W&M STARTER PACKS is a new series unpacking essential foundational concepts for navigating music and tech.
Every two weeks, we’ll ground a timely music-tech topic in evergreen findings from our research projects. Hopefully, this format will give you more context on everything we’re doing as a community, and serve as a jumping-off point for further analysis as we collectively navigate the rapidly shifting music industry.
If you have any feedback or suggestions on this new format, please reach out to us at email@example.com — we’d love to hear from you.
It would not be an exaggeration to call the rise of Web3 one of the biggest music-business stories of the last few years. And yet, for all the hype around music/Web3 and the “Music NFTs!!!” meme, there’s surprisingly little concrete, accessible data out there to illustrate what’s actually happening in the market, at the level we would expect of other industries.
Data literacy is table stakes for making smart decisions about how to grow music careers and brands, and Web3 shouldn’t be any different.
Having a solid, realistic grasp of both top-level sales data and on-the-ground artist and collector behavior is crucial for developing Web3 investment theses, marketing strategies, and user experiences that actually drive cultural and commercial impact. Understanding the unique characteristics of blockchain data — and how they differ from what we expect with traditional music data practices — is also essential for building applications that genuinely drive the industry forward, and don’t just replicate what’s already there in Web2.
How much money have music NFTs made so far?
Since December 2020, Water & Music has been diligently tracking the music/Web3 market , compiling one of the most comprehensive databases of music NFT projects, platforms, and communities available online.
As of writing this, we’ve tracked:
- Over $200 million in primary music NFT sales,
- From 1,700+ unique artists and music brands,
- Across 120+ different NFT platforms and marketplaces.
Unlike some other analysts out there, we take a pretty liberal view on what defines a “music NFT.” Arguably, an NFT does not need to have audio attached to it to be related to music. In our database, tens of millions of dollars in primary sales have been generated from NFTs that have no audio, but whose value is still directly tied to an artist, music brand, or music culture at large.
Even still, $200 million over two years is a tiny number compared to:
- Recorded music at large (which made $25.9 billion in 2021 ), and
- The NFT market at large (which generated $25 billion in 2021 ).
All this to say, the music NFT market is still a small niche, with all stakeholders involved still ironing out the kinks when it comes to sustainable business models and compelling user experiences.
What makes music/Web3 data infrastructure unique?
Two core tenets of decentralized blockchain infrastructure are:
- Immutability (i.e. transaction data cannot be altered after its creation), and
- Permissionlessness (i.e. anyone can access the network and build off this data).
In other words, once something is on a public blockchain like Ethereum, it is made irrevocably available to the public, and may be accessed by all. This has mixed implications for ecosystem development in music/Web3.
On the one hand, the permissionless nature of blockchain enables anyone to build their own custom frontends on top of music NFTs. This is arguably friendlier to niche music communities, as it decentralizes the act of music curation and contextualization across a much wider group of potential, bottom-up participants, in contrast to the more centralized curatorial power that today’s dominant DSPs wield.
On the other hand, copyright law still exists regardless of where artists choose to distribute their music — and the traditional copyright landscape is far from permissionless. For instance, if people are streaming music from NFTs on a Web2 frontend, that could arguably qualify as a “public performance” of that music, for which PROs (representing songwriters and composers) are technically owed a licensing fee. This tension is at the heart of many tensions that are slowly bubbling to the surface in music/Web3, especially around the limitations of blockchain infrastructure for music licensing and rights management.
What are good metrics for analyzing collector behavior?
Most media coverage of the music NFT market stops after reporting on overall primary and secondary sales revenue, or at whether or not a specific drop sold out.
In reality, gaining a full understanding of music/Web3 market dynamics also requires understanding collector activity over the long term. Fortunately, thanks to the availability of decentralized transaction data on blockchain explorers like Etherscan or Polygonscan , one can start to dig into key metrics around music NFT drops, including but not limited to:
- Ratio of primary to secondary sales
- Ratio of unique minting addresses to editions
- Percentage of tokens that get resold
- Average lifetime revenue per token sold
For example, we found earlier this year that Snoop Dogg’s Death Row Mix: Vol 1 drop on Sound had a higher-than-average level of secondary market activity. A whopping 74% of tokens in the collection were resold in the first week, and 80% of tokens were resold in the first month. While this likely led to solid financial returns for Snoop, this suggests low retention for this segment of Snoop’s community, and raises the question of whether long-term financial value is necessarily the healthiest measure of success for a given artist’s NFT drop, especially at the independent level.
What makes music NFT metadata different from the traditional music industry?
The traditional music industry maintains strict metadata requirements for distributing songs online and offline, with standards-setting bodies like DDEX guiding rights holders on what kinds of data are required and how they should be structured.
In contrast, because Web3 data is permissionless, the design space is practically unrestrained for what information an artist wants to include on their NFT. There is no widely accepted standard on whether artists should include, say, which collaborators worked on a given music NFT, what genres or styles the associated song is in, or how that song relates to others in a given NFT collection.
This open design space is a double-edged sword. While lower metadata requirements enable artists to experiment more nimbly with Web3, they also leave music NFT discoverability and searchability in a highly fragmented, opaque place. Music/Web3 artists and developers are hungry to build next-gen experiences on top of NFTs, across streaming, curation, community-building, and market analysis — but the harsh reality is that the music NFTs themselves don’t contain the information needed to drive these use cases forward.
Several of the most challenging, but also most critical, collaborations happening in music/Web3 today center around trying to arrive at consensus around a minimal viable metadata standard for music NFTs, that will give artists and developers the context they need to deliver on the use cases that collectors and fans want.