Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Since Beeple’s record-breaking auction, NFTs have become synonymous with 2D visual art, dubbed “small pictures/JPEGs” in the industry, and the most valuable NFT brands are overwhelmingly still images. In contrast, audio and video NFTs are not worth mentioning at all in terms of transaction volume.

But will “small pictures” rule the NFT market forever? That seems unlikely, especially given today’s digital media landscape.

First, there are far more people who love music than people who love art. The music industry generates $57 billion in revenue from billions of people, with more than 500 million subscribers to paid streaming services. Art’s global revenue of $50 billion appears to be comparable in size. But for art, there is an estimated support of only 10,000 art collectors, who often buy expensive art. In terms of mass attention, the difference is staggering.

Of course, it’s unclear whether the future of NFTs will resemble today’s media landscape. But a combination of several factors, such as collector culture, early adoption, and recent sales numbers, suggest that music NFTs in particular deserve close attention. In this report, we take a deep dive into why music NFTs are a good fit for them from a collector’s perspective, and the emerging trends we’re seeing.

Delphi’s Music NFTs Investment Theory

The reason NFTs are taking the visual arts by storm: The arts are free from the burdens of copyright laws and industry gatekeepers.

Music has more hurdles to cross. Technically, the playback of any song is copyrighted, which complicates the display of NFTs. The supply chain for music is also more challenging. Visual artists are used to selling directly to consumers, while third parties like streaming platforms are often between musicians and fans. Finally, the music industry is notorious for always having a penchant for legal battles before simply embracing technology.

These are serious drawbacks. But there is also a stronger group of founders, builders and investors who are unafraid in their mission to realign incentives. As more people join the cryptocurrency industry and web3, we believe there will be more and more opportunities for artists to ignite their careers and sustain them in their own way. It’s not just about bypassing record labels, we’re talking about new revenue streams and engagement models that allow artists to build more successful and sustainable careers.

There are several areas of particular interest to Delphi:

  • Superfan engagement and rewards: Fans and fan clubs will become an even more integral part of the artist’s journey. The Web3 tools here help fans earn rewards for status and support.
  • Social Graph: Each artist can now build their own fan social graph, which can be verified by on-chain actions, such as participating in NFT purchases, or applying for POAP NFTs when attending the latest gig.
  • Closed-loop relationship between artists and fans: NFTs and tools transform the relationship between fans and artists from consumption to collaboration. We hope to see more artists experimenting with the Token community and DAO to create stronger connections, including crowdfunding and marketing.
  • Governance and exposure: Platforms and protocols can incentivize better governance and exposure models. This will allow fans to build their reputation as fashion leaders, while elevating up-and-coming artists without industry gatekeepers.
  • Composability and Standardization: Even with ERC-721, there is a lack of standards for NFTs, especially multimedia standards. Now, experiments around smart contract frameworks could revolutionize the way art is made.

Why Music NFTs? why now

Cryptocurrency wallets have exploded, with MetaMask recently surpassing 30 million monthly active users (MAUs) from 5 million in April 2021, and the taste for digital art may expand. The profile of the typical NFT buyer is rapidly evolving, and there is no denying that musical NFTs will reach a wider audience.

Despite the theoretical appeal, the music industry is seizing the opportunity. Major labels such as Universal Music Group are experimenting with NFT-centric virtual bands with Boring Ape. Meanwhile, artists like Grimes and 3LAU have sold NFTs for over $1 million, opening up a whole new revenue stream.

Music also has a unique history and culture of ownership that can unlock asymmetric value, especially when compared to other media. Among artists, musicians arguably create the most culturally impactful things in terms of what they capture. Take Kanye West, whose name alone has brought in billions of dollars in market value for partners like GAP and Nike. In fact, in the fine arts, no one can claim to have such an influence. The late Virgil Abloh, a longtime collaborator with West, saw this dislocation and planned an NFT-centric DAO before his untimely death.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

The internal state of the industry makes web3 particularly suitable for disrupting traditional music models. For most artists, Spotify is a tool for getting exposure for free. 99.4% of traffic on Spotify comes from the top 10% of artists. Streaming platforms are now fighting for lower artist pay. NFTs provide a way for more artists to earn a living from their work, which may speed up their adoption.

Finally, music has a natural power to create tight-knit communities. The rapid rise of NFT brands like Boring Ape is largely due to their community. For many, holding BAYC is not about image aesthetics or showing off their profile picture on Twitter. Instead, value comes from exclusive brands, real-world events, and growing attention. With 40 million followers, K-pop group BTS (BTS) has the most avid fan base in the world. Music NFT collectibles could gain a similar appreciation if launched properly.

