The Record Industry Needs You to Love NFTs (Part 2)
Hello, hello, hello folks. I didn’t go to SXSW, but this is a good time to say my email is pennyfractions@gmail.com if you’d like to connect. Not much news from me beyond some self-promotion: send this newsletter to any friend, coworker, or rando that might be interested in my writing. Now, let’s get back into NFTs and the millions of dollars major labels are spending to make your favorite artists sell them to you.
Earlier this month, when writing about NFTs, I initially wanted to focus on some smaller projects within the space. I focused on the grandiose rhetoric of these efforts and thought they would be interesting case studies because, right now at least, they aren't fully subsumed into the major label web of influence. This week will be a 180-degree flip, and I’ll instead look closely at what’s happening with major labels and NFTs. This won’t be fully comprehensive, so, again, check out Water and Music’s NFT database if you’re interested in that. This will be an attempt to outline what the major label NFT moves might signal about this emerging technology.
Major labels aren't the only ones that want in on NFTs; so do smaller labels, distribution companies, and basically anyone with large financial ties to the record business. What that means so far is endless announcements, vague promises, and opaque business proposals outlining how or why people should suddenly care about these new digital assets. This can take the shape of DistroKid announcing a 10,000 piece NFT collection or HYBE, the company behind BTS, announcing an over $400 million deal with Dunamu, a South Korean financial tech firm, with the explicit aim of creating “collectable” digital goods. Even Sony threw $30 million into MakersPlace, the NFT marketplace behind the $69 million stunt sale for the digital artist Beeple. (This resulted in the fun headlines about the children’s mascot Baby Shark appearing as an NFT late last year.) Considering Sony’s recent purchases and investments include AWAL, NetEase Cloud Music, and the Brazilian label Som Livre, it’s clear that the company is making moves but isn’t sinking all of its resources into this space. The other majors, however, aren’t being as timid.
Universal Music Group, the world’s largest record label and home to many of the world’s most successful contemporary artists (Billie Eilish, Drake, Taylor Swift, The Weekend), also seemed a bit more conservative initially. However, that’s shifted over the last few months. Last month, UMG announced it was hiring Richard Cusick, who previously worked at Yahoo Music and advised the company Audible Magic, as the Chief Product Officer for Global E-Commerce. This caught the attention of some folks in the web3 space because it was framed as an explicit web3 hire.
Last November, UMG announced it was launching 10.22pm, an NFT group that would be based on four specific Bored Ape Yacht Club NFTs, so like the 00s digital band Gorillaz but uglier. (They reportedly spent $350,000 for another Bored Ape to be the band’s manager…again, whatever that means.) KINGSHIP, the group’s name, is the brainchild (according to the media accounts…press releases) of j1mmy.eth (government name Jimmy McNeils) and Celine Johnson, who joined UMG in 2018 and is pretty clued into the NFT space, at least based on an interview she gave last year. So far, there hasn't been any official music from this alignment of brands, but it shows a willingness on UMG’s part to further legitimize the space and their own investment into these NFTs.
Before we leave the disinterested Apes, Guy Oseary, the manager of Madonna, started representing the four creators of the BAYC. Oseary is also a rather prolific investor in the crypto and web3 space whose portfolio includes OpenSea, Dapper Labs, and more. This is just to show how the interconnection of celebrity, crypto, and web3 technology is self-reinforcing in terms of who’s gonna be making out with bigger paychecks at the end of the day. This is notable because it isn’t hard to find examples of self-dealing trades, especially amongst celebrities, to help boost the value of these NFTs. Yet, this isn’t the only deal in the works for UMG.
There are at least three other NFT projects the company is juggling at the moment. Last December, they announced a deal with Genies, a digital avatars company that had already announced a deal with Warner Music Group. Again, when, where, and how, these chibi avatars will pop up isn’t fully explained. Universal is featured in an NFT project being led by Billboard to act as a digital plaque for chart success. They also announced a partnership with Snowcrash, an NFT marketplace co-founded by Bob Dylan’s son, Jesse Dylan. While UMG has more active deals than Sony, both companies are exploring the edges of this space at the moment. Their main competitor, Warner Music Group, is diving all in.
Billboard recently profiled Oana Ruxandra and Celine Johnson, two women leading majors into the world of Web3 and the metaverse. Ruxandra, Warner’s Chief Digital Officer, is presenting a different NFT path for a major label. Back in 2019, Warner invested in Dapper Labs, the creators of NBA Topshot and CryptoKitties, which predates much of the attention boom around NFTs. Since then, Warner’s remained on the ball, investing in the "metaverse" through companies like Wave and being the first to partner with Genies for their digital avatars.
The mixture of partnerships and investments might be why Warner Music boss Steve Cooper earlier this year said: “The emergence of Web3 is going to further amplify the importance of music labels and publishers.” The label is carving out a new lane in the vein of a venture capital company, expanding beyond the music investments that it has explored with partners like Providence and Blackstone. The potential success of any of these projects also sets up a buffet of NFT options available to artists signed to Warner. The label can thus use its talent to help promote the many companies it’s invested in or partnered with, which in turn only helps drive an increase in NFT prices.
