Web3 for Music: The NFT is as fundamental a technology as the MP3
As one of the music industry pioneers who enabled Oasis to stream in 1996 and launched the Daft Punk club, Simon Scott explains why CIRKAY are so excited about Web3 and unleashing the potential of NFTs.
There was a time when the MP3 was nearly extinct. Then along came iTunes and Apple ‘changed everything’. Looking at the future through a historical lens, I can sense Web3’s potential for the music industry. It feels like for the first time in a long while that there’s a moment of possibility for artists, their representatives, and their fans to take back control of the music ecosystem and benefit from its booming economy… or create a whole new one.
I was one of the people who did the Oasis online stream in 1996 and at the turn of the century launched the award-winning Daft Punk club. These early days (1996 – 2002) of screechy dial-up modems is what the tech world is now calling Web 1.0. Our challenge back then was that online fandoms and ecommerce was in its infancy and little or no monetisation was possible for either physical or digital products. It wasn’t all that easy to get text to appear online, let alone deliver online experiences for 600,000 fans.
Early internet adopters and “innovators” in the music industry like myself could ‘add value’ and create headlines by being first, but bringing the industry along with us was not always easy. Monetising was hard, especially even a basic credit card transaction was not easy. There felt like a void that Apple with iTunes and Amazon with their online store swooped into. Then Web 2.0 brought with it a combination of monetisation (via ads) around user-generated content and subscription services that gave access to a stream, both keeping platforms in control of revenue and formats. This state of affairs was not ideal for an industry built on fans wanting to own the records that they love and to easily access the fan communities that built up around artists. Even at iTunes’ peak, there was no way for existing consumers to know an artist they had already bought tracks by had a new record out… money was being ploughed into ad networks and traditional media to join these dots. I’ve done a lot of boring things with very basic data capture that has been valuable at keeping a connection to audiences that has extended artists’ careers, as well as finding ways of doing far more than digitising the little ‘send us your address’ postcards or download codes or allowing fans to access online enhanced CDs.
At CIRKAY we believe that Web3 technologies will bring the control of fan relationships and revenue generation directly into the hands of the musicians and their representatives. The tech is already here, but we expect to see in the second half of 2022 and early 2023 scaleable and trusted solutions emerge and we will be part of that story together with our blockchain partner Eluvio. We chose them as our Blockchain partner for a variety of reasons, not least because their ‘proof of authority’ is a light touch on the environment, where minting one NFT equates to 0.2g of CO2. Compare this to posting a photo on Instagram which emits 0.15g of CO2, and scrolling your Insta newsfeed for 1 minute emits 1.5g of CO2.
As we today launch the first CIRKAY Fan Pass, a new music format that acts as a digital members card that uses the “token” element of the NFT to provide access to experiences and exclusive files we wanted to share some of the lessons our team have learnt and share our thoughts on what the future will bring.
1. There will be more than one blockchain
In essence, a blockchain is a database which keeps track of everything. It’s often described as a ledger of transactions but the technology allows for so much more. It’s also used for storage and distribution, as well as allowing for the logging and expressing of identities.
We believe that in the same way that Apple iTunes was not the only digital music platform to thrive, Ethereum will not be the only blockchain to enter mass market use in the entertainment industry. Specific markets and use-cases will have their own preferred chains and there will be common interoperability between them.
The rights of users will rise to prominence as we all need/want/must have the ability to control access to our private data and content owners will need rights to control usage of their content and the ability to revoke rights if terms are breached.
Ease of use will eventually win over, with interoperability and shared standards meaning that users will be able to choose the combination of privacy controls and technology friction they want to have for each type of use.
2. If you are selling content you need a Content Blockchain.
“Content” is the reductive catchall for everything from a tweet to Metallica’s entire back catalogue. Often it’s just shorthand for files.
A Content Blockchain, like a sophisticated server where the content, rules of consumption and method of distribution are combined into one secure & metered solution. We’ve emboldened this as it is fundamentally important, that your content (music, videos, and various other files) has to be secure or you cannot sell it and it has to be metered or you cannot charge correctly. These are two fundamental business requirements that are not met with the current trend to host NFT content on a web 2.0 CDN type service. Eluvio, our Content Blockchain partner, have been delivering web3 tokenized content since 2019 and are the only truelable scalable solution that exists.
A good way to consider the Eluvio Content Blockchain is as ‘Bittorrent with DRM’.
3. The NFT is as fundamental a technology as the MP3
For us the NFT, or the ERC-721 Smart Contract to be precise, is ‘the first transportable proof of ownership of digital content’.
In the same way that the MP3 compression algorithm revolutionised the media landscape (because the innovative compression of MP3 files made video platforms like YouTube and Netflix possible), the NFT will allow new freedoms for creators and visionaries to build relationships and engage with their fanbases.
As proper use cases with fan value emerge we predict that the NFT will shake off the ‘dodgy piece of art’ tag. In 2001 people did not confuse an elegant compressed audio file from iTunes, played on an iPod and bought for 99 cents with a virus laden mp3 from Limewire.
Our CIRKAY Fan Pass is what we call a utility NFT i.e it is useful & beneficial, and gives access to an evolving content experience over time.
