Music NFT market update, April 2021: $70.5M in sales to date

By: Cherie Hu

Published: 2021-04-21

For your learning convenience, you can also view this update in the form of a Google Slides deck, which is available to the public. As a reminder, paying members have access to the dataset behind this research, which I invite you to play around with yourself.

Our last music NFT market update was published exactly 50 days ago, on March 2, 2021. At that time, the market was defined by hype, plain and simple. 3LAU and Grimes had each just pulled off multimillion-dollar NFT auctions, driving a frenzy of activity from artists looking for short-term cash grabs — especially those signed to major labels, including Kings of Leon, Snoop Dogg, Shawn Mendes and Zedd. Beeple’s $69 million NFT auction with Christie’s would shake up the ecosystem even further, waking up the general public to the technological and economic potential of NFTs and crypto as a whole.

What has changed since then? To be sure, there’s still a ton of hype to go around. But in the music industry, I’m noticing people dedicating more time and energy to addressing more practical, fundamental questions: What is this technology even good for? How can we use NFTs to benefit society and bring income to those who need it most, instead of keeping it exclusive to a small playground for the ultra-wealthy? What can fans actually do with these NFTs, apart from just staring at their purchase receipts on the blockchain?

In the past 50 days, many more NFT marketplaces and use cases have emerged that can help clarify these questions for the music business. At the same time, there remain immense legal, political and cultural challenges to making sure NFTs can reach their full potential across a wider scope of artists and fans.

While music NFTs might now represent a nearly nine-figure economy, and the underlying technology might signal a long-term paradigm shift in music economics and ownership, it’s far from the “new normal.” Hopefully this report will illustrate both of those sides — the incredible amount of innovation happening right now, but also the work we have to do to keep it going on the long term.

But first… a few data disclaimers

As a reminder, I define a “music NFT” as any NFT sold by a musician, and/or that heavily features music. The NFT itself does not have to be tied to a specific musical recording, but 50% to 100% of revenue from the NFT’s primary sale has to be going to a musician or music company.

The data that informed this research was compiled via a highly manual process of monitoring over 20 different NFT marketplaces on a daily basis between June 6, 2020 and April 16, 2021. There may be a geographic bias, as most of the platforms and artists featured are based in the U.S. and Europe. That said, I can guarantee that our dataset is the most comprehensive and reliable aggregation of music-specific NFT transactions that you will find on the Internet.

All sales figures in this report are primary-only (i.e. no secondary transactions) and recorded at the point of final sale in USD, using historical crypto exchange rates. With the volatility of crypto prices, keep in mind that the current value of a given music NFT is likely different from what it was worth at the time of its primary sale. This is normal.

Last but not least, this specific update does NOT include social tokens or any other fungible token types. While social token applications in music are certainly exciting, they are beyond the scope of this particular analysis.

First, let’s dive into higher-level summary stats.

Musicians and music brands have generated over $70.5 million in NFT sales since last June, from selling nearly 75,000 NFTs. To give you a sense of how quickly the market has accelerated, $68.7M of those sales happened in the last 75 days alone.

You may have remembered from our previous update that there was a huge spike in music NFT sales around February 2021, largely thanks to the multimillion-dollar auctions from Grimes and 3LAU. Now, market growth is more incremental rather than exponential, with monthly music NFT sales averaging out to around $25 million to $30 million (pictured below). At their current pace, monthly music NFT sales in April 2021 will likely surpass $30 million, and total music NFT revenue will likely surpass $100 million by the end of May.

In terms of pricing models, there are three main kinds of music NFT campaigns that I’ve seen in the wild:

One of the biggest myths about the music NFT market right now is that the vast majority of revenue is being driven by single-copy, 1/1 auctions, where scarcity inflates the final bidding price. This is simply NOT TRUE!

In reality, 67% of music NFT revenue to date ($42.5M) has come from fixed-price sales, with no bidding process involved. Auctions (silent and 1/1) account only for the remaining 33%. This suggests that the long-term revenue opportunity is in widening NFT access to a larger audience, not in keeping it exclusive to a narrow bidding process.

