W&M Report (3): Current Status of Web3 Tools for Musicians

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Odaily资深作者

2022-07-01 04:20

This article is about 11183 words, reading the full article takes about 16 minutes

Better fan development mode.

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Better fan development mode.

Original Author: Water & Music

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This article is from The SeeDAO.

tl;dr (too long to read version)

Music/Web3 tools are becoming more diverse and more exciting than ever. New platforms are launched every week, helping artists build a new economic model around creativity and fan engagement through NFT, social tokens and DAO infrastructure. However, in order for this ecosystem to work for artists of all career stages in a healthy and sustainable direction, the imbalance of music/Web3 funding flows, as well as the gaps in basic metadata and community building models need to be addressed .

The Water & Music community has completed a series of research reports on "The Status Quo of Music and Web3 Fields" in the past two months. The report consists of five parts, and this article is the second part. We list the contributors who provided leads for this part of the study at the end of the paper. (by role)

The first part of this report examines "The Emerging Market for Generative Music NFTs" and the second part examines "Legal and Contractual Issues for 'Music NFTs'" (particularly those that promise a share of streaming revenue or royalties). You can view all reports completed so far, as well as a full list of community members and contributors, by visiting our website.

For most of 2021, the tunneling of NFTs has profoundly changed how the mainstream music industry views Web3. In just a few hours, the album sales of the two musicians 3LAU and Grimes reached seven to eight figures respectively; as celebrities from all walks of life flocked to join the ranks of music NFT in early spring, music NFT level one The market's total March sales hit $27 million, the highest monthly sales on record. This frenzy has sparked resentment from some scams and fans, arguing that NFTs, as a form of music, have financial exclusivity and environmental concerns.

Subsequently, the music NFT entered a bear market, which also made many people in the music industry realize that they should not only focus on short-term market capture and quick money absorption, but to establish a more comprehensive and thoughtful strategy to incorporate NFT into the artist's long-term Marketing strategy and business model. In August 2021, two members of our team, Cherie Hu and Brooke Jackson, wrote a guest article for NFT Now, calling this transition "From Collection to Community". At the time, emerging use cases for NFTs included portable fan identities, on-chain ticketing solutions, and the launch of crypto-native albums.

Four months later, the long-term use case for Web3 is starting to become clearer as more artists start experimenting with the technology. Artists turned their attention to the distant future of NFT, and began to explore new models such as interactive fan sponsorship, crowdfunding, and community-driven creative cooperation through social tokens and DAO. In turn, this spirit of experimentation is creating fertile ground for new music/Web3 startups to solve the various problems faced by artists.

From this, we think it's time to re-evaluate the status quo of music and Web3 today. We launched a market panorama of music/web3 tools, covering 80+ different startups, all in the music and creator-centric context, issuing NFTs, social tokens or building DAOs . Most of these tools were launched this year, proving that the momentum for developing Web3-native solutions for artists continues into 2022.

Note that this market panorama may not be exhaustive; our main purpose is to present an initial mental model of the entire music/Web3 industry panorama. If you see startups missing from the panorama or our overall crypto data dashboard, you can fill out this form (airtable.com/shr3lxL147b5AKb67) to add them.

In addition to the Market Panorama, we've completely revamped the Tools section of our members-only Music/Encrypted Data Dashboard. We've been tracking sales of music NFTs since the summer of 2020, but haven't been able to break them down any further. Now, we're splitting this into two new tabs:
Music / Web3 Tools
This is a curated list of startups and tools that artists and music labels are actively using to shape their overall Web3 strategy, including NFTs, cross-fan/community engagement, music licensing, distribution, and more. The database can be categorized and viewed according to the following dimensions: core utility, channel network, launch date, financing amount, etc.
Music crowdfunding and NFT sale on Mirror

While this underlying data (which will continue to be updated weekly after publication of this report) is only available to paying members, we wanted to distill some key trends and clear needs for today's music/Web3 builders. We hope this resource will ensure that the future of Web3 infrastructure is sustainable and beneficial for artists and fans, while serving as a warning to issues that may resurface in the Web2 industry.

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Research Methods and Disclaimer

In order to build this market panorama, within two months, we gathered many suggestions from the community for music/Web3 tools. Data collected includes product type (regular NFT, music NFT, social token), core utility (music/audio collectibles, fan/community rewards, royalty investment, event ticketing), network type (Ethereum, Flow, Polygon) and Public funding information (mainly pulled from Crunchbase). During this time, we also held several weekly brainstorming and feedback sessions on our Discord server to determine the scope of the database and how we could mine the data for deeper stories.

