Lately, with cryptocurrencies and blockchains dominating financial news headlines, another term has sprung up that has people scratching their collective heads: NFT’s, or Non Fungible Tokens.
In the music business specifically, Grimes recently raised eyebrows when she sold $6 million worth of digital art as NFT’s, and Forbes ran an article about the largest NFT sale ever from a Star DJ.
So what is an NFT? Let’s go to Wikipedia for some answers:
A non-fungible token is a unit of data on a digital ledger called a Blockchain. NFTs can represent digital files such as art, audio, videos, items in video games and other forms of creative work. The NFTs can be bought on an NFT market. Access to any copy of the original file, however, is not restricted to the owner of the token. While the digital files themselves are infinitely reproducible, the NFTs representing them are tracked on their underlying blockchains and provide buyers with proof of ownership of the NFTs.
Okay, okay–now how about that in English?
From the Verge: ““Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible.” And perhaps, the most crucial point: “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). To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.”
The legal implications of this in the music business raise some interesting ideas: What does it mean for a songwriter or music publisher if an artist sells a piece of work to which they contributed?
Also from the Verge article: “A helpful analogy to an NFT is a limited edition vinyl print. Think of a signed physical copy of a vintage album. The purchaser now owns a unique item that is theirs’ forever. Since this is simply one iteration of an item, the songwriter behind the songs on that album would receive the mechanical rate dictated by the courts. An example would be if the Beatles released 100 vinyl album copies, signed and numbered 1-100, while they might fetch an astronomical price from collectors, the co-writers on the album would receive the statutory mechanical rate under Section 115 of the Copyright Act.”
NFT’s also bring up interesting discussions about ancillary revenue streams and expansion–especially in terms of the recent boom in catalog sales and an artist selling their master rights.
The Verge leaves us with this thought: “There are many questionable aspects to NFTs that the market hasn’t fully grappled with – their environmental impact, challenges with storage and distributions of cryptoassets, how to manage or track unlicensed duplication and the parameters of potential secondary markets. However, 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.”