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How Could Musical NFTs Affect My Rights and Royalties?

Picture of Andrew Parks
5 minute read

Now that the dust has settled from last year’s NFT rush — a flurry of non-fungible activity that generated millions for such early adopters as Grimes, The Weeknd, and Kings of Leon — you may be wondering whether any of this Web3 business is worth it for most artists. Or at the very least, what a non-fungible token actually is.

“NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork),” The Verge explains in its essential breakdown of the love-or-loathe phenomenon. “To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.” 

While that may be true on a philosophical level, many detractors have argued that NFTs are more about bragging rights — having the “receipt” for a blip in the blockchain — than appreciating a newfound form of art. In fact, there’s an entire subset of NFT critics that proudly call themselves “right-clickers.” As in, why buy an NFT when you can simply hit save on most digital images without spending a dime?  

“Right-clicking a JPEG, saving it, and displaying it back to the NFT owner is a way to point out the Emperor has no clothes,” Motherboard writes in its take on the Twitter meme. “Meanwhile, the NFT fans make millions off their naked Emperor. Round and round [it goes].”

Celebrity DJ Steve Aoki has witnessed the inflated values of music-related NFTs firsthand. During a private Gala Music event in early 2022, he claimed that they have boosted his bottom line more than all of the advances surrounding his six albums combined. Aoki also made the now-familiar argument that NFTs empower artists and turn digital assets into a fluid, secure form of self-expression. 

“There will be a new version [of the internet] where we’ll show what we own,” explained Aoki, “and that will be a part of who we are.” 

In a way, NFTs are no different than the artfully arranged “credibility bookcases” that characterized our COVID-19 lives during lockdown. They’re an extension of our identity, a way of establishing who we are no matter how superficial that might be. Which isn’t the worst thing if you’re an optimist with a built-in audience willing to spend millions on an idea, but there’s no way around the fact that we’re still in the speculative days of what NFTs mean for rightsholders and royalties. 

The latter is clear on a marketplace level, at least. Unlike the dawn of 99-cent tracks and $9.99 albums on iTunes, and its slip into slightly variable pricing in 2009, the NFT industry is dynamic by design. 

Take OpenSea, for instance. A major selling point of “the world’s first and largest digital marketplace for crypto collectibles and non-fungible tokens” is its custom approach to creator earnings. Unlike the drawn-out, often difficult process of tracking traditional royalties, they are paid within two weeks using Ether (ETH), the digital currency of Ethereum — Bitcoin’s biggest competitor. 

Aside from the fact that you set the sale price of every newly minted NFT within its website, OpenSea encourages its users to determine the percentage (a variable fee up to 10%) that will be paid every single time it’s resold. “For example,” OpenSea writes in its Help Center, “If you set a sale price of 1 ETH and have a creator earnings of 5% on the collection, you’ll receive 0.925 ETH from the sale (2.5% goes to OpenSea and 5% is in the creator earnings amount).” 

If that’s not open-ended enough for you, you could always go the DIY route like DJ Justin Blau did for an NFT auction around the three-year anniversary of his Ultraviolet album. When all was said and done, Blau’s 33 NFTs set a record with $11.7 million in sales. A single token went for as much as $3.6 million. 

“We were all cheering, and then everyone just stopped talking,” Blau told Forbes when he was asked about the night his family watched the auction in real-time. “Trust me, I didn’t know it was going to go this high.”

As exhilarating and encouraging as all of this may sound for an independent musician, it does leave one important question unanswered, which is exactly who owns what when an NFT is minted and resold. 

“I would never outright sell a piece of music,” copyright attorney Cliff Fluet said in a Guardian story exploring “music’s problem with NFTs.” “You can ask for a period of exclusivity, but I don’t think any publisher or songwriter would say, ‘Yeah, absolutely, go and take that forever.’”

With that in mind, songwriters should be careful what they wish for when selling their work to the highest bidder. “Anyone who is considering an NFT sale needs to make it crystal clear what is and isn’t being made available by way of the NFT, what proportion of the value is for that, and [clear] the rights accordingly,” explained Fluet. “You’ve got to pick a lane. You’ve got to know what you’re selling.”

This advice is doubly applicable for NFTs that involve music you do not actually own. While it may seem like anything goes in the metaverse, a viral NFT video like the one skateboarder Nathan Apodaca made with the Fleetwood Mac song “Dreams” could easily have its primary selling point stripped away if rightsholders aren’t willing to go along for the ride. (Apodaca had to cut the track from an NFT on when Warner Music Group and Steve Nicks refused to get on board.) 

“Although this is a new space, the issues feel quite the same as it relates to copyright and selling music rights,” entertainment lawyer Karl Fowlkes explained in a Synchtank story about whether selling music rights as NFTs are a fad or the future. “NFTs aren’t and shouldn’t be used as a way to shirk copyright law. You have to make sure you actually have the ability to sell the music rights and royalty shares that you are looking to sell.”

If anyone understands the potential financial peaks and pitfalls of NFTs for songwriters and publishers, it’s David Israelite, the president/CEO of the National Music Publishers Association. In an op-ed about what NFTs mean for the monetization of music, he wrote, “While NFTs seem novel, and the verification and purchasing technology are certainly interesting, the issues are relatively straightforward. Songwriters and copyright owners should be vigilant about NFT sales that implicate their work and of course our role is to ensure that when implicated, creators are fully paid and have the negotiating power they deserve.

He continued, “Visual artists, record labels and musicians are already working out splits when exclusive recording sales include cover or other art, and songwriters should understand that in many instances they could be part of that equation – to what degree depends on what rights are being utilized or even licensed for future use…Ultimately, what the boom in catalog sales and the musical NFT frontier all point to is the fact that songs have immense and growing value, and NFTs are only the latest in what will be an increasingly varied landscape when it comes to exploiting music.” 

In other words, it’s better to be an active participant in the ongoing conversation over NFTs — someone who benefits from what’s bought and sold within a wide-open, digital marketplace — than to write them off entirely. That goes for whether you’re a songwriter or simply a fan looking to invest in your favorite musician. 

Participating in the wild, wild west that is Web3 means believing in what could happen more than what is set in stone, however. As Music Tomorrow points out in a piece about what we should “(realistically) expect” from NFTs, “this dream of an ‘open market for music rights’ can’t come true — at least not just yet.” 

“Right now, most distributors and labels are simply not equipped to deal with [rights transfers and NFT contracts],” explained writer Julie Knibbe, “nor are the publishers or collecting societies. That is why thus far NFT sales have only involved newly-produced music, owned solely by the artists. An NFT auction for the previous catalog, where rights are already divvied up between several parties, is simply not possible, at least [not] yet.”

Former Google employee Falon Fatemi — a co-founder of the burgeoning live platform Fireside alongside Mark Cuban — is a little more bullish on the NFT market. In a Forbes op-ed, she wrote, “NFTs are not just another buzzy acronym. When you closely examine the value propositions of NFTs — the potential for more equitable compensation, more collabs and remixes, and time-tested appeals to scarcity — NFTs seem poised to transform the music industry. The key will be for NFTs to continually reinvent themselves and creatively evolve — as much as the musicians that they are supporting.”

That’s where Songtrust comes in; we’re devoted to keeping you in control of your rights and responding to rising trends within the music industry. To find out more about how our platform can help, check out our resource center or reach out to one of our team members today!  


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