The disclaimer is as follows
The database and market panorama will focus on services that help artists build or sell creative works on-chain, rather than one-off NFT collections. For example, Arpeggi Labs is an on-chain DAW (composition software) for music creation and production that any artist can use. The on-chain generated music project EulerBeats does not provide artists with self-help tools, so it is excluded from this list (however, this project is introduced in the first part of this report "Will music NFT usher in their PFP moment")
For the most part, we tend to rule out general-purpose NFT platforms like OpenSea because they aren't specifically geared towards creators or artists, even though those platforms could generate significant revenue for the music NFT category as a whole. Such databases and market panoramas are more sensitive and effective for music audiences who want to know more about companies that build industry-specific tools.

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01. What can the data tell us?

We can divide the music/Web3 market today in three main ways, each with its own characteristics; whether you are an artist, developer or entrepreneur, you can find your future opportunities in each way:

1) money method;

2) utility mode;

3) Network mode.

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1) Money:

Unprecedented amounts of VC capital are flowing into NFTs and social tokens for artists, surpassing the amount of Web3 money going directly to the artists themselves.

2) Utility:

After the bear market of music NFTs, music/Web3 founders are experimenting with new applications of Web3 infrastructure to facilitate more artist-fan interaction, focusing on some key utilities such as long-term fan returns, royalties investment, and music consumption and discovery superior.

Currently, music/Web3 tools are also highly polarized, and developers need to decide whether to adopt a complex decentralized infrastructure, or allow fans to directly participate in the blockchain network through hosted wallets.

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follow the money

Music/Web3 tools get hundreds of millions of dollars, but how much goes to artists?

Not counting the mass NFT marketplaces and platforms in our database (Foundation, Sturdy Exchange, MakersPlace, and Manifold Studio), music/Web3 startups have raised over $300 million in venture capital funding in 2021.

As we expected, the two categories of music/Web3 companies that attracted the most funding were:
Music NFT Platform
OneOf, a collaboration between Doja Cat and iHeartRadio, has $63 million; Royal, co-founded by DJ/producer and crypto veteran 3LAU, has $55 million. )
Social Token Tool

$57M for Rally, which launched tokens for Megadeth and Portugal. The Man, among others. $18 million to p00ls, which just launched a social token for producer Blond:ish.

Let's compare these numbers to this year's music NFT revenue, which according to our ongoing tracking on the Dashboard, has generated just over $83 million in primary sales this year. While this may seem like a high number, there are three caveats.
Not all of the $83 million goes directly to the artist for a variety of reasons (e.g., the artist shares revenue with one or more creative collaborators; or the platform takes a 5% to 20% cut of the sale; used for charity; or part of the income is eventually eaten up by chain fees or other costs). So while the $83 million may accurately represent the value collectors and the public see upfront in music NFTs, the actual money that artists get is likely to be far less.
Over 75% of these sales were concentrated in just three months of an unprecedented NFT hype vortex (February, March, and April 2021).

These statistics show an unfortunate reality: when it comes to music and Web3, the amount of money flowing into music/Web3 technology is at least 3 times greater than the amount of money flowing into artists. It's not as unbalanced as the Web2 music industry -- Spotify, for example, distributed roughly $5 billion in streaming royalties in the same year that it was itself worth nearly $50 billion. However, in the context of a more thoughtful and critical discussion of ensuring artists and creators remain central to future music/Web3 developments, this is still an important capital flow asymmetry to note.

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follow practicality

Web3 experiences are more than collections

Let's revisit our original market map:

Many companies in the ecosystem are resorting to deceptive marketing tactics, often at the expense of adequate fan education and protection. We at Water & Music thought that this phenomenon existed on many music platforms. With that background in mind, "music/audio collectibles" accounted for nearly 50% of the companies on our list, unsurprisingly making up one of the most popular and crowded utilities on the market map.

Looking at the broader path of music and technology history, it makes sense that much of the first generation of Web3 was built around a market infrastructure. Similarly, Napster drove the early adoption of digital file sharing, iTunes drove MP3 sales, and Spotify made streaming mainstream. In Web3, the focus happens to be on the exchange of NFTs (including minting, buying, selling, and distribution).

