NFTs have taken creative industries by storm, and the music industry is no exception. Innovation, coupled with the benefits of decentralization, has brought a period of substantial changes in the way we perceive the interaction between the artist and the fan.

The NFT music craze has challenged legacy music business structures, as NFT technology is ushering in a new era of value and community between creators and buyers. So let’s take a look at why NFTs are important for the music industry, and how they are affecting the industry. 

Utility Value

Utility value of the NFT represents the rights granted to the token holder, these rights usually being something that the token offers in exchange for the purchase. Within the world of music it very often relates to some sort of combination of digital and real world bundling, whereby a digital collectible such as an artwork or an audiovisual is sold together with a physical object or an experience that has value to the fan.

That includes rights and access to some kind of intimate, behind the scenes experience of the artist, where the collector could be entitled to a limited edition vinyl, CDs, exclusive access to unreleased material or alternative mixes and edits, or perhaps even tickets to the artist’s new show. But the types of utility value offered through music NFTs go beyond that and are subject to constant innovation by new creators entering the scene.

The opportunities and an ongoing innovation within this technology allow fans to interact with their favorite artist to an extent that just wasn’t attainable before. 

Patronage & Funding

Unlike something like Patreon.com, NFTs bring an aspect of decentralization and cut down the middle man and the limits of what can or cannot be offered to their fans. Despite the fact that the accessibility of releasing music is at an all time high, music artists still massively rely on heavy amounts of financial capital to “cut through the noise” and reach a desired amount of listeners.

NFT technology changes this as decentralization helps both creators and fans to align incentives and form mutually benefiting communities.

Stakeholder Community Creation

Stakeholder Community Creation is another beneficial process we can clearly observe within the music NFT space. What it means is that fans can become direct financial stakeholders of the musical product of an artist, which fully modifies the fundamental operational mechanism of the music industry.  This leads to a faster development of communities, where the fans are truly united with artists in marketing and promotion efforts, as they now have financial incentives to promote the music of a creator.

Speculation

Speculation is not the most valuable aspect of the NFT experience in the music industry (however, it has played a big part in the NFT music craze), but is still nevertheless some part of the appeal. Investing into tokens of artists that are bound to grow could potentially lead to massive financial capitalisation.

As the popularity and platform of the artist in question increases so does the interest of the collector community, further driving the value of the NFT. As a result, the NFTs you bought to support your creator friend can actually go through significant appreciation in value and then be subsequently resold for profit.