That said, it is true that single-copy music NFTs are more expensive than ever: The average auction price of a single-copy music NFT has grown nearly 7x over the last six months, from ~$15,000 in November to ~$104,000 so far in April. That means that if you won an auction for a single-copy music NFT in the last month, you’re probably in the top 5% of the population by annual income. This auction average will likely continue to balloon in the coming months, as more celebrities and major labels warm up to the market.

If we compare the average going price of a single-copy NFT to that of a more widely available, fixed-price NFT, the difference resembles what we’ve found in previous reports. In particular, the average single-copy music NFT is around 116x more expensive than that of a fixed-price music NFT ($74,514.68 vs. $641.84). This is unsurprising, as artificial scarcity drives up market value.

The average price of a music NFT sold without a bidding process has actually gone down by around $140 since our last update, from $788.75 to $641.84. This is also unsurprising, given the sheer increase in the supply of fixed-price NFTs in the market today.

That said, hopefully this graph demonstrates that the most financially “accessible,” widely available music NFTs are still being sold at a much higher average price point than what we would expect from even, say, a typical concert VIP package. In other words, the music NFT economy is financially out of reach for the vast majority of fans.

According to my records, around 150 artists and music brands have sold NFTs so far. The point really needs to be driven home that this is an EXTREMELY small number compared to the number of working musicians today, and that the NFT economy has only impacted a small niche of artists and fans to date. It is far from the “new normal.”

Top artists

The top artists of all time by music NFT sales are mostly artists who either have already-established fan bases, or who have deep ties to and familiarity with the crypto community:

Let’s dive into three specific case studies, highlighted in green:

Indie labels experiment — and major labels quickly catch up

To date, independent artists and brands command the majority of all-time music NFT sales ($40.1 million). Because they can move much more quickly and nimbly than larger music companies, independent artists continue to set the standard for the rest of the music NFT economy in terms of pricing trends and inventive use cases.

What’s really interesting to me is the rise of independent labels and event promoters organizing branded NFT campaigns and exhibitions, building their reputation in the crypto community using the same strategies as individual artists. A handful of examples include:

It also cannot be understated that major labels are quickly catching up. February 2021 marked a key inflection point in the market, when major-label acts like Mike Shinoda and Chet Porter started selling their own NFTs. Dozens of other celebrity acts soon followed.

All in all, major-label acts have generated over $30.4M in music NFT revenue — or 43% of all-time music NFT sales — in the last few months alone, which speaks to the power of celebrity and reputation in driving up the prices for these works. Assuming this trend continues, we should expect major-label artists to surpass indie/unsigned artists in NFT revenue by the end of this year.

Top genres

Unsurprisingly, the vast majority of NFT revenue to date has gone to electronic artists ($47.8M, or 68.1%).

That said, this is already a much smaller share for electronic music (by around 16 percentage points) compared to last month. That’s because hip-hop, R&B and soul artists are embracing NFTs faster than ever; thanks to campaigns from the likes of Snoop Dogg, K Camp, LATASHÁ and Kenny Beats, artists in these three genres generated over $15 million in NFT sales in the past 75 days alone — and now account for 23% of all-time music NFT revenue.

This is unsurprising, given how consistently electronic and hip-hop/R&B artists have been early adopters of emerging tech throughout history. Meanwhile, all other genres including pop, rock, folk, classical, jazz and reggaeton are still catching up, collectively accounting for the remaining 9% of revenue.

Before diving into specific platform trends around music NFTs, it’s worth pointing to a higher level trend in crypto right now — namely, the sheer volume of funding being poured into the ecosystem. So far in 2021, companies specializing in NFTs, including Dapper Labs, Zora, SuperRare, Rarible, OpenSea, Curio, Dibbs and Recur, have collectively raised over $350 million in VC funding. In some cases like with OpenSea and Zora, musicians are included on their cap tables. We should expect, and push for, musicians to benefit directly from this influx of capital.

Now, let’s move on to specific platforms for the music industry.

To date, the platform Nifty Gateway alone has processed 56.4% of all music NFT sales ($39.8 million), which is actually a higher share of the market from last month. In case you’re unaware, Nifty Gateway runs on Ethereum and specializes in highly curated, Supreme-style drops from celebrity figures in music, art and entertainment; recent customers include The Weeknd, Zedd and Halsey.