Patterns for Audio NFTs

Audio NFTs in the form of MP3 and WAV files are a relatively niche market compared to small pictures, and on Opensea they typically trade in excess of $100 million per day. However, a music-focused NFT platform proves that the concept is economically viable.

Now, various platforms are experimenting with what matters to collectors. Royal and Decent tie NFTs to royalty income. If successful, this model will be a powerful combination. Not only will NFTs attract collectors, but early fans will also have ownership of the song’s streaming. is experimenting with a 1-of-many model, where singles are owned by a group and have privileges like public commentary. Backed by VCs and helmed by music industry insiders, these platforms have high potential.

However, Catalog’s full-single (1-of-1) model really sparked interest in the niche. Catalog is similar to the familiar SoundCloud library, but allows songs to be sold and auctioned off as NFTs. Currently, Catalog is in an invite-only beta phase and is primarily aimed at up-and-coming artists who understand the cryptocurrency industry. But well-known brands like Boyz Noize, Vic Mensa and Mick Jenkins already sell work on the platform.

Catalog’s full singles mode may have reached an inflection point. In October 2021, Catalog’s volume surged to $600,000, a 13x month-over-month increase, helping it surpass $1 million in cumulative sales. Even in the turbulent market of early 2022, the platform’s volume has held up.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

In December 2021, Sound launched its Share Fragment NFT platform, which allows artists to host a listening party for new songs and release them as a limited-edition NFT. Fans can support their favorite artists, post public comments on songs, and interact with artists and other fans. Sound released a total of 84 songs, with a total of 66 artists, with a transaction volume of 432 ETH ($1,197,587) and 855 ETH ($2,369,882). Artists have already taken 518 ETH ($1,434,586) in commissions from the secondary sale, which is a decent number for a platform that launched just four months ago.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Other audio modules like Async Art and Arpeggi are able to subdivide musical NFTs into audio tracks (such as drum patterns or bass lines). While this may be a niche attraction, they have the potential to be a collector’s item.

Breaking up songs into individual units on the chain can be a powerful lever for adoption. Among visual art NFTs, collections like Art Blocks and Gen art are popular in part because collectors take a closer look at scarcity and on-chain metadata. The earlier generative audio NFTs produced by Deafbeef and Euler Beats became popular for similar reasons. As musical NFTs expand, on-chain properties may become increasingly important.

On-chain music splits also have the potential to create new revenue streams for artists and producers, if they can easily remix and reuse. Companies like Splice have proven that royalty-free samples are a huge opportunity, and the successor to the technology could be CC-0 licensed music NFTs. Although far from today’s reality, streaming and royalty payment activity could shift to on-chain payments over the next decade.

As far as the collection strategy is concerned, there is no clear playbook yet. There’s no true “index investing” to bet on broader growth, but VC-backed platforms like Catalog, Royal, and Sound have some potential for retroactive airdrops. If music NFTs catch on, grabbing the market on these platforms and acquiring original works from artists would be a risk-reward bet. Again, it’s unclear which artists or collections would become historically significant. Building a blockbuster sale from a potential star web3 artist is more convincing than Tory Lanez’s limited-edition NFTs. But as more credible musicians embrace web3, that may not be so true.

One source of Alpha could be the spate of investment clubs. Following the Pleasr model, groups like Noise DAO (with a 1750 ETH pool) and Morii Music are quietly acquiring music NFTs. So far, their strategy seems to be simply to collect artists they like and think could be blue-chip stocks.

Whether participating in these clubs or simply monitoring acquisitions from the outside, narrative and collector swarms play an important role in pricing. As the saying goes, “Save what you like”, because the liquidity situation of NFTs trading is a double-edged sword.

Early Music NFTs Trends

Music NFTs are enabling a new wave of independent artists to circumvent the middlemen in the music industry. A case in point is Daniel Allan, who was able to crowdfund the cost of a mini-album with just a few hundred Twitter followers. Allan raised 50 ETH ($140,000 at the time), more than double the fundraising goal on Mirror. Backers of Allan’s mini-album get 50% of future master royalties, effectively spreading out the typical record advance.

Stories like Allan’s are increasingly common. According to Delphi’s analysis, the median artist on Catalog has 16,000 monthly Spotify streams and 3,300 followers on Twitter, suggesting that the majority of web3 musicians are currently indie or unsigned.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Surprisingly, an artist’s popularity on Spotify doesn’t correlate closely with Catalog sales. Sales tend to be clustered around 1 ETH, without large variations based on Spotify’s monthly traffic. This shows that early collectors were willing to support less established artists and valued the first releases of early musicians.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Artist Case Study

How can promising artists utilize NFTs?

