Investment

NFTs and streaming song royalties capture the imagination of investors

The music industry has been more thoroughly chewed over by the internet than any other, and the process shows no sign of ending. 

The latest innovation is the brainchild of a company called Royal which wants to offer fans the chance to invest in songs through NFTs and receive their share of the streaming royalties the songs generate. 

The idea that musicians might sell shares in individual songs to pay their way, and build a fan base, is part of Web3’s blockchain vision, where online consumers free themselves from platform tyranny and control their own assets

Royal’s backers have invested a total of $71 million. They include rappers, music publishers, James Hahn’s tech-savvy family office Asia Alpha, Peter Thiel’s Founders Fund, serial crypto investor Joachim Lecrivain, Jean-Brice Abrial of consulting firm Gartner, Coinbase Ventures and Atomic, the VC firm run by NicklasZennström, co-founder of Skype.

Zennström also happened to develop music file-sharing business Kazaa in 2001, now defunct. 

The streaming of music by the likes of Spotify, led by Swedish billionaire Daniel Ek, has become standard, to the detriment of physical formats. 

To top up their royalties, famous musicians often sell their back catalogues to publishers. Those yet to become famous seek new fans via YouTube or SoundCloud.

Music publishers have worked hard to adapt.  An EMI buyout laboured under heavy debts, and lost its identity in 2011. Its former chief Guy Hands opted for a quieter life. His family office bought a cattle rearing business in Australia in 2020.

The idea that musicians might sell shares in individual songs to pay their way, and build a fan base, is part of Web3’s blockchain vision, where online consumers free themselves from platform tyranny and control their own assets.

For their part, musicians might sell NFTs to their fans, and forge links with them without needing the services of intermediaries.

Katie Haun recently left Andressen Horowitz, also an investor, to set up her own VC firm. She is an enthusiastic supporter of music NFTs. Of Royal, she said: “Musicians can receive support from fans early in their careers, with fans then rewarded for getting in on the ground floor.”

Justin Blau, aka 3Lau, is an electronic musician and co-founder of Royal with JD Ross, who co-founded online house agency Opendoor Technologies. Blau says his interest in digital assets goes back to a chance meeting with bitcoin pioneers, the Winklevoss twins.  These are early days, but Blau told CNBC in April 2022 that Royal had marketed rights for four music artists attracting bids worth $1 million. 

Royal’s NFTs give investors the chance to buy a share of copyright income from songs as they stream, plus the pleasure of being associated with their favourite musicians.

Musicians can enhance the value of a token by attaching access rights at future concerts. Musicians who contributed most to a song could get extra shares. Trading platforms are likely to develop and fans could get rights to access merchandise or attend concerts in the metaverse or the real world. 

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