NFT as a music saver? Warner Music sets the pace

The golden era of music, in which even one-hit wonders with a gold record provided for life, is long gone. Although piracy à la Napster, Kazaa and LimeWire has largely been overcome, the streaming platforms are more of a consolation than a permanent solution to the industry’s problem. The blockchain could provide a remedy, or more precisely: non-fungible tokens (NFT ). Because they enable musicians and labels alike to create an additional source of income. A global player that jumped on the NFT Hypetrain early on is Warner Music. Is the US billionaire company setting the pace for the shaken industry?

Every year the Federal Association of the Music Industry (BVMI) publishes its report on sales and the sales shares of the local music industry at around the same time. And every year the image of a digital market that is gradually displacing the analogue market becomes more acute. At the beginning of March 2021 it was that time again. The result: 71.5 percent of industry-wide sales in the past year was due to digital use, with streaming increasing by an impressive 24.6 percent and accounting for 63.4 percent of sales in the overall market. The CD, only displaced from first place in 2017 after 30 years of pole position, lost another 18 percent compared to the previous year and was 21.6 percent in 2020. The reason for the dramatic slide is also given in the report as the shop closings caused by the lockdowns. In addition to music shops, there have been almost no concerts for a good year. And that, although the live performances play an increasingly important role for the income of the musicians and labels with falling income from music sales. So what to do Quite simple, think famous bands like the Kings of Leon and individual artists like Grimes: off to the net, in the direction of blockchain and these new ominous “non-fungible tokens”.

It is not the first time that the Internet is supposed to act as a lifebuoy; the last major crisis in the international music industry – file-sharing platforms such as Napster, Kazaa, Limewire and eDonkey2000, which caused a catastrophic drop in sales – was also fought online; through legal music downloads (e.g. Apple’s iTunes). Now, however, these are in turn largely being replaced by streaming platforms (Spotify, Apple Music), which again leads to a drop in sales for the overwhelming part of the industry. Because the platforms reap the majority of the income themselves. Then come the labels and finally the artists and producers themselves, who have to be content with a fraction of their former income. NFT could help – and Warner Music is emerging from a conservative industry giant into a pioneer of a veritable revolution in music in the digital space.

Warner Music and Dapper Labs

Founded in 1958 as Warner Bros. Records, it has been part of the Warner Music Group Corp. since 2001. (WMG) operating conglomerate to the so-called “Big 3”, ie the largest music companies in the world – together with Universal Music Group (UMG) and Sony Music Entertainment (SME). After Warner pulled out of the stock market in 2011, the company went public last June – raising $ 2 billion, at a valuation of 12.75 billion.

But a year earlier, the Warner Music Group jumped on a hype train, which at the time was not much more than a wooden train from Brio: NFT. Because in September 2019, WMG participated in an investment round from Dapper Labs, the Canadian blockchain development company that is responsible for such successful NFT projects as CryptoKitties, NBA Top Shot and the Flow Blockchain. Also to work together on new monetization models for music using the Flow Blockchain. Speaking to Forbes, Jeff Bronikowski, who was still on the Warner board of directors responsible for economic development at the time, said: “The main goal is to create new ways in which fans can explore their fanatic lives and interact with the artists in new and different ways too busy.” At the time, Dapper Labs represented the first blockchain investment by the Warner Music Group, not least thanks to the visionary Bronikowski, who has since been poached by Apple – an accolade in the industry.

With the investment made at the time, Bronikowski and his employer Warner Music showed foresight, learned from the CryptoKitties that there is definitely a market for digital unique items that sometimes offers large sums of money for art and artists. Today artists earn tens of millions of dollars with their NFT. Beeple, for example, scored with his work EVERYDAYS recently won a record $ 69 million at a Christie’s auction, and is far from the most famous artist active in the NFT space. The rock band Kings of Leon recently released an album as NFT, and Linkin Park frontman Mike Shinoda also sold his own NFT – and achieved around 30,000 US dollars in ETH. So there is great potential for growth, especially when you look at the line-up of music giant Warner.

Cardi B, Ed Sheeran and Coldplay

Because if you take a look at the list of artists and bands who are under contract with the Warner Music Group, Linkin Park moves closer to the rank of an opening act. The singer-songwriter Ed Sheeran should be mentioned, for example, whose last album sold around 1.1 million copies worldwide and earned the singer a total of eleven platinum times (spread across the various regions). The same is true of many other acts, including rapper Cardi B, DJ Robin Schulz, the band Coldplay and singer Rita Ora.

If the Warner Music Group now takes an example for its artists from the NFT platform NBA Top Shot, which is also running on the Dapper Labs Blockchain Flow and makes special moments from basketball games of the American professional league tradable, the potential grows exponentially. The label could, for example, perpetuate special moments of the concerts – provided they take place again after the pandemic has been overcome – on the flow blockchain as digital unique items and auction them off among the fans. Individual artist groupies would undoubtedly spend a fortune on “their very own Ed Sheeran moment”. Digitally signed albums, personal virtual booklets and individualized music videos are also conceivable. A big advantage: There are no middlemen, artists and labels come one step closer to the fans and the streaming top dogs are ignored. That flushes far more money into the coffers of Warner and the respective artists.

The conglomerate’s share price, however, is unimpressed by developments in the NFT space.

Sideways trend since IPO

On June 5, 2020, Warner Music Group went public for the second time in its company’s history, trading at a starting price of $ 29.94 and then hovering around the $ 30 mark until December last. The share started the new year under better conditions, even reaching US $ 38.74 in January, but has since been on a decline, slowly but surely pointing back towards US $ 30. At press time, the WMG price is $ 34.11. So the NFT hype has not yet spilled over into the music industry as such, but the great potential could soon ensure that the share price of the music company rises again northwards. Especially when you consider, with some optimism, that lockdowns, going out and closed concert halls will soon be a thing of the past.

Disclaimer

This article first appeared in the April issue of our magazine “Kryptokompass” – you can find out more about the magazine and a subscription here.