Music NFT market update, March 2021

By: Cherie Hu

Published: 2021-03-02

Last month, I published one of the first in-depth analyses of the burgeoning market for music NFTs and social tokens. Drawing on transaction data from June to December 2020, I wanted to paint a picture of a digital economy that not only was growing rapidly (150x increase in sales over six months) amidst newfound societal openness to alternative finance, but also had the potential to invert recorded-music economics as we knew it, by introducing scarcity to the digital music experience.

To no one’s surprise, we’re due for a major update just two months later.

In the context of an as-yet emerging technology like blockchain and crypto, two months can feel like a lightyear. Indeed, in January and February 2021, dozens of indie and established artists joined the NFT bandwagon for the first time, imagining new and innovative use cases for the token type and leveraging new kinds of platforms and protocols to do the job. The resulting hype can feel overwhelming, but cannot be ignored — especially because, again, there’s a significant amount of money being made here.

If you haven’t already, I recommend you read through my original piece on music NFTs before continuing below. That first piece provides some more ideological context around why the trend is important for artists and music rights holders, plus an overview of the different kinds of platforms and business models that define the landscape as a whole.

The following updates will build off of this context, focusing more on hard stats and assuming a base knowledge of how NFTs work.

As a reminder, all paying members have access to my own music NFT sales tracker, which I update on a regular basis to inform my research on this topic. I invite you to play around with the data yourself and see if any trends emerge on your side that I may have missed.

I also might make this a regular “monthly music NFT update” kind of thing, so if that would be valuable to you, please let me know in the comments below.

Sales & pricing overview

Incorporating data from January and February 2021 into our analysis, we can safely say that the growth of music NFT sales in the last year has been literally exponential.

Since June 2020, musicians have sold $23.6 million worth of NFTs. Nearly 80% of those sales took place over the span of just one weekend (February 27–28, 2021), from just three artists — namely 3LAU, Grimes and Ozuna.

How much does a typical music NFT sell for? In the previous analysis, I found that the majority of music NFT campaigns were structured as single-copy (or 1/1) auctions, where fans could bid on the final price, and that there was a significant price difference between the average price of a 1/1 NFT and a non-auction NFT ($13,381.88 versus $801.79, respectively).

Taking January and February 2021 data into account, this price difference is even more exacerbated. The average final price for a music NFT sold at auction has increased more than 5x from December, to $74,132.76 per token.

In contrast, the average price of a limited-sale, non-auction music NFT has actually decreased slightly, to $788.75 per token.

Naturally, the NFT auctions with the highest bidding prices are going to get the most buzz, and are going to drive future bidding prices up even higher, so this widening price gap is understandable.

That said, in terms of gauging the role that NFTs will play in most artists’ careers, I think it makes more sense to follow non-auction NFTs just as if not more closely moving forward. As illustrated above, the average prices of non-auction NFTs tend to be more stable over time (so far), and are much more realistic and accessible for everyday artists and fans to partake in.

The way people have been talking about Grimes’ latest NFT collection on Nifty Gateway is a great example of the contrast between what draws the most hype and what is actually happening in the market.

Perhaps the buzziest NFT in Grimes’ collection is “Death of the Old,” which was auctioned off for a final price of $388,938 yesterday (March 1). It would be rational for you to conclude from this single data point that the world of music NFTs is made only for wealthy millionaires and crypto whales, and only reinforces rather than solves the hyper-capitalistic tendencies we normally associate with Christie’s and other institutions in the traditional fine-art world.

But this conclusion would be ignoring the vast majority of Grimes’ collection, which is much more affordable. Four of her NFTs — with the straightforward names Newborn 1, Newborn 2, Newborn 3 and Newborn 4 — were sold for only $20 apiece and had 400 total copies available. Sure, there’s still the barrier to entry of understanding how crypto works in the first place (more on that later), but this price point and scale feels much more like a digital version of merch that can reach more than just one whale. Hopefully the music industry will explore more diversified pricing models like these moving forward, instead of purely pursuing 1/1 auctions and pricing out the vast majority of music consumers in the process.

Top marketplaces & protocols

The most lucrative NFT marketplace for musicians so far is Nifty Gateway — which has processed over $10.6 million in music NFT revenue in the last six months, or 45% of the entire music NFT market.

To date, Nifty Gateway has worked with around 15 artists and music brands — ranging from Grimes to Lil Yachty and brands like Space Yacht and Monstercat — with upcoming drops this week from Steve Aoki and the music-focused visual artist Rhymezlikedimez. Sources tell me that the platform is backlogged with music-related campaigns at least for the next few months due to surging inbound interest from the music industry.

That said, the runner-up platform for the most number of music NFT campaigns is expanding rapidly, and wasn’t even on my list before last month: Zora.

To clarify, Zora is better understood as a protocol than as a platform in its own right — allowing artists and creators to engineer their own markets around their own media NFTs (what the company calls “cryptomedia”), which can then be platform-agnostic, i.e. transferred easily from one platform to another without being locked in. In late January 2021, the company launched ZoraOS, a collection of developer tools that allows anyone to build new decentralized apps on top of the Zora protocol. (One such app is Catalog, a music-focused NFT marketplace launching later this month.)

That said, for now, the most active proof-of-concept around the Zora protocol is its own NFT marketplace of the same name. It’s invite-only, but each artist on the platform can recruit others in their network — an approach that has opened up access to a much wider range of independent creators compared to other competing crypto-art platforms.

In the past month, Zora’s own platform has processed over $155,000 in music NFT sales, from artists as wide-ranging as Mike Shinoda, Vérité, Sam Gendel, Latashá and Pauline Herr. In addition, Zora is the official partner for IAMSOUND’s groundbreaking NFT exhibition — which features artists like Yaeji and Mura Masa, and has generated over $40,000 in auction revenue so far within just a few days.

Some crypto art platforms like SuperRare are still growing in revenue every month, but are now ranking further behind in terms of music-related revenue — if only because they’re still heavily curated and closed to a select few partners, to cultivate the reputation of acting like a premium art gallery in digital form.

Other emerging platforms and protocols to watch include:

Top genres & artists

The lion’s share of music NFT revenue to date (84%) has gone to electronic artists. Rock comes in second (largely thanks to recent campaigns from Mike Shinoda and Two Feet), followed by pop (mostly Shawn Mendes) and reggaeton (mostly Ozuna).

All other genres, including hip-hop, are crammed into the remaining 1.3% of music NFT sales. This is surprising to me, given how hip-hop artists tend to be earlier adopters of new technology. As fellow writer Dan Runcie has pointed out, many rappers like the late Nipsey Hussle would excel at the NFT model given their penchant for community engagement and/or artificial scarcity around their music.

As for the top artists of all time, the ranking looks quite different from just a few months ago:

With the exception of deadmau5, all of the artists in this table have broken into the top five of all time thanks to NFT sales from February 2021 alone, and almost entirely on Nifty Gateway. Two Feet in particular was able to drive over $1.3 million in NFT sales thanks to his collaboration with FEWOCiOUS, one of the most prolific visual artists in the crypto community, as part of the new digital art collective Illumino.

Interesting use cases for music NFTs

I’ve compiled a simple bullet-point list of all the different use cases I’ve seen for musicians’ NFTs so far. If there’s any use case that’s missing, let me know:

In the previous analysis, I mentioned that we should expect to see many music-focused marketplaces, auction platforms and services companies emerge to address artists’ specific needs around NFTs. Sure enough, the artist RAC just announced yesterday that he is part of a new “NFT creative agency,” simply called 6, that will specialize in solutions for artists and other creators.

Challenges & critiques

1. What are you actually buying?

Some people with vested interests have claimed that 10% of the US population now owns some kind of cryptocurrency. This is seen by many as an overly ambitious estimate; even if it’s true, that’s still less than one-fifth of the number of Americans who own traditional stocks. Mainstream awareness of crypto might be growing, but actual ownership is still relatively low compared to fiat currency and other kinds of investment vehicles.

With this context in mind — and given that many people in the music industry see NFTs as a way to engage superfans — the lack of education coming from the artists themselves about what NFTs are, and what fans are actually buying when they purchase an NFT, is a bit concerning to me.

Yes, a lot of artists are going on invite-only social platforms like Clubhouse to exchange their thoughts openly on crypto, which is really exciting from an intellectual standpoint. But that kind of conversation is not reaching the majority of fans who might be interested in partaking in the kind of economy that the crypto world is supposedly facilitating. And when artists do talk on social media or in the press about NFTs, the explanations tend to be lackluster or completely absent. For instance, no hard feelings, but Mike Shinoda did not actually explain what an NFT is in his recent interview with Input Mag titled “WTF is an NFT?.”

In the vast majority of cases, when you are buying a music or art NFT, you are not actually buying or owning a concrete digital artwork. When you see headlines like “Nyan Cat just sold for $590,000,” or calls to action like “here’s the chance to own my NFT artwork,” in most situations that characterization is false.

Instead, what you are buying is simply a certificate or purchase receipt that associates your name with that artwork on the Ethereum blockchain, in a way that only has value in the world of crypto and nowhere else. You are not buying the Nyan Cat meme; you are buying the right to affiliate your name and crypto wallet address with the only crypto token that is verifiably tied to the meme.

Obviously, that doesn’t roll off the tongue as well and isn’t as easy to sell. But that’s what’s actually happening, and can be confusing to the average fan.

3LAU’s Ultraviolet NFT campaign and Shawn Mendes’ campaign on OpenSea are notable exceptions to this trend, in that token owners in those cases can unlock paywalled, exclusive content as part of their purchase, as opposed to the content being available to everyone by default.

2. Copyright concerns

I know for a fact that several indie and major labels, following the path paved by the likes of IAMSOUND and Warner Music Group, are now following the NFT trend closely and considering launching their own campaigns for their roster artists. This is likely going to create a copyright minefield, especially when it comes to determining revenue splits for audiovisual NFTs.

If an artist gets $80,000 from an NFT affiliated with their back catalog, and that album is still technically owned by a major label, should the label be getting 70%–80% of that NFT revenue, or should most of it go to the artist because they are not actually selling the digital work itself — just a token affiliated with the work? And what about the publishing side?

I don’t have any clear answers to this right now — but given the immense potential value generated in this ecosystem, we should expect NFTs and cryptocurrency to start appearing concretely in artists’ recording and publishing contracts in the next few years, if not sooner.

3. Environmental concerns

There are many other sources that have written about the ecological costs of crypto extensively, but I wanted to help raise awareness of this issue here just in case.

Almost all major NFT marketplaces right now, especially the ones popular in the music industry, run on the Ethereum blockchain, which uses a rather energy-intensive form of verification known as proof-of-work. Memo Akten found that minting, selling and transferring ownership of just one single-edition NFT on SuperRare, which runs on Ethereum, requires the energy equivalent of flying a plane for two hours. Multiply that by all the music NFTs sold across different platforms in the last six months, and you can quickly see a long-term challenge around environmental sustainability.

That said, Ethereum is in the process of switching from proof-of-work to proof-of-stake, which relies a lot less on pure computational force for its underlying verification mechanism. One of the most popular NFT marketplaces right now, NBA Top Shot, runs on Flow, a blockchain that uses proof-of-stake. I don’t have an immediate solution for the environmental issue around NFTs, but just know that active alternatives to the norm are available and/or in the works.

4. What about the long tail?

Say it with me: Auctions. Are. Not. The. Only. Business. Model. For. NFTs.

It’s totally rational to see all the buzz that six- to seven-figure music NFT auctions are generating, and think that music NFTs are only a playground for the top 1%. But what I hope more artists and music companies realize is that you can always sell a higher number of limited-edition NFTs for a lower, fixed price point. This allows NFTs to act more like digital versions of the physical limited-edition merch that the music industry is already used to seeing, and to bring more fans into the fold and create a larger community around an artist’s work. If you happen to care about money, this approach can often make the artist just as much if not more revenue in the process than just a single-copy auction.

And as I said in my original analysis last month, NFTs will likely help the long tail of artists not by copying-and-pasting aspects of how the “traditional” music industry works, but by creating entirely new kinds of subcultures and economies around music that would otherwise be rejected or dismissed by incumbent gatekeepers. The unique fan experiences and use cases that NFTs and cryptocurrencies enable, and the unique kinds of artists who can excel creatively under this model, are the kinds of patterns we should be encouraging in the coming months — not just the biggest dollar signs.