1. Overview of the traditional music market
1. The traditional music market is dying and being reborn
The size of the entire music market in the past 20 years can be described as fading and nascent.
The physical music represented by records, CDs, and albums continues to weaken. The market size in 2020 is about 4.2 billion US dollars, a decrease of 81% compared with 2001. After 2010, with the continuous development of Web 2, Internet music represented by streaming media has developed rapidly. The size of the streaming media music market in 2020 will be 13.4 billion US dollars, an increase of 3250% compared with 2010. Although the market size of the entire music market in 2020 is still not as large as that in 2001, we have noticed that Internet music represented by Web 2 streaming media is constantly giving new life to the entire music market. With the maturity of Web 3 infrastructure, the growth of musicians and users, and the problems existing in the traditional music industry chain, we believe that Web 3 music may be another innovation in the music market.
Global music market size
Source: International Music Market Report: 2021
2. The number of global musicians is in the order of ten million, but the income is not satisfactory
From the perspective of creators, the number of musicians in the world should be around 10 million.
From the perspective of the global market, according to Spotify CEO Daniel Ek, by the end of 2020, Spotify has about 8 million musicians, and by 2025, the number of musicians will reach 50 million. From the perspective of the Chinese market, both QQ Music and NetEase Cloud Music have more than 300,000 musicians. Considering the duplication of data, the number of global musicians will be around 10 million. The growth of musicians has benefited from a significant reduction in the threshold for distribution and production. However, in terms of income, the income of most musicians is not satisfactory. The music industry28 is more differentiated. Judging from the income of musicians in China in 2020, 75% of the musicians have a monthly income of less than 8,000 yuan. In addition, most of the long-tail musicians’ music income is just extra money.
Comparison of monthly income of musicians in 2019 and 2020
Music revenue of musicians as a percentage of total revenue
The number of clicks an artist needs to earn a minimum income
Source: China Music Market Report: 2020, Euterpe White Paper
3. Global paid music streaming users have exceeded 400 million
From the perspective of the user side, as of 2020, the number of global paid music streaming users has reached 443 million. In the past 10 years, international streaming media paying users have shown rapid growth. From a domestic perspective, the number of people paying for QQ Music alone has reached 71.2 million in 2021Q3, and the payment rate has reached 11.2%. In addition, music users also include record consumers, concert consumers, music-related peripheral consumers, etc. The overall number of potential music consumers and the penetration rate are expected to maintain rapid growth.
2010-2020 World Streaming Media Payers
2019-2021 QQ Music’s new music payers
4. The complexity of the traditional music track industry chain is the core factor leading to low royalties for musicians
The industrial chain of the entire traditional music track is too complicated, which is the core factor that leads to the current low royalty income for musicians. The upper reaches of the entire music industry chain are mainly music producers represented by lyricists, composers, and singers. Everyone is familiar with Jay Chou and Fang Wenshan. The middle reaches are mainly record distribution companies, mainly the world’s four major record distribution companies represented by Sony, Universal, EMI and Warner. The downstream are mainly all kinds of consumers and all kinds of agents, such as QQ Music, NetEase Cloud and listening users.
In the current royalty distribution based on Internet streaming music, musicians can get less income. The current practice of streaming media playback platforms is that 42% of a song’s royalties are distributed to record companies (such as Sony, Universal, etc.), about 30% to operating systems (such as Android, IOS, etc.), and about 20% to the Internet On broadcast platforms (such as QQ Music and NetEase Cloud), lyrics and songwriