Smart Contracts are the Newest Chart Topper

The music industry as it stands is unsustainable for artists, which means it is unsustainable for all. Smart contracts may represent a solution but will require buy-in from a dedicated fanbase to work.

We all love music. Maybe some of us prefer certain genres or styles, but overall it is rare to not come into contact with music at some point during the day. According to a recent study by Dolby, over half of all Americans claim they listen to over 4 hours of music per day. That’s a lot.

Unfortunately, music is very much an industry stuck in the past. Similar to other content streams like publishing, there are two core factors working against creators in the space.

The first is that the business models are archaic and based on revenue assumptions made 50 years ago. An example would be consumers actually purchasing records. This just doesn’t happen anymore. Streaming has demolished the need to put cash down for an album when you can pay a few bucks per month for unlimited access on the go. Still, massive percentage cuts are taken out of creators’ checks and go to middle actors like labels and distributors based on hilariously antiquated premises such as the ability to get records into shops.

The second mark against musicians is streaming. As mentioned, it is no longer necessary to actually purchase an album to listen to it. Services like Spotify have effectively enabled us as consumers to access content for virtually no cost. To put this into perspective, on average an artist can expect to make around $0.003 per stream. That means that it takes over 333 listens before an artist makes a single dollar. Of course, this is before music labels have taken their cut. For some big names, decent money can still be made here. For the majority of creators, this is completely meaningless.

The result here is that musicians have a difficult time making money in today’s landscape and when they do, most of the proceeds are spent on cuts to individuals, labels, and firms that provide almost no value add.

So, what can smart contracts do to help?

Let’s start by tackling the root of the problem. Cash flows. The real question is whether there are any ways that musicians can improve their revenue potential while also capturing more of the profit.

The answer to the first portion of the question is through an automatic payout method constructed within the contract itself. Given the unique way NFTs are structured via smart contracts, any song, album, or piece of work could be tokenized and then auto-debit some small fee from a listener’s account. This could be done on a song-by-song basis, or it could be done through a purchasing mechanism where the listener will then have effectively bought the song for unlimited consumption. This fee could still be incredibly small for the listener but could go directly to the artist.

Even better, as more platforms begin the process of integrating blockchain directly into their systems through products such as Metcy, any access to the smart contract will result in a payout regardless of where this is done.

In addition to automatic user payments, another way to boost artist engagement and success rates could be through co-investments made through smart contract structures. In this way, current or future music projects could be tokenized such that fans could actually buy direct ownership of them. This would take the place of or work alongside labels. Through this form, musicians could fund upcoming projects and smart contracts could govern profit pass-through or repayment structures with interest in the form of a loan.

Clearly, there are a variety of opportunities that can be found through smart contract structures that can help musicians improve their compensation for their work. However, it is important to note that this is not without challenges. First and foremost, it should be noted that any community funding structure is limited in certain ways. While funding can often be found, this does not always replace structures of distribution that can help work succeed.

More importantly, they really do rely on an audience base that is honest in the intention to support an artist. Not everybody is willing to pay for music, even if an incredibly small amount. As with many projects in the Web3 or blockchain space, assumptions cannot be overlooked regarding participation and broader involvement.

To truly support artists is to want to support them.