Unlike Napster, iTunes, and Spotify (which at the time represented new models of fan consumption), NFTs and social tokens represented a new opportunity for more interaction between artists and fans. While the structure of fans consuming digital music has historically been a one-way transaction (download songs, buy songs, stream songs), the underlying technology of Web3 opens up the possibility for more tools around fan and community engagement.

To this end, we believe there are three emerging categories of utility in the music/Web3 space that will define the outlook for 2022.

Fan/Community Rewards and Social Tokens (12% of companies on our map)

At the most basic level of artist/fan relationship, ERC20 or ERC721 tokens can make fans' sponsorship records easy to verify in both directions, unlike the likes, likes or concerns that stayed on their respective platforms in the past, this is relative to the Web2 world A major paradigm shift.

In this case, in addition to using NFT as a one-time collectible, many artists and music groups have begun to combine the Internet and in-person experience, using NFT as a gateway to unlock long-term, interoperable models. Prime examples of such tools on our list include Unlock (WordPress that verifies tokens, Discord, etc.), Temple (manages WordPress, Shopify, Webflow, etc. through tokens), FWB Gatekeeper (activities that verify tokens), Afterparty ( activities to verify tokens) and Communifty (to verify NFTs to manage access to DAOs).

In addition to NFT, many platforms, including cooperative platforms such as Rally, Mirror and P00LS, have begun to generally accept the use of tokens. Tokens can give fans many benefits, such as deeper access to an artist's exclusive community, and sometimes even management rights over certain decisions in an artist's career or creative process. Of course, there is an added benefit (or burden): access to the expected extrinsic economic return of an artist’s cryptocurrency, the key impact of which is revealed when it comes to reshaping the artist-fan relationship (more on that later) .

Royalty Investment and Licensing/Metadata Management (12%)

Several of the platforms on our list focus on this area of Web3 infrastructure, managing music metadata, licensing transactions, and royalty investment agreements in a more streamlined manner. Platforms like Royal and Decent work with artists to make some fractional investments in NFTs. Some Web2 platforms (equity crowdfunding platforms, not record labels) such as Royalty Exchange and Republic Music are also including NFTs in their catalog of investment products. As an add-on on top of traditional investment protocols, these protocols remain off-chain and highly regulated.

The concept of fans being able to own "shares" in the music of their favorite artists sounds tempting in theory, but there are currently two major problems.

1) Most royalty investment NFT application protocols lack basic knowledge about music copyrights and fail to convey confidence to end consumers. Bringing this lack of education on-chain exacerbates ongoing fan and investor protection issues.

2) These tools rely on the traditional streaming economy, and none of them can really disrupt the current music economy. As Dan Fowler has previously written for Water & music, these projects "ultimately still rely on old-fashioned royalty flows"—that is, streaming royalties—"to generate value in their systems," rather than on the assumption that: The future sources of value generation for the music industry will come entirely outside of today's dominant financial structures.

A Web3-friendly music streaming experience, including a Discord bot (10%)

In recent months, we've seen a fascinating new culture emerge in Web3. In contrast to the opaque business practices of the music industry, many music and culture DAOs today are building custom tools and offering modular services to other DAO communities for free. This collaborative framework extends the "come for the network, pay for the tool" paradigm that is permeating the entire online payment community.

Friends With Benefits pioneered this way of thinking in cultural Web3 circles back in July 2021 with FWB Gatekeeper, a custom token-validated ticketing app that their community built for their offline events This app was later used by several other DAOs such as The Heart Project and SquiggleDAO for their own meetups.

In the following months, some music DAOs launched custom Discord bots—mainly creating a new consumption and curation layer on top of music NFTs, and paying music consumption directly to artists in a more Web3-native way. Typical examples of this type include:
Tone, Topshelf Records' own free Discord music bot, pulls songs from SoundCloud and Bandcamp, paying artists in Celo.
BPM bot, a Discord bot built by Songcamp that scrapes data from music NFTs on the Catalog.

In 2022, both music "consumption" and user participation around NFT will continue to grow, especially in the context of joining a broader and more mainstream fan base. The importance of discovery and human curation.

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follow the network

Make Web3 more visible

We also collected network information (according to the blockchain hosting each instrument) for the market map. Ethereum is by far the most popular network in our database, hosting over 50% of the tools on our list. Others include:
Flow – a proof-of-stake blockchain created by Dapper Labs; makes up 8% of our list, examples include KLKTN, RCRDSHP, and Sturdy Exchange.
Polygon - Layer 2 scaling solution for Ethereum; makes up 8% of our list, examples include Serenade, Decent, and YellowHeart (which also supports Ethereum).

