Discord Digest #032: Web3 as an "exit strategy" for artists

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“Exiting to the community” — could Web3 provide an exit strategy for legacy artist catalogs?

shared by @Joshua Glazer in the #web3 channel

We discussed a novel potential use case for Web3 in music: Ethical estate management.

As the latest issue of The Cadence newsletter notes, there’s been a much-publicized rights acquisition boom as of late, with several financial giants acquiring high-profile rights portfolios — perhaps most notably Blackstone’s $1 billion investment in music fund Hipgnosis. As the former piece argues, part of the reason behind the boom in catalog sales is due to “a generation of musicians now in their 70s and 80s” reaching old age and wanting to cash out or realizing that management of their estate is beyond their family’s capacity.

Unsurprisingly, the idea of some of the most loved and iconic catalogs falling into the hands of sizable corporate entities doesn’t sit well with many fans or artists. Blackstone, for example, now owns the back catalogs of Fleetwood Mac, Rihanna and Taylor Swift, to name but a few.

Set side-by-side with PleasrDAO’s groundbreaking acquisition of the iconic Wu-Tang Clan album Once Upon A Time in Shaolin, we’re compelled to ask: Could Web3 become, as @Joshua Glazer put it, “an exit strategy for legacy artists”?

Ultimately, the community was divided on whether the PleasrDAO model presents a truly desirable alternative to corporate acquisitions. Some of us were skeptical that DAOs at large — a notoriously fluid concept, and one still very much in its infancy — were capable of scaling at all, let alone to the level required to manage massive catalogs of hundreds or thousands of tracks. As @CRITIQ and @marlonjm2k suggested, a complete consensus is notoriously challenging to achieve at scale, especially for a topic as subjective as music.

DAOs and Decentralization as a whole is going to be an interesting social experiment. There will be some heavy social engineering involved to get everyone playing nicely together. If it plays out, we’ll likely see a further emphasis on the long tail and niches for everything. Web4 will be back to the great consolidation if history holds true with the unbundling/bundling cycle 😉 – @marlonjm2k

Others drew parallels between traditional investment funds and the small groups of wealthy, self-selected fans that comprise many DAOs. @Zach Miller suggested that DAOs built around active contributions to a community (where users “play to earn” rather than “pay to earn”) may provide a more egalitarian alternative:

I’d agree in regards to small collectives like PleasrDAO. I do imagine DAOs can scale though, and as that happens the power over it becomes diluted with each new user, assuming ownership is earned and not bought. – @Zach Miller

This points perhaps to a fundamental difference in incentive structures and expectations from stakeholders between emerging Web2 vs. Web3 models of catalog management. While the Hipgnosis model is all about passive profit generation, DAO models are (largely) about rewarding active, collective participation and stewardship around a community’s core product. Hence whether DAOs make sense as an “exit strategy” for future artists and their catalogs may be less a question of technological scale or financial performance, and more a question of long-term cultural alignment.

Further reading: The DAO of DAOs (which includes some ideas for how DAOs can scale)

Bowie Bonds — ahead of their time?

shared by @nbaronia in #legal-and-policy

We discussed Bowie Bonds — David Bowie’s groundbreaking 1977 experiment that saw him launch the first instance of a royalty-backed financial instrument, allowing fans to invest in his massive back catalog.

Bowie Bonds were a runaway success at launch, netting Bowie $55M upfront, which he used to buy back songs owned by his former manager. Sadly, Bowie Bonds also coincided with the rise of music streaming, which saw music sales nosedive across the board, prompting Moody’s to downgrade Bowie Bonds to just above junk bond status.

As @nbaronia notes, Bowie Bonds provide valuable context for projects like Royal — as well as serving as a reminder that experiments blurring the lines between art and finance have taken place for decades, despite recent rhetoric that presents new ideas of ownership and investment in art as “the ongoing financialization of everything.” It’s also interesting to look back and appreciate just how thoroughly Bowie Bonds became a victim of circumstance, and how different things could be if they were launched today.

100%, those bonds would be back to their AA ratings and have been acquired by Hipgnosis or something – @maartenwalraven

Further reading: The whole story behind Bowie Bonds (Billboard)

Web3 tech, Web2 problems

shared by @BlackDave in #web3

We discussed a Twitter thread shared by @BlackDave arguing that the artists who find success in Web3, by and large, look a lot like the artists who find success in the traditional music industry.