4. What can Web3 do that Web 2.0 cannot?
These three are the fundamental foundations that mean real change, shaped by the musicians themselves, can occur.
- The transportability of content means real ownership, not tied to a 3rd party service is possible. Simply put, a fan can buy a piece of content and continue to enjoy it without needing any sort of relationship, login or subscription with the place they purchased it from.
- As you have real ownership then you can have a proper secondary market where price reflects the ‘scarcity of’ and ‘demand for’ any specific item.
- The inherent nature of a blockchain itself provides both transparency & integrity to the ownership and value of any specific actor or content on the chain.
For instance, it will allow a modern day Brian Wilson to keep on fiddling with his albums after release or, it could provide an artist to track early supporters to one day get them into the aftershow for their first Brixton Academy show. More than a mailing list or being a follower on a social platform or giving someone a password to access an online area, there’s so much that this technology finally makes possible.
5. Create a first party market for content then think about reselling.
From one perspective, you could consider reselling music NFTs as legitimised home taping with the copyright owners continuing to be paid. We think that the resale market will take shape in the medium term but in the immediate period our advice would be to focus on the initial content proposition that will generate initial sales to your fans.
A first party sale of content will yield more than a share of an aftersale. Great content will get fans telling other fans to buy it and share the experience. Content drives emotion, emotion builds communities and a good community is self-sustaining.
As a side note, there is a difference in the type and production values of content that a streaming platform will ask you to provide and that which a true fan wants to purchase.
On first sale a CIRKAY Fan Pass will tend to be untradeable, we do not believe that every piece of content or ticket needs to be an auction. The audience for a specific creator could get very small indeed with no long term emotional connection if ‘life is an auction’ activity continues unchecked. If the creator of the CIRKAY Fan Pass wants to make it tradeable at a later date then we have the ability to update the Fan Pass to allow it.
6. It’s a “Fan Club Jim, but not as we know it”
Web3 technologies allows musicians to control revenue from music, but this should not be confused with traditional fan club models where a monthly or annual fee has to be paid to maintain membership. In our experience this ‘always on’ model does not work for all creators. There is a continual obligation to produce and invent value to ensure that fans do not feel shortchanged. Fans on the other hand tend to join fan clubs for specific benefits e.g. early access to tour tickets.
Our vision is that a Fan Pass will be used to accompany a specific phase in the artists creative cycle i.e a Tour Fan Pass may offer content from life on the road or a Digital Box Set Fan Pass will be interactive additional content to enhance your enjoyment of an album. CIRKAY Fan Passes will be available for a specific period of time and have a precise content offer. Upselling and offers of new content can be made to owners of a different Fan Pass.
With this new technology we can create a hybrid of an enhanced CD and a private members area but associate it with a track, album, tour, one-off gig, entire career, side-project or any other way you might like to use a token to connect and enrich a sale.
7. Start at 1,000 True Fans and build to 600,000.
We are devotees of the Kevin Kelly essay from 2008 entitled 1,000 True Fans, and the business model underpinning the CIRKAY Fan Pass is aimed at helping to facilitate that vision. Our guesstimate is that the maximum number of True Fans is about 600,000. Why 600,000? We’ve hit that number twice already, however no one made any money as there was no ecommerce to sell physical products and no way to digitally lock content or charge for access (tbf, there wasn’t any proper data capture either…).
The first time was in 1996 when our founders broadcast Oasis live from Loch Lomond, using RealAudio, CuSeeMe cameras, early digital cameras and scrolling HTML with crowd reaction about 7000 people around the world enjoyed the stream live, 5 weeks later the number had risen to 650,000 as fans tuned in to a specific point in the stream where a new track was played. This exact start time of the track was shared on message boards on the Oasis official website. There was no press, no hype, an artist did something and the community discovered it and shared.
5 years later we worked with Daft Punk and built a similar sized audience of 600,000 Daft Club members within 2 weeks.
The key lesson from both of these was the focus of real content for true fans. Envision an audience of one fan and build for that. If you get it right the community will take care of sharing it for you.
8. The impact of the NFT on the music industry has not started, but it will soon.
Looking back, the emergence and adoption of the NFT is mirroring that of the MP3 in many ways; The initial MP3 promise was “all music should be free”, and for the NFT it seems to be “you can make loads of money”.
With hindsight the MP3 promise should probably have been ‘this amazing compression technology is going to allow music to travel the world and reach everyone in a matter of seconds’, by that measure the NFT promise should be ‘a digital smart contract that allows a musician to establish perpetual provenance over their work.
Both are pretty fundamental.
Mp3s moved into the mainstream with the release of the iPod and iTunes for Windows, these combined to provide an easy way for people to purchase music for 99 cents and the path to a digital music economy opened up.
We predict that The NFT in the music industry will see its own watershed moment in the near future and CIRKAY intends to be a part of it.
18th April 2022
If you want to get some deeper perspectives please find below some links to podcasts and youtube videos that explain the current market. These are all generally critical of Crypto and NFTs specifically but do highlight the underlying value of the Web3 technologies if harnessed and combined with content correctly.
Web 3.0 – A libertarian dystopia
Ezra Klein Show – The most thorough case against crypto I’ve heard.
Line Goes Up – great background on NFTs