TL;DR
Music industry has some significant problems.
Audius, royal, and Good Karma Records DAO is web3 application which tries to solve this problems.
Present of Music Industry
We all consume music in any kind of forms. As time changes, music became much more accessible to people and artists were able to communicate more with fans and build diverse revenue pipelines. However, there ARE also some significant drawbacks.
Problems
Too many stakeholders
Too many stakeholders are intertwined in music industry.
First, there are songwriters, artist, session, recording engineer, mix/master engineer in player side. Second, there are labels and distributors in production side. Lastly, there are streaming platform like Youtube and Spotify for end point that users interact directly.
The biggest piece of the pie is never given to the one who baked it
These phrase is from Graby, which is founder of Good Karma Records DAO, which it will be introduced later. This really doesn’t make sense, but it’s happening in reality.
The core value of music industry is simple; artists make good music and fans consume it. However, as too many stakeholders squeeze in, this irony occurs.
Let’s look at different streaming platforms. In Spotify, which is mostly used streaming platform worldwide, typically, 0.00437$ per stream is given to artist. 70% of revenue goes to right holders, like label and distributors. It becomes slightly better in Napster or Tidal, but still, it’s disastrous.
Artists hate Label (in most cases)
Except for few artists, most full-time artists sign with labels. Except for artists whom are extremely famous, labels tend to have more power than artist in relationship between them. That’s why it’s very often artists sign to unfair contract and get disadvantage from it.
What Web3 can do
No Middleman
Most important feature of blockchain is that we can operate network transparently without middleman. That’s why industry which middleman have much power is applicable for blockchain. Music industry is perfect example.
ASCAP and BMI are organizations that protect the right of songwriters to get their royalties. In past, these organizations were needed because there were no reliable way to protect rights. However, with blockchain, we can remove it and fees that they are taking.
In case of streaming platforms, they tend to have some significant problems like excessive fees, censorship and opaque revenue settlement to artists by abusing the advantage that it's the only channel for fans to access music. Audius, which will be introduced later, is tackling this problem with blockchain.
Incentive Alignment
For artists to make living from music, it’s impossible without fans. Most of revenue comes from fans streaming music, coming to concert and buying merchs. However, by doing this, what fans earn was nothing than satisfaction of supporting their favorite artists.
Main keyword of Web3 is ownership. In Web3, fans no long end with just consuming artist’s content, but they are rewarded as much as they contribute. In other words, as artists and fans’ incentives are aligned, they become win-win relationship.
Projects introduced below are projects that I’m most interested in and looking forward to among the projects that tries to innovate music industry through Web3.
Audius
Unlike Spotify, which platform controls entire streaming protocol, Audius is trying to make decentralized streaming protocol using blockchain.
Goal
For artists, they are free from censorship and controls from platform and can have entire freedom of releasing their music and monetization(not available now) in Audius.
For fans, they can be rewarded by $AUDIO as much as they contribute to Audius network. According to the roadmap, $AUDIO will be distributed in proportion to the user’s contribution based on on-chain analytic.
How it works
As Audius is decentralized protocol, every content and data are stored and indexed by third party node operators.
Node
There are two types of node in Audius, content node and discovery node.
Content nodes allows us to stream from Audius. The actual content and data are stored in IPFS based Audius own storage solution.
For fans to find tracks in Audius, Discovery nodes hash and index data like user profile, playlist and followers whcih makes fans to easily search for data.
$AUDIO
$AUDIO, which is native token of Audius has 3 features; security, utility, and governance.
To run a node in Audius network, one must stake certain amount of $AUDIO. It motivates node operators to not make any malicious moves. In case of utility, Audius is planning to allow users to access exclusive contents by holding $AUDIO. Lastly, $AUDIO means governance power which can be used for deciding the future of Audius.
Currently
As I used Audius for some period and looked for Reddit and AMA(Ask Me Anything) sessions, I concluded that Audius still needs much improvement. Of course, there are no competitors in decentralized streaming protocol. So, if they solve below problems one by one, I think they will success after few years.
Not much to listen
The first, and most important question that users ask when they choose streaming platform is ‘are there music/artists which I listen to’. Considering it, Audius is least compelling compare to other streaming platforms, even Soundcloud which is also free to use.
Monetization
Audius is free application. According to the AMA, monetization will be integrated in the first half of 2022. Apart from this, it’s very hard to find proper monetization model for free to use platform. In case of Soundcloud, they introduced monetization model called Soundcloud Premier in 2018, and it had quite bad feedback from artists.
However, monetizaiton is essential. Only if monetization is possible, more artists will use Audius, and only if number of tracks and artists increase, more users will visit Audius.
Copyright issue
If we look at Audius chart, many malicious accounts have uploaded other famous artist’s track without permission. Of course, although it is a decentralized protocol that is not managed by any entity, Audius should take care of copyright issue to attract more artists. Currently, Audius deletes the track if artist reports the copyright issue.
royal
royal allows artists to sell partial royalty ownership of their song as NFT and NFT buyer can claim the royalty of that song.
Goal
royal aims to align incentives of artist and fan.
For artist, they can get instant revenue by selling partial royaly ownership of their released or pre-released song.
For fans, they can collect part of songs that they like and get royalty which allows them to invest in artist’s success.
How it works
Artist use royal to sell their royalty ownership as NFT through auction. Fans buy this NFT and claim royalties for the music they own. If artist become popular, artist and fans both wins.
According to the proportion of royalty, NFT class and price differs. To buy NFT, royal uses polygon network for gas fee issue and also supports card payment for non-crypto users.
Currently
On January 20th, Hip-Hop artist Nas has sold royalty ownership of his track Ultra Black and Rare by NFT through royal. I tried too, but failed because there were too many people.
Not only royal’s mission is appealing, I’m bullish about royal because of its strong team members which consists of a16z as investor, worldwide know DJ 3LAU as co-founder, and Fred Ehrsam, co-founder of Coinbase and Paradigm as board member.
Good Karma Records DAO
Good Karma Records DAO(GKR) is community owned label that works as DAO.
Goal
Existing labels has been ran by small number of board members and because its priority is profit of shareholders, label weren’t able to fully support their artists.
GKR tries to tackle this problem through DAO.
DAO allows anyone who owns governance token to participate in running the DAO and every processes are open to public. Also, because artist, label and fans are rewarded by same governance token, their incentive aligns which creates synergy between them.
How it works
Every decisions such as label’s future plan, what artist to sign, how community treasury will be used, are all made through vote by holders of $KARMA, which is governance token of GKR.
Anyone contributing to GKR are rewarded by $KARMA and every artists signed to GKR gets certain amount of $KARMA. Certain proportion of GKR artists’ royalty and every profit made by GKR goes to community treasury.
GKR is planning to release NFT, do offline shows and also collaborate with different Web3 music applications like Audius, Catalog, and Sound.
Currently
Through on-chain voting, GKR signed its first artist Daz Merchant on January 20th. On January 21th, GKR ran second showcase in LA.
GKR is a bold attempt which tries to disrupt existing label model. If GKR can a) keep decentralization and transparency, b) have efficiency and expertise to compete with other label, c) attract people to relate with GKR, I think GKR can become pioneer of new form of label.