work and progress on protocols and platforms. We’ve got you covered on the latest in music + web3 – just stick to The Beat.

Welcome to The Beat, Decential’s bi-monthly breakdown of the music-web3 byway. 

Like most things in web3, the music space moves at breakneck speeds, issuing regular bouts of hope, cringe and FOMO. That combination of qualities blur the essence of the movement – on the enduring solutions to legacy industry problems and the people building them. Let’s focus on the essence; the rest, as Alex Ross wrote, is noise.

“Bitch Better Have My Money”

You may have heard Rihanna just headlined the Super Bowl halftime show. And perhaps you’ve seen a “Rihanna Concert Interrupted by a Football Game, Weird But Whatever” tee floating around, courtesy of her own company Savage X Fenty. The star’s appearance got a lot of media attention – not just because she’s Rihanna and doing Rihanna-like things, but because it was her first live performance since the 2018 Grammys.

(I would be remiss, on that note, not to mention Beyoncé’s newly christened crown as Grammy Queen B, now owner of 32 gilded gramophones and more than anyone else – and also the fuckery that is the fact that she’s 1 for 18 in the big four awards (album, record and song of the year, and best new artist – she won song of the year for “Single Ladies”) and a woman of color hasn’t taken home album of the year since Lauryn Hill won in 1999).

Anyways, Rihanna kicked off the show with “Bitch Better Have My Money” and kept on delivering from there. But the Super Bowl wasn’t the only place Rihanna’s name appeared these last couple weeks. Much web3 media attention was given to “the Rihanna drop,” referencing the arrival of “Bitch Better Have My Money” as a non-fungible token (NFT) on anotherblock, a web3 platform that sells stakes in songs’ future royalties.

Big win for web3, right? Onboarding an artist of Rihanna’s celebrity? Well it seems like she didn’t even know about the drop.

So… who’s got my money?

What actually happened is that Deputy, one of the song’s four credited producers, sold a percentage of his future streaming royalties on his percentage of the master rights to the song, which amounts to 1 percent of the full track’s master for the NFT sale.

So that went down like this: anotherblock fractionalized the 1 percent stake into 300 NFT sales priced at $210 a pop, which means Deputy netted $63,000 from the sale. (He’ll also take 5 percent of each resale in perpetuity, and those NFTs are already reselling for $1200-1800 each). So if you bought one NFT, you’re now owed .0033 percent of future streaming royalties for the song. 

As Music Business Worldwide (MBW) cites, “Bitch Better Have My Money” is averaging 886,000 streams per week, which means about $3,500 is going to rights holders (based on the standard of $4,000 per million streams), and if about 80 percent of that goes to the master, each NFT holder will earn .0033 percent of $2,800, which means about $9.30 per week. If my math is correct, if you got in at $210, you’re looking at a 230 percent return (pre-tax) in the first year – not too bad.

Now there’s a lot of nuance and variability to consider, and buyers should always read the fine print – one testament to that is the update MBW had to publish about the sale’s mechanics, which drastically affected their math. But this is still a ‘yes and’ situation: wow what an experiment and all the warnings and caveats MBW mentions are worth keeping in mind and they’re not wrong in being concerned about hype-fueled drops and lack of regulatory oversight.

How can I get some of that money too?

Platforms across web2 and web3 are experimenting with innovative royalty structures – and have been for some time. In 1997, David Bowie released his Bowie Bonds, an asset-backed security that used his own royalties and other income streams as collateral. Today, 26 years later, it feels like we could be in the nascent stages of a massive structural overhaul. 

Remember Universal Music Group (UMG) boss Lucian Grange’s plea for a foundational shakeup to the streaming payout system? When he called for an “artist-centric model” in a recent memo to UMG employees? Details then were vague, but more clarity is emerging. 

UMG just announced a partnership with streaming platform Tidal, long an aspirant to secure more equitable industry terms – e.g. the eclectic, star-studded (both Rihanna and Beyoncé were there) 2014 launch event that underscored the platform as “the future of music,” an NFT-fueled payout strategy with then Twitter CEO Jack Dorsey and a tiered payment system that explored “user-centric payments.”

In the user-centric model, if I spend 100 percent of my time in a given month listening to Rihanna, my entire subscription fee (after intermediaries take their cuts) would go to her. Currently, with the widely adopted pro rata model, payouts are based on total listens, which means payments are pooled together and paid out accordingly, so if Rihanna had 35 percent of all of Spotify’s monthly listens, she gets 35 percent of all of our subscription payments – regardless of if we listened to her or not. That’s made sustainable music careers largely unattainable for all but a select few, and is part of the fervor that’s fueling calls for systemic change. 

But in light of the partnership, Tidal discarded its ongoing investigation into user-centric payments – which are notoriously difficult to implement at scale – in order to “focus on this opportunity for more impact.” Details of ‘how’ have yet to emerge.

Concurrently, news arrived that JKBX – a forthcoming royalties marketplace – partnered with GTS Securities LLC, one of the largest designated market makers at the New York Stock Exchange. JKBX was founded by industry vet Scott Cohen, founder of The Orchard (one of the earliest digital distributors) and former Chief Innovation Officer at Warner Music Group.

In essence, JKBX is a marketplace for trading song royalties as an asset class. It works by “packaging the investments in SEC-registered entities and creating a platform welcoming of investors confused by blockchain and NFT jargon,” says Cohen. 

Cohen was recently a guest on the Music Tectonics podcast, where he discussed how the platform marries scale with regulatory framework and retail investor availability in a way, he says, that’s never been done before. Cohen’s already secured $1.7 billion in catalog value, and he expects that to grow to $4-5 billion by the time they launch in September.

Though he talked about web3 and NFTs in the podcast, and his CTO Matt Brown was previously co-founder of the web3 startup Arthur and a former employee of blockchain platform Ripple, Cohen never discussed if or how JKBX’s own infrastructure interacts with the blockchain – likely for prudent reasons. “If you lead with technology, it’s not mature,” he said. 

That’s been one of crypto’s pitfalls. ‘NFT’ and even ‘web3’ are technological terms – for those on the outside looking in, those words do little to describe the value or utility of a product, and they can feel exclusionary. In reality, whether it’s on-chain or not doesn’t really matter to the consumer. And the fact that JKBX is already SEC-compliant and not simply crossing their fingers in the “is an NFT considered a security” debate could give it a leg up in the long term. 

Progress

Elsewhere in web3 there were lots of iterative improvements to familiar products. Music NFT aggregator Ooh La La announced its Direct Mint feature, which allows listeners to mint NFTs directly from their platform, as well as an On/Off switch, which gives artists control over the availability of their tracks on Ooh La La. 

Sound.xyz released custom allowlist functionality and Curator Rewards, which allows curators to earn a percentage of sales through a referral link. For instance, if I share a song with you and you then buy that NFT via my referral link, I’ll get a split. And speaking of splits, the on-chain earnings tool Reveel launched an SDK to make it easier for other platforms to add revenue splits and complex revenue sharing. 

Meanwhile Nina Protocol joined Sound in offering open editions – a model where releases can have an infinite supply, and are generally limited by time instead of amount – and the video protocol Glass.xyz thinks it's found an even better edition model, introducing Milestones, which uses time- and supply-based milestones to guide a drop.

Finally the decentralized autonomous organization NOISE DAO – a community of prominent music folks who support and believe/actively invest in web3’s potential to impact the larger music industry – released details of a compilation album they hope encourages a new wave of collectors to join the movement. It kicks off on Tuesday, February 21 and features many of today’s more influential web3 musicians.

Coda

Rest in peace to David Jolicoeur – better known as Trugoy, one third of De La Soul, one of the most important American music groups of the past half century.

RIP also to the legendary composer, songwriter and pianist Burt Bacharach, whose work with people like Dionne Warwick and Dusty Springfield earned him six Grammys, three Oscars, and an Emmy. 

And finally, rest easy to the voice (and just the voice) of singer-songwriter Janis Ian, who at 71 is retiring because she can no longer sing, a loss she painstakingly compared to a death. Consider it a reminder to use your voice while you can. 

See you next time. Go see some live music.