There’s little more to say about the state of the legacy music industry that hasn’t already been said. These days it’s common knowledge that labels and executives rake in the dough while artists earn pennies. And to top it off, touring, which anecdotally has been a major financial support for artists, has become increasingly unsustainable thanks to monopoly ticket markets.
This is precisely why, to take a better shot at independence, artists and musicians have flocked to Web3. Due in large part to the fact that blockchain is revolutionizing the artist-fan dynamic, those seeking to break away from traditional music career structures have found themselves doing so via NFTs. Many have waved off the idea of landing a big record deal in favor of embracing the 1000 true fans model. This is why.
Traditional record deals are severely restrictive
By some accounts, traditional record deals, in one form or another, have been around for over a century. Because they are most often conceived and executed by labels, many of which own the means of production within the music industry that independent artists cannot afford, the terms governing major recording contracts are almost always dictated by the seal itself.
In today’s music era, dominated by digital streaming platforms (DSPs), there is a wide variety of record deals. There are distribution deals whereby an artist provides fully completed records to a distribution company that manages the process of getting the songs onto DSPs, simply taking a piece of the wholesale price in the process. There are production agreements that serve to help budding artists produce high-quality records. These tend to help artists who can’t afford to produce music themselves the most. Then there are the joint venture agreements that can be established between an artist and a production company. These help both parties to split the profits between them instead of splitting the royalties.
But above all else, there is the infamous 360 deal.
In a 360 deal, the label essentially takes a part (often somewhere between 10 and 25 percent) of an artist net revenue, even if it doesn’t accrue directly from music revenue. Hence the 360° figure that is assigned to this type of contract. While an artist is still offered a cash advance, as is often the standard when starting a deal, from publishing and endorsements to touring, merchandising and even sources of income, such as acting, outside of the career sphere an artist’s musical, a label can claim percentages in general.
Because these types of deals first originated during the era when the music industry began transitioning from physical to digital sales (thanks to iTunes), they’ve become overwhelmingly popular in the age of DSP. However, they are very obviously insidious to an artist’s career, considering the restrictive nature of being bound by a label on all creative endeavors, however small.
360 agreements exemplify the biggest problem with traditional recording contracts, which is that they basically all act as an exchange of music rights for money. that is, an artist is almost always asked to give up their intellectual property rights (master recordings) in exchange for a sum of money from a record company. But with Web3, things don’t have to be that way.
Web3-centric models could be the answer
While zipping through Web3 music may have seemed daunting in the past (or maybe still does today), success stories of musicians making it on the blockchain have become more common. Increasingly, it’s possible to ditch traditional record deals in favor of the aforementioned 1,000 true fans and community ownership model.
Perhaps one of the best examples of this is Web3’s featured artist and music producer. daniel allan.
First attract attention with the completion of almost 50 ETH ($140,000 at the time) crowdfunding for his EP, overstimulated, Allan established early on that there was a market for shared ownership of music through NFTs. With his rise, Allan essentially invalidated the idea that, in order to make money starting out in the music industry, an artist or band needed money from a record label or other forms of assistance.
After carving out a unique niche for himself within the NFT ecosystem with a long list of impressive releases on curated music NFT platforms such as Catalog and Soundword of Los Angeles-based artists began to spread, fueled by placements in Billboard and TIME Magazine. Then, in March 2023, with music NFTs continuing to prove a lucrative model for digital native artists, Allan took his Web3-focused efforts a big step further with the completion of a $1 million seed funding round to support the next stage of his career. But how?
While Allan had been successful selling music NFTs for some time, his seed funding round drew on more traditional crypto sensibilities, moving slightly away from the “music NFT” space and more into the broader section of Web3-powered music. . Establishing a C corporation, Daniel Allan Entertainment, to act as a holding company for the intellectual property and revenue from Daniel Allan’s project, Allan used a more corporate structure as a means of attracting outside capital.
Directed by cooperative records with the support of Palm Crew Crypto, DAO noise, Woodstock CAD, and eyes of fire daothe $1 million seed funding round allowed investors to buy shares in Daniel Allan Entertainment, essentially giving them exposure to all aspects of Allan’s career to come. And if this sounds familiar to you, there’s a reason for it. Because what Allan orchestrated was essentially an artist-dictated, blockchain-powered 360 deal.
Driven by, like allan put it, “intent on building an evolving team and business around Daniel Allan,” the up-and-coming Web3 artist created a blockchain-focused parallel to a traditional recording contract. And one that benefits both artist and investors alike, as it gives each the same incentives for a project to succeed, rather than a record label getting the lion’s share of a deal under the guise of cost recovery. .
However, while Allan’s efforts may seem quite significant, his rise is nothing more than a unique use case for Web3 technology breaking the cycle of traditional record deals. The reality is that there is a wide variety of Web3 record labels who have also launched initiatives as antitheses to traditional structures.
By building relationships with artists and consumers through deeper social engagement, on-chain revenue streams, and decentralized governance, entities like Hume Collective, dreams never die, SongCamp and more are inherently challenging the standards perpetuated by the big three legacy labels (Universal, Sony and Warner Music). Notably, though, even established Web3 music efforts like these are critically dependent on the transformative power of blockchain technology and its effects on fan engagement.
General benefits of Web3 for the fandom
Ultimately, the undeniable reality of Web3 music is that few musicians have reached a level close to what Allan has. But even so, the blockchain has continued to prove to be a wonderfully strong place for artists to create sustainable business models through community ownership.
Especially in the case of musicians, the artists who find sovereignty in Web3 often have nothing to do with the traditional facets of the creative industry. Because in Web3 the conventional communication channels have been substantially expanded. Now, musicians have incentives to do more than just drop music and wait for fan feedback. On the blockchain, they can get real-world value from their fans by selling ownership of their music and reaping the benefits together with their community.
Although it may take some time for Web3 music (or any NFT use case) to become more widely adopted, the innovation being driven on the blockchain is becoming increasingly difficult for those in the industry to ignore. Web2 music.
This seems especially true when it comes to record deals. Because with established players like Steve AokiSnoop Dogg and more, becoming champions of the NFT space, metaverse record labels are surely on their way to securing a slice of the DSP revenue pie, no doubt making digital native artists and music-based endeavors blockchain are more important than ever.