In January, Warner announced a deal with the “metaverse” company The Sandbox to make a “music-themed world,” but buried in the press release is the fact that Warner would also own and be able to sell digital land in the game. Suddenly, Warner’s role as a partner is both lending credibility to The Sandbox and incentivizing the company to see the value of the world’s land increase. The Sandbox also announced multiple collaborations with web3 brand ambassador Snoop Dogg, where proximity to “cool” brands in the world commanded a higher price. More deals like this keep rolling out. Warner announced deals with Blockparty Partners, an NFT marketplace; OneOf, a “green Web3” company; and WENEW, Beeple’s NFT marketplace. They even got a deal with Splinterlands, a “play-to-earn” video game company, which is just code for placing a price tag on a digital experience created to keep you playing. Again, what exactly Warner is going to do with a business model built to exploit children, or empty their parents' pocketbooks, isn’t clear, but they’re making sure not to miss any opportunities.
The breadth of these deals is why last week I tried to take seriously the narratives promoted by smaller music NFT projects. Major labels aren’t passive observers; they’re rather actively shaping the future of NFTs. The record industry can see that streaming growth is going to slow and increased global tensions aren’t going to make international growth any easier. That means newer markets, like NFTs, while still very much in the early days, are getting pumped with money as a hedge against these potential headwinds. Despite what evangelists preach, this isn’t a new trend. Major labels quickly responded to Napster with their own failed platforms, signed deals with YouTube and invested in Spotify early, and established the legal straightjacket that most platforms operate within right now. It would be foolish to view NFTs outside of that historical context, in which major labels dictate recorded music’s future through their market power and legal practices. Artists can create alternatives, and perhaps these paths will involve NFTs, but major labels see this technology as further entrenching, not disrupting, their power.
The recent controversy around Spotify and Joe Rogan has demonstrated the lengths Spotify will go to to protect their podcasting strategy — perhaps at the expense of properly valuing music on their platform. What will this mean for music rights holders, and especially for artists who are already getting a raw deal with streaming economics?
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Unheard Labor
Recently this section’s centered on moves happening in the United Kingdom and New York City. I live in NYC, so some bias is to be expected, and the UK is doing quite a bit right now to examine the industry more closely, but I’m sure there are exciting things related to music and labor happening in other parts of the world as well. If any reader knows of stuff or events I should follow, let me know.
Now, for this week’s news. The UK’s Competition and Markets Authority approved Sony’s over $400 million purchase of AWAL (see my discontent about said deal here). The Guardian reported on the increased concerns over legal battles bogging down the creative process for artists as bigger investors buy up catalogs, only creating more incentives to squeeze every penny out of these highly valued assets. In New York State, the Music Workers Alliance is rallying to get an $8 million tour relief fund for artists that might not be able to tour because of the ongoing coronavirus pandemic. I continue to be in awe of the work they and other groups, particularly in NYC, have done to fight for working musicians.
A Note of Financialization
Kobalt announced it’s raising $550 million in debt to buy song rights. Exciting. Primary Wave bought the masters for a majority of the recorded catalog of the country singer Martina McBride. Iconic Artists Group—one couldn’t imagine a more unique name—signed a deal with Nat King Cole’s estate to acquire “a broad range of rights from Cole’s career including his recorded music, publishing, television shows, and name and likeness.” A few days later, Universal Music Group announced it bought Cole’s 1961-1964 catalog back in 2021. I cannot help but wonder if this was just thrown out there to undermine the IAG announcement. Just throwing that out there. Round Hill Music picked up a big bundle of song rights from the former Scorpions drummer Herman Rarebell. Reservoir Media bought the “entire catalog” of the film composer Henry Jackson. Finally, Tempo Music, a joint venture between Warner Music Group and Providence, is looking for a buyer, which seems like a sudden turnaround for a fund that only started in 2019. It will be interesting to see who the potential buyers are and what that could signal for this market.
6 Links 2 Read
Streaming Services - The New Inquiry
I’m always interested in essays on the music business that encourage all of us to think a bit differently about recorded music’s current set-up. Jaime Brooks makes a strong case for why we need to more deeply understand what catalog means in the context of music streaming, as its value to the industry is increasing.
Why Music Companies Should Stop Using Vague Stats - Music Business Worldwide
Years ago, I wrote about my disdain for Spotify’s “monthly listener” metric. Here, Eamonn Forde casts a wider critical net to include the incomprehensible press releases that tout stats that obscure, rather than illuminate, success in the industry. Forde correctly notes that fudging numbers predates streaming (remember “albums shipped, not sold”), but the plethora of newly accessible data only makes this more apparent.
Zapovednik & The environmentalist Question in Dance Music - Techno Antonio Negri
A further teasing out of the different manners of examining electronic music’s political economy with regards to climate change. I find scene-specific thinking about global issues interesting, especially for electronic music, which can be hyperlocal but is often transnational for the biggest artists.
Why Electronic Music Sets The Tempo For NFTs - Billboard (Subscription)
Billboard recently did a fairly massive series on web3/NFTs/crypto and what it could mean for the record industry. This piece stood out to me because while it covered how electronic musicians are using NFTs, it didn’t fully explain why. I’d posit that electronic music, particularly in the United States, never fully crossed over into the major label system and thus always operated a bit outside of the established industry. That’s partly due to its middle class base of artists and fans, who are also quick to embrace online trends compared to other parts of the industry.
The Vinyl Resurgence is Understated - Music Technology Policy
Never really deeply considered how increased major label vinyl production could potentially suppress independent vinyl sales. That, mixed with the continued resistance to increase mechanical royalties, further harms independent and smaller musicians.
‘Out of Control’ Gas Prices Are Reshaping Artists’ Touring Plans - Billboard (Subscription)
There are shared themes between these two stories on how broader economic forces can have outsized impacts on independent musicians, especially compared to the major label side of the industry. Increases in gas prices will only make touring accounting more stressful after these rocky two years.