Tezos - a proof-of-stake blockchain overseen by the Swiss government; less than 5% of our list, examples include OneOf and Truesy.

Why is it important to understand music/Web3 tools at the network level? It all comes down to understanding what we mean when we talk about decentralization - a concept that is the purest core strength of "Web3" infrastructure, but not all networks adopt it equally.

At its core, decentralization is about convincing people that your asset is safe, it's only committed to something explicitly programmed, and it's permanent. We can measure the decentralization of a network in a number of ways. One way is to look at the probability of operating a node on a given blockchain and count the number of independent, unrelated hosts or "node operators" of the underlying protocol. Another measure is the distribution of tokens supplied by the protocol, and how well the supply policy is managed over time. Ideally, in the purest expression of "Web3", both the network itself and user access to the network should be completely decentralized.

Every network exists on a decentralized scale; Ethereum, the most active by number of users, is the most comprehensive "decentralized" network according to the above metrics. As a result, a thriving community is building at the application layer and influencing the entire Web3 movement, including the music category. The basic concepts of NFT, social pass and DAO were first built and developed on the Ethereum network.

From the perspective of marketing and drainage, whether to expose the complexity of the blockchain at the application layer has become the biggest controversy in Web3. Since the inception of the internet, it has been optimized around improving the user experience and fundamentally simplifying the process; in contrast, cryptocurrencies are still in their infancy, the user experience is clumsy, and a whole new process is required. For the end user, cryptocurrencies introduce the concept of this “digital currency” that is not a dollar, a concept that is not a wallet but actually acts as a personal portal tool on the blockchain.

Kayvon Tehranian, founder and CEO of the popular NFT art marketplace Foundation, mentioned the concept of this gateway in his article "Why Cryptocurrency Wants to Be Seen." For Tehranian, the clunky user experience was such a major issue early on in Foundation's development that "figuring out how to abstract away from cryptocurrency became a key focus of our design process." He wrote, "However, when we As we tried to push this approach further, we started running into problems. And the longer we took this approach, the bigger the problem. Eventually, we realized that with every new endeavor, we were digging ourselves a deeper pit."

As the title of Tehranian’s article suggests, cryptocurrency, and its unwieldyness, ultimately wants to be seen. It can be argued that the consequence of this is to reduce the value provided by these new tools (Web3, the Internet owned by users). In contrast, several NFT marketplaces have popped up in the last year on newer ethereum-incompatible networks that have instead been lauded as “better than ethereum,” with lower network fees and user Better experience, or both.

Meanwhile, one-third of the music/Web3 tools in our database offer fans and collectors an option to keep a wallet without directly interacting with a specific network. This mentality can be said to give up the entire Web3 forest for a tree; in order for users to truly own the Internet, the whole point of blockchain technology is to force users to interact with the network itself.

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In addition to the data-driven trends above, we've identified three key areas where Web3 tools can improve to increase accessibility for artists and audiences.

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1: Build a better metadata model for music NFT with the creator as the center

Metadata, as one of the most critical components of NFT, especially in music, you can't see on the surface.

NFT metadata involves storing attributes of a particular asset, either on-chain like IPFS or Arweave, or off-chain like a central data server. The following are the most common NFT metadata keywords:
image
external address
describe
describe
name
Attributes (such as color and garment characteristics primarily for PFP)
background color
Animation address (for some reason, this key is currently where the music is stored)

youtube address

In order to obtain concise data for NFT transactions, the above metadata standards are largely influenced and changed by OpenSea. However, the irony of the current Web3 environment is that OpenSea, as by far the largest NFT trading market in the world, even if other NFT platforms are better at certain assets (such as Mint Songs), in order to maximize exposure on OpenSea , also had to cater to the metadata standard of OpenSea. Startups are under pressure to homogenize their offerings into a system built before them, which goes against the so-called ethos of interoperability in Web3.

We need a better, more targeted standard for music NFT apps — and the sooner the better. Because a defining feature of blockchain technology is immutability, many smart contracts are constructed in such a way that metadata is "frozen" and cannot be changed. This means that the longer we wait to make changes to the current system, the harder it will be to meet better standards. This creates problems for decentralized applications (or dApps) if they don’t have a standard way to read data.