That said, other platforms and protocols are growing much more quickly by market share. Crypto.com only launched its NFT marketplace in late March 2021, but already accounts for 19.1% of all-time music NFT sales — thanks to high-volume, high-revenue drops from the likes of Snoop Dogg, K Camp, Nathan Evans and Axel Mansoor, with upcoming campaigns featuring Beatport and Janelle Kroll. The company recently hired music-industry veteran Joe Conyers III to lead their NFT strategy and recently announced a payment partnership with TIME, so we can expect the platform to play a significant role in driving more widespread adoption of crypto in everyday life.

The Origin protocol, which accounts for 16.7% of all music NFT sales to date, takes a more white-label approach to helping artists and personalities run bespoke NFT campaigns. This customizable approach is quickly making Origin the partner of choice for the likes of 3LAU, Lupe Fiasco and Ryan Tedder.

Some other platforms to be aware of include:

The big question that I’m sure all NFT marketplaces are asking themselves is how they will really approach differentiation long-term, if NFTs technically live on a decentralized blockchain architecture that cannot be siloed to a particular Web 2.0 website or app. In this regard, long-term innovation will likely happen more at the protocol rather than platform level, in terms of giving creators interesting tools to code their own economics into their tokens (e.g. see what Mirror is doing for writers, or Zora for musicians and music app developers). NFT platforms that exist on top of these protocols can ultimately be powerful as curators (e.g. SuperRare, Nifty Gateway) and virtual exhibition/experience designers (e.g. Decentraland, Cryptovoxels), innovating on the end-user experience.

This brings us to the next section…

Emerging use cases for music NFTs

Obviously we know about one surface-level use case for music NFTs: making a sh*t ton of money.

But in terms of their actual long-term utility and value for artists, fans and owners, there are six specific categories that I’m seeing emerge in the market:

A. NFTs and “meme stocks”

NFTs can help give a sense of value, permanence, ownership and provenance to otherwise fickle, ephemeral meme culture.

Many examples of NFTs as meme stocks already exist in the general cryptosphere, with tokens connected to Nyan Cat and Overly Attached Girlfriend being auctioned off for six figures apiece. This approach could be especially relevant for the music industry, which increasingly relies on meme-friendly apps like TikTok to spread awareness of new tracks. There’s a joke question I have in mind that might not actually be a joke in the long term: If you went viral on TikTok and didn’t make a commemorative NFT about it, did it really happen?

Some key early examples of this approach in music include:

B. Philanthropy

Several artists and music organizations have used NFTs to raise money for charity, or to pay it forward by covering fellow artists’ gas fees and offsetting the environmental costs of minting on proof-of-work blockchains like Ethereum. This mimics the centuries-old model of philanthropy and arts patronage from wealthier benefactors; the hype around NFTs certainly drives up the prices of these donations, but you arguably don’t need NFTs to pull this model off.

Some key examples include:

C. Fractional IP ownership and investment

A growing number of artists and labels are exploring using NFTs as a vehicle to facilitate IP investment, licensing, rev-share or ownership-transfer deals between artists and fans. The core idea is that the decentralized, immutable nature of blockchain technology can make licensing and ownership verification much more efficient (a relic of the first wave of music-industry blockchain hype around 2015, which focused on metadata and rights management). That said, the main challenge with this model is that by technical necessity, all rights transfers are still happening manually off-chain, rather than automatically on-chain, which might only add to long-term inefficiencies. There’s also no consensus right now on what kinds of rights a music NFT sale should even implicate (more on this later).

A few key examples of this approach include:

D. Dynamic art

There’s been a recent rise on the fringes of crypto on the concept of “dynamic NFTs” or “programmable media,” in which tokens and their underlying smart contracts evolve in real time in reaction to external events or data. This has a strong alignment with the trends of adaptive and generative music that had already been pervading the worlds of fitness, gaming, A.I. and other verticals.

Key early examples of this approach in music include:

E. Live events

This use case can be connected to dynamic or programmable NFTs — i.e. auctioning off NFTs that evolve based on events that unfold in real time during live shows. Or, it can be the reverse — namely, using NFTs as keys to unlock exclusive live experiences online, which would make them the closest crypto-based parallel to a VIP concert ticket.

