It’s a collaborative research doc to analyze NFT music market trends by genre, label, platform/protocol, utility, and more, covering over $86 million in primary sales.
This is what distinguishes an NFT from a vinyl record, for example it is the smart contracts used to create NFTs allowing creators to deliver more benefits to fans directly over time, in a modular way by providing a sense of personal connection and/or social status. The Music NFT also comes in the form of music rights, which may include artist music royalties and ownership rights under the NFT sale.
Over the past month, several community contributors Water & Music have collaborated to analyze Music NFT market dynamics, based on data from our members-only Music NFT Database. This report is the result of an in-depth analysis of NFT music sales in 2021 by artist genre, platform/protocol and label affiliation, covering over $86 million in revenue. Although their database is not exhaustive, it is surely the most comprehensive view of musical NFT activity that exists in the world today.
The main lessons of this research:
- 20 new NFT music platforms launched in the second half of 2021
- NFT music revenue skyrocketed in early 2021 with mega celebrity driven declines with a slowdown throughout the summer and edged up slightly in the fourth quarter.
- Throughout the year, independent artists made up the majority (64%) of NFT’s sales, while major label artists made up the minority (36%).
- The average price of NFT music remains expensive, but has come down over time. Between February and December 2021, the average NFT music price dropped by 46%, from $18.8K to $10.2K per unit. The median fell 27% over the same period, from $1,000 to $825 per share.
- The most popular category by revenue share was electronics (65%), followed by hip-hop (19%).
- The competition in the NFT music market has increased significantly. At the start of the year, Nifty Gateway dominated with more than 60% of NFT revenue from mainstream music. By the end of the year, however, the leader (OpenSea) had only a 28% primary revenue share, facing competition from many new music NFT platforms like Sound, Pianity and Nina.
- The use of non-Ethereum blockchain protocols has also diversified considerably. In the first half of 2021, Ethereum had dominated with over 90% market share down, but only claimed around 50% of the declines in the second half as alternatives, including proof-of-stake chains like Tezos and L2 chains like Polygon, have been more adopted.
- The usefulness of NFT offerings has also diversified considerably. In addition to different forms of NFT media (e.g., audiovisual art, music videos), artists have experimented with different forms of complementary offerings such as royalty shares, usage rights, NFT splits, online/offline bundles, live music and community.
2021 has been a banner year for music experimentation and Web3. Monthly sales averages fell more than 90% in May after peaking at the start of the year, but have since risen slowly. The dramatic drop in music NFT activity from the spring peak reflected the NFT market as a whole. However, we did notice a significant increase in activity towards the end of the year, due to a number of new music-related NFT-focused platforms launching in late 2021.
Looking at the year as a whole, a few artists dominated the market, especially in the peak sales we saw in early 2021. A cluster analysis conducted by the collaborative researchers showed that five artists stood out in as leaders representing the activity we’ve seen in the year: 3LAU, Deadmau5, Tory Lanez, Grimes, and Steve Aoki. With nearly $18 million in NFT sales in 2021, 3LAU has become a leader in music NFTs in 2021 for several reasons. Of the top-selling artists we tracked in 2021, 3LAU did not sell the most units, but had the highest average sale per unit. Its royalty-driven NFT Royal music marketplace, which we’ve discussed in previous research and again below, secured $71 million in seed and Series A funding rounds last year.
Independent and unsigned artists comfortably dominated NFT music sales in 2021. Artists from the major labels certainly attracted a lot of attention in the market at the start of the year – but the allure of the absence of middlemen , along with direct control of rights and access to artist communities, has generated a lot of activity towards NFTs for the indie sector.
Questions remain as to whether royalty-bearing musical NFTs could be classified as titles? Web2 streaming royalties are already paltry, raising questions about whether buyers will ultimately generate a return on their investment. Royalties and license terms are usually established through a legal contract that exists off-blockchain and separately from the NFT smart contract. Token licensing models that grant NFT holders commercial rights (usually in full) to exploit the creative works embedded in NFTs have slowly gained traction in music.
Building Web3 communities is also a challenge for artists and requires additional team support, not to mention basic knowledge of technology. There is a clear need for resources for savvy artists to think strategically about their fan journeys in a native Web3 context. The best is ahead…
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NFT music market trends
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