Without any hard statistics, it’s tricky to tell whether this is true or not — but it did spark a discussion about whether Web3 offers artists real career longevity. For one, as @CRITIQ and @dan – pcdkd point out, many music/Web3 platforms do not offer any real discoverability to artists, a genuine obstacle for artists who want to invest in growing their fan bases. And as @BlackDave points out, even if residual income might be one of the key perceived benefits of blockchain, many music NFTs (and NFTs at large, for that matter) don’t tend to generate secondary sales. Some hotly-traded NFT projects such as PFP art collections do generate significant windfall, but music is largely left out of this upside.

Think it’s hard to solve for “discoverability” when there is such a small audience/demand for music distribution via this medium. My current thinking (will look for more data to disprove) is that assumptions around fan/audience demand for ownership is overstated and most of the interest around music NFTs is simply hoping that music NFTs will have the same get-rick-quick aura as PFP-NFTs. – @dan – @pcdkd

One question I often ask in twitter spaces that spark a debate is “what drives a secondary sale for a music NFT” because that’s a biiiig missing part of the NFT narrative for music artists. – @BlackDave

Ultimately, it’s still unclear whether Web3 should function as a replacement to a traditional music industry career or function as a kind of supplementary channel. As @yung spielburg points out, the two may eventually feed into each other.This would support the growing sentiment that one strategy might be to raise funds in web3 to then apply them in more traditional areas (touring, marketing).

I’ve said this before, but I think the best value prop for web3 in music at this moment (more to be unlocked for sure) is the ability for independent artists to raise capital outside of traditional means. I think there are major benefits to crowdfunding using this tech – namely the real feeling of owning SOMETHING as a contributor, as opposed to just watching the bar go up, and then the ability to receive things to the wallet holding that token in the future with ease, or unlock things etc…. the usual. – @yung spielburg

Further reading: Water & Music’s comprehensive report on the state of music/Web3

Temperature check on touring

shared by @cheriehu on #live

Prompted by a tweet from electronic artist RAC, we discussed how we’re feeling about the return (or lack thereof) of live tours in 2022.

First off, it’s important to note, as @danfowler does, that after two years without live revenue, many artists simply do not have the luxury of the level of cautiousness RAC expresses in his tweet.

feels like a position that only a few privileged artists can take… – @danfowler

But despite record levels of infection recorded during December’s omicron surge, many of us also expressed eagerness and a sense of optimism about the prospect of live music, predicting a record festival season (which would be a welcome development after 2021’s stilted return). That said, some events might be easier to execute than others — the idea of one-off events that take place outdoors seem far more palatable to some of our members than committing to a global tour, for example.

Whether this uncertainty creates a cultural shift within the industry — with a lasting impact on the range and availability of live events to the consumer market — remains to be seen.

Further reading: On the road, again: the state of touring in summer 2021 (Pitchfork)

The environmental impact of catalog acquisitions

shared by @Tom_Brown in #sustainability

An open question from @Tom_Brown made us consider an under-discussed side effect of catalog acquisitions — namely, the environmental impact of redelivering preexisting digital content through the “pipes” of a new organization.

Very niche open question. Does anyone have an idea of how much energy might be consumed when aggregators take down and redeliver huge swathes of catalog content? Say for instance Sony‘s purchase of AWAL goes through. AWAL‘s entire catalog of audio files and metadata would need to be taken down and redelivered through The Orchard‘s pipes. Surely there‘s a more energy efficient solution, without the duplication. – @Tom_Brown

While thankfully, as @vintroxx notes, audio encoding isn’t nearly as intensive as video encoding, the process could still be pretty energy-intensive, especially if metadata-related issues crop up or if the audio needs re-encoding. This output depends on how the various DSPs distribution services are designed (FWIW, we’ve covered ongoing issues Spotify has had with its metadata in previous digests — check out Digest #003 for more on this).

Distribution isn’t particularly energy intensive. There isn’t a lot of computation going on there. It does use quite a bit of network bandwidth (the DSPs have to grab the lossless audio from the distributor) but none of that is going to use a lot of energy. What could, however, is re-encoding. Depends how smart the platforms are – I would hope Spotify could deduplicate to avoid having to re-encode audio, but if not, that’s somewhat energy intensive? Nowhere near as much as video encoding though – YouTube probably uses as much energy as re-encoding the entire AWAL catalog every hour. – @vintroxx

And making sure all metadata is correct too…😳😳 – @jrakzjrakz

As the music industry grows increasingly environmentally conscious, it’s important that we pay attention to administrative, industry-facing activities like production and distribution alongside hot-button topics like NFTs.

Further reading: Is streaming music dangerous to the environment? (Rolling Stone)