Key examples of this approach include:

F. Visual music discovery

At their core, the most successful music NFT auctions to date have centered visuals, not audio. In aggregation, this naturally lends itself to a more visually-driven form of music discovery — akin to flipping through album art at a record store to decide what to listen to.

Key examples of this model in practice include:

Top concerns and challenges for the music industry

Generally, my biggest concern right now is that there’s too much focus and hype in the music industry around short-term cash grabs, and not enough consideration of what the post-transaction experience could look like for artists and fans. What kinds of new experiences can NFTs unlock in the long-term, where preexisting tech falls short? How can we make sure NFTs can be accessible and valuable to the average fan, not just to those existing within niche, ultra-wealthy crypto communities?

In pondering these questions of long-term utility and accessibility, some more specific strains emerge:

Copyright implications… of course

As I’ve put it on Twitter in the past, crypto is not ready for copyright law, just as much as copyright law is not ready for crypto.

It’s a complete wild west right now for music NFTs in particular, with no standard for what kinds of rights should be implicated in an NFT sale. Should labels and publishers have a right to revenue from a music NFT tied to a song — especially if, in the majority of cases, there actually isn’t a music file that is concretely embedded into the token on-chain, such that what fans are buying is more like a ticket or abstracted purchase receipt than the song itself? Or should it count more as merch or ecommerce, where the artist would be monetizing their trademark and name/likeness rather than their recording and publishing catalog?

In any case, many rights holders, particularly songwriters, producers and publishers, are retroactively trying to chase down NFT revenue that they think they deserve — only to receive a fraction of a percentage of sales in return. While it’s certainly important to credit and compensate those who contributed significantly to a given creative project, hopefully the majority of energy from major rights holders moving forward will be dedicated to enabling new forms of value around music NFTs, rather than trying to stifle them.

Gender and racial diversity

To be frank, the music NFT economy is not only relatively small compared to the music industry as a whole, but it’s also still a boy’s club. The vast majority of music NFT revenue is going to white, male artists who either have established fan bases or are already wealthy.

That said, it’s encouraging to see emerging platforms like Foundation and Zora taking diversity more seriously, both in terms of their staff and their featured artists. Initiatives like the Mint Fund are emerging that can give cash-strapped artists the resources to cover gas fees as they mint their first NFTs.

High barrier to entry

At this stage, music NFT campaigns are still largely crafted for the crypto community — specifically, for people who are already familiar with the technicalities of how crypto works, and who are sitting on enough crypto to be comfortable investing $600+ in buying a digital artwork (or paying around $200 in gas fees to mint an NFT in the first place).

Beyond as-yet closed-off apps like Clubhouse, I think there’s a severe lack of fan education from most artists in this ecosystem about what NFTs even are, how they work, how to set up a crypto wallet and other technical factors. I would love to see more artists talk about NFTs and crypto in a more public-facing way — especially on platforms like Instagram Live or Twitch that are accessible to a wider audience, not just in Clubhouse. Unsurprisingly, independent artists who are not bound by an exorbitant number of contracts or legal obligations are doing a much better job at this than major-label artists right now.

Do we really need NFTs to do this?

I’ll close off with a reminder that emerging technologies are most exciting when you actually make use of the unique capabilities they have to offer.

In contrast, many music, media and entertainment companies try to copy-and-paste old business models, fan behaviors and power structures onto new technologies, which ultimately does said tech an injustice. We’ve seen this with livestreams and VR concerts, and now we’re seeing it with NFTs: Many major NFT campaigns are just glorified VIP fan experiences that only feel news because they have the buzzword “NFT” attached to them. In reality, there are tried-and-true ways to use pre-existing technology to pull off high-quality, secure VIP fan experiences or music sales, without the environmental inefficiency or relative financial inaccessibility of NFTs.

Hopefully, this analysis has shown that there is an incredible amount of positive experimentation around music NFTs right now, drawing on an increasingly diverse set of potential use cases. But if your NFT campaign is not making genuine use of the distinct technical or economic affordances that blockchain has to offer, you’ll probably save yourself (and fans) time, energy and money using something else.