Explainer: How Do Musicians Make Money With NFTs?
The popularity of NFTs (non-fungible tokens) has exploded even in the music industry. Big music brands and music personalities are getting on the NFT action. That is because Music NFT auctions and sales offer musicians an exciting opportunity to monetize their artworks.
Recently, electronic musician 3LAU sold his NFT collection for $11.6 million. But how are musicians making money from NFTs?
What is a music NFT and how can you create one?
An NFT is a non-fungible token and it represents ownership of a digital asset on a blockchain. For musicians, it represents a song or an audio file that is in high-quality formats like MP3, WAV, and OGA.
The advantage of using music NFT is that all the details of the music file remain recorded on the blockchain. The details like the creator of the file, whether it is a limited-edition music file or not are all recorded. This helps establish the ownership of the music files in a way that no one can temper the ownership details of the NFT. In addition to this, NFTs allow musicians to go far beyond the traditional streaming platforms. We will discuss the ways musicians can earn money with NFTs after we learn how to create music NFT.
How can musicians create an NFT for music?
There are multiple platforms where musicians can create their NFTs. Some of these are Rarible, OpenSea, and more. Here is the systematic process about how musicians can create their NFTs on Rarible.com and how they can make money by selling these.
1. Go to Rarible.com
2. Tap Create on the top right of the webpage
3. Musicians can choose to create a single or multiple collectibles
Single Collectible — Musician can choose to create a single collectible that mints one-of-a-kind NFT. Musicians will have to pay a one-time minting fee here.
Multiple Collectible — Musicians can release multiple copies of the same collectible using this option. Let us assume they choose 10 which means the music artist can sell 10 copies of the created music NFT. Moreover, the artist needs to pay the minting fees only once. Thus, in case a musician plans to have multiple copies of his music NFT in the future the best practice is to use multiple options and save on minting fees.
The maximum size of a music file that Rarible allows to mint is 30MB and it can vary from platform to platform. After uploading the file, the musician needs to put in details like
- Royalties for income from sales on the secondary market
- Properties like the size of the file (optional)
- Alternative text for NFT (optional)
- Price for every instance of NFT
Once all is set, musicians need to connect wallets like MetaMask and create NFT.
To put the NFT on sale, musicians need to pay 2.5% fees to the marketplace and pay the gas fees. The artist can use MetaMask wallet to pay the fee.
Strategizing NFT selling
According to the industry stats, music artists take home only 12% of the profits that production labels make on their music files. But NFTs can change this for the musicians because by selling their music NFTs musicians can pocket almost all the money that their music NFT makes. NFTs have paid an important role in musician’s careers during pandemic times when the touring income had come to a stop. NFTs made it possible for musicians to reach out to a global audience all by themselves.
Listing the NFT on leading marketplaces
Fixed-price listings: This is the simplest way to list music NFT. While listing, the musician picks a fixed price option, currency of his choice and can choose the expiration date of the listing.
Declining-price listings: Using this type of listing musicians can sell their music NFTs above market price. They can choose a start price and an end price. In addition, they need to set the duration between the start and the end price. This helps them engage eager buyers.
Highest-bid auctions: Just like the eBay platform, NFT selling platforms allow musicians to set the highest-bid auctions. They can set duration and during this, whosoever bids the highest wins the bid and buys the NFT.
Thus, there are multiple ways to maximize the earnings of his music NFT. These platforms just charge 2.5% fees on the final price and the rest of the amount is take home for the musician.
Earnings from music NFT sales
NFT marketplaces like OpenSea and Rarible allow musicians to collect royalties on their future NFT sales. This means whenever the music NFT sells, the creator or owner of the NFT receives secondary sales fees. This percentage is set when the musician mints his music NFT.
However, there is a catch. What if the NFT was minted on Rarible, someone bought it on Rarible and then moved it to OpenSea? In this case, the musician who created the music NFT might not receive the secondary sales fees. That is because cross-chain NFT sales are something that is still a work in progress. Many blockchain projects are working on it to bridge the gap.
Promoting the NFT
For big brands like 3LAU selling music, NFTs is easy because they already have a huge fan base. What about a budding musician? Is selling music NFT an avenue for him to make money? Well, the answer is yes.
The up-and-coming music artists can always incentivize their fans. These fans can help promote the growth of the artists and can help them attract potential NFT buyers. Upcoming NFT selling marketplaces like Opulus allow music artists and fans to earn alongside and support each other.
For example, the music NFTs can be embedded to share a part of the sales with the fans or the fans can receive incentives like tickets to shows and merchandise, and more. While this helps fans earn more rewards and a share of the sales, the music NFT reaches a wider audience for sales.
Bundle up the NFTs
Platforms like OpenSea allow NFT creators to bundle up NFTs and sell them in one go. This helps with quick sales and saves service fees for the music creators.
Wrapping it up
The current music industry payout model has some significant barriers. A musician can stream his music on platforms like Spotify, YouTube, and more. To use these platforms the musicians, need to pay a monthly subscription fee to the platform. However, it takes almost 3 months for the music artist to start being paid for the audio streaming.
NFTs promises to change this by allowing music artists to list their NFTs on a marketplace where they can directly engage with their fans and take home all the sales generated by their music files. In addition to this, the artists can always earn royalties from future sales. Furthermore, the music artists who sell their music as NFTs will not face any copyright issues as blockchain maintains the records immutably.