Suppose there is a trend of including genre as a keyword in NFT metadata so that dApps can build creative filtering methods for fans. But until this is fully adopted, you have frozen generic metadata without any on-chain genre information. This means that there is no way to integrate your NFT into this new standard without introducing a centralized service, (for example, being forced to internally self-classify your NFT in a central database, or send your own NFT to If you want to enter a third-party centralized database of all NFTs that do not have this genre key), then your NFT can only be completely excluded.

In general, with more use of the blockchain, there has been a migration of putting audiovisual works off-chain to save on transaction costs. A clear demarcation of metadata will be especially important when mixed with permanent and semi-permanent storage systems.

In the spirit of collaboration in the industry, there is an urgent need to improve metadata standards for music NFTs based on artists' existing creative and commercial relationships. For example, in the current paradigm of payment on the NFT chain, we always assume that the on-chain party behind the NFT is the artist. In reality, it's often the artist's manager or other team member responsible for building and minting music NFTs for them. However, there is no easy, standardized way for third parties to send 100% of royalties to the original artist.

(If you're interested in more collaborative metadata standards for music, reach out to Water & Music member and Season 1 contributor Garrett Hughes, and check out his open source working paper here).

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2: Better fan development mode

As with visual art, collectors are flocking to music NFTs, and platforms for artists to release music continue to emerge, which in turn attracts a large number of artists. Across all major music NFT platforms on Ethereum (Mint Songs, Catalog, Zora), there are only about 500 unique collectors, and most of their holdings are focused on established artists. Ironically, extrapolating from our database, this is roughly the same number of artists who have successfully generated income from NFT sales.

Therefore, we believe that the growth of the music/Web3 ecosystem needs not only to focus on the entry of new artists, but also to increase the number of active regular users within the specific field of NFT or from other channels at a more affordable price. Building tools for artists is a largely untapped opportunity for music/Web3 developers, especially in the artist's creative process, allowing fans to participate and contribute can help transition a Web2-native audience to Web3. We'll dig into this in depth later this week in the Fan Engagement and Experience Report chapter.

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3: Better communication incentives

As this article says, social tokens have been gaining momentum in music, whether it’s usage by artists (such as the 200 ETH of the music-related Mirror crowdfunding) or investor interest (such as nearly $90 million in funding from platforms like Rally and P00LS). / Most momentum in the Web3 space.

One of the glaring problems with this trend - the pressure to act fast, while ignoring the extrinsic, financialized incentives these tokens bring to artist-fan relationships, and how this can greatly Change the way artists run their careers (for better or worse).

Mechanisms like crowdfunding or token sales, of course, give fans a sense of being more deeply and directly involved in an artist's growth (and, in turn, give artists more direct access to their most loyal fans). But this new structure for artists and fans doesn't necessarily make them immune to deep-seated legacy issues, or the potential risk of losing an artist's representation. In fact, replacing intrinsic rewards with extrinsic rewards, intentionally or not, tokens may only exacerbate these problems, especially from a fan perspective.

Regarding the launch of Deadmau5's latest token, Head5, Water & Music member and software developer Lee Martin recently took to Twitter to outline his experience as a fan with these issues. From Martin's perspective, he found that many token holders "think about whether minting failed because they didn't sell out immediately" to the point of feeling that "their definition of failure is related to the perceived value of their NFT", rather than a priority The intrinsic value of art or the artist itself.

The continuous rise of social tokens for artists creates an urgent need for clearer language and communication around the incentive design of social tokens for artists to directly address the following issues:
What does token ownership really mean? In a traditional artist-brand relationship, this could mean the control and exploitation of intellectual property. In Web3, it could be this, or ownership of a potentially rare, collectible digital asset. Artists have to be clear about what they are offering and what fans are buying. (We delve into the complexities of defining digital ownership of music NFTs in the Contracts chapter of our collaborative report).
What motivates fans to buy? Are token holders acting as fans or as speculators? How, if anything, does the promise of music royalties affect contributors' incentives? How do artists define the decision-making power of crowdfunding contributors in terms of creative output?

What is the long-term source of value for the token? Is there some shared mission or set of core values that binds the community of token holders together beyond the earning power, personality, or celebrity appeal of individual artists? If so, how will technology facilitate this community's alignment around these values beyond just shared financing? Or, to borrow a line from Martin's Twitter: "Excuse me, how do you turn those 'holders' into fans or your art instead of turning your fans into 'holders'?"

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