A well-known stand-alone case is Haleek Maul, a Barbados-raised rapper who sold nine works on Catalog for a total of 133.6 ETH (or $299,000). Maul has sold the 8 most expensive works on the Catalog, mostly ranging from 10 ETH to 25 ETH. Sales of Maul’s INNER mini-album (56 ETH, or $256,000 at the time) could translate into 58.7 million Spotify streams. Interestingly, Maul has relatively few followers on Spotify and Twitter (about 4k monthly traffic and 8k Twitter followers), but the artist is pushing hard towards web3. Doomsday is a venture-backed production company that crowdfunds music videos through NFTs. The company has been working closely with Maul with the goal of winning a Grammy for music video.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Indie artists arguably get the most from NFTs, and they will be the ones to watch in the development of the artist’s gameplay. There is also a lot to learn from top artists who have released series of musical NFTs. The NFT offering from Disclosure remains a groundbreaking case study of what’s possible. We are biased here because our Delphi colleagues bought this NFT. Several things went well for this auction, first, the art has the iconic Disclosure face image, which appears on all album covers. And it has a unique selling point: owning it gets you 4 free tickets to all Disclosure concerts around the world.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

While this is undoubtedly a special case, it is clear that NFTs can help foster a special relationship between artists and fans.

Another play worth knowing is Avenged Sevenfold’s Deathbats Club (DBC), an NFT-centric fan community. Certain features in the band’s NFT production determine the access that fans have at the concert meet-and-greet. This model is easily replicated by established artists, although it requires some serious commitment and follow-up work to deliver a real-life experience. The negative reputational risk of overpromising and not delivering is real for your superfan community, so we shouldn’t make the choice lightly.

The DBC series has generated a trading volume of over 280 ETH. Artists who take the time to do this well and really get closer to the most exciting aspects of web3 will benefit a lot, seeing their fan club take care of themselves.

Not all mainstream sales go smoothly. The Kings of Leon band generated huge sales for their NFTs, but the process was met with varying degrees of popularity as Ethereum fees were more expensive than people claiming NFTs. The band also auctioned off a small collection of unique NFTs that gave holders four front-row tickets to any KOL gig. There wasn’t much trading activity, but people paid over 300 ETH for them at the time. Gas fees also hurt sales for Tory Lanez, which sold 1 million NFTs for $1 each.

Recommendations for first music NFT releases

Artists entering the field must be aware that this is a 10-year game, not a few months’ fad. Unfortunately, some artists took advantage of last year’s NFT craze to dump their fans. If you look at a platform like Nifty Gateway, you’ll find some very well-known people who have released musical NFTs without ever having any communication with the NFT holders. You can see a clear downward trend in their secondary market sales.

Planning is key. When asked to comment, Haleek Maul offered the artists the following advice:

The first release is critical, and I think the best advice is to plan as thoroughly as possible. Determine the story you want to tell and make sure you communicate it to your audience in the best possible way. I think that’s the ideal source of value to focus on a core idea and build on that.

Halek Maul

The legal implications are also worth investigating beforehand. Independent and unsigned artists flocked here because the legal complexities here are far less. As Disclosure explains in our podcast, digital products are increasingly taken up by major label contracts:

If you’re an independent artist right now, and a big record company wants to sign you, I’d consider it carefully. Or at least consider the part about NFTs in the contract, or if there is no part about NFTs in the contract, then make sure there is one in the contract.

Disclosure (Lawrence)

Finally, it’s wise to think about what superfans want most. Artist Harris Cole, who sold 16 works on the Catalog website, gave the following advice:

My best advice to artists is to identify what they can come up with to make a difference, based on the existing public sentiment. For me, that means including the scarce tapes from my debut album pause. These tapes sold out a long time ago, and we only made a few reels, so those of you who have been listening to my music since its release might be interested in getting one.

Harris Cole

Delphi Digital regularly assists artists and major brands with their first NFT releases. Here are a few points we need to add:

  • Make sure your release is well thought out so you can create a big buzz.
  • It’s important to make sure your NFT has a story associated with it. Make sure your NFT matches your brand.
  • If possible, include a few extras: whether it’s watching a show, a Discord channel, or even a physical exclusive/vinyl record. However, the main focus should ultimately be on the NFTs themselves, not necessarily the additional benefits.
  • Now we see many NFTs being released just to capture instant value. Take a long view.

rise gradually

Although still in the experimental stage, the Record DAO is a promising new agency for talent development. Dreams Never Die, Good Karma Records and HiFi Labs are using the latest web3 tools and community building strategies to develop artists and music merchants.

Creator-led DAOs are starting to have a tangible impact on cutting-edge artists. Artists guild Songcamp has jointly created a music NFT adventure game. SongCamp musicians and artists crowdfunded 40 ETH to create an NFT portal called Elektra, which requires an NFT ticket to enter. Songcamp also funds experimental teams that allow artists to collaborate, create art, and create web3 products like the music robot BPM for Discord.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

Similarly, MusicFund is an NFT community for music discovery, funding, and curation. Friends With Benefits (FWB) has proven to be a strong community of artists. The popular DAO has launched a scholarship and donor program to support creatives, with grants run by Pat Lok, an electronic musician whose work is sold on Catalog and Sound.

Elsewhere in the music industry, Audius, ModaDAO and Metaplex are trying to bring encryption to music streaming, licensing and marketing. While there is no Spotify yet, Audius currently has more than 6 million monthly unique users.

NFTs give artists more control

What is the real meaning of music NFT? At first glance, it’s just another tool in an artist’s toolbox for creating collectibles, memorabilia, and merchandise, with the added flexibility of being software.

A subtle but important difference, as Matthew Chaim points out, is that NFTs give artists control over the original. Chaim’s argument is that NFTs contain three form factors at once: canon, collectible, and replica.

Delphi: Pattern Trends, Investment Theory and Issues of Music NFTs

In this case, the canon is the representation of the recording, or the source file of the Internet. It’s also a collectible, just like any other limited-edition item. Best of all, even if millions of people stream an exact copy on Spotify, the genuine and collectible properties remain. In fact, as more and more people listen to this copy, the NFT becomes more valuable. (This is a common refutation of the “right-click + save” problem.) But unlike art where only Mona Lisa-level work is widely seen, the music is endlessly copied.

Having the “Internet source file” of a song may seem trivial, it is not recognized by law and there is no guarantee. However, it doesn’t matter if enough collectors believe that the NFT is a genuine representation. As Jesse Walden pointed out, once enough people think it has value, a single NFT can even surpass copyright and accumulate more market value.

Outlook: How NFTs will change music

Technology has lowered the cost of music recording, marketing and distribution, which is starting to tip the scales in favor of artists. But in the age of streaming, true artist wealth remains elusive.

There’s a joke in the industry that record companies hire more lawyers than marketers. For record companies, it’s about extracting the most value from copyright. As we said, NFTs provide a copyright-like expression without all the legal red tape. With NFTs, artists don’t have to worry about when they will receive a check. Instead, its value is instantly determined each time it changes hands. Platforms like Catalog are already starting to demonstrate that the concept works at scale.

Going forward, one area to watch is incentives. An example here is the slice feature of Catalog, which was originally implemented on Zora. By splitting, bidders can create an advantage for the current owner of the NFT and offer a portion in a subsequent sale. This is influential because established collectors or investment clubs are more likely to try their luck on the artist, especially if their curatorial power can be monetized later.

Meanwhile, Sound recently partnered with independent label Soullection to host a special episode of their popular radio show. Founder and legendary curator Joe Kay played a 62-minute mix in which he played unreleased songs from some of the label’s artists and friends. After Sound’s listening party, 333 NFTs were offered to collectors at 0.1 ETH. In particular, no matter how much money is raised, each transaction is automatically split and assigned to the artist who played the song in the mix. Using technology from 0xSplits, 20% goes to Soulection+, 5% goes to Joe for planning, 5% goes to project designers, and the rest goes to artists. All collections sold out almost immediately, raising 33.3 ETH (~$90,000) for participating artists.

But this is just the beginning of implementing smart incentives. It is not difficult to imagine that NFTs can reward the earliest fans for a long time. Status indicators such as limited edition music, VIP experiences, chat room access, or community tokens can all be included on-chain. It’s just a matter of establishing the rules in a fashionable way.

With the development of NFT technology, digital media is bound to undergo tremendous changes. NFTs will be staked, they will receive royalties, they will act as licenses, they will represent discoveries by early artists, and they will take on new forms. Right now, only a handful of household-name musicians are trying. But as more blue-chip artists start selling music NFTs, this could soon be a market grab moment.


If nothing else, the NFT boom in 2021 has proven that the cryptocurrency industry is an excellent way to monetize digital media. It’s still early, and it may take a few years for the technology to truly disrupt the music industry’s incumbents, but there’s an air of inevitability.

Artists will no longer put up with the current model, and the movement has begun to find momentum. For their potential, musical NFTs are not guaranteed to usher in a new middle class of artists. However, for artists leaning towards the web3 community, crowdfunding and distribution, the results are promising. (Daniel Allan, for example, says that 85% of his revenue now comes from NFTs.) Also, as the data shows, having a large following is not a prerequisite for selling.

As our friend Disclosure told us, “Whether it’s for streaming, sales, or business, this is a whole game-changing moment. If you put this technology into the mix, I think the music industry is going to have to Adapt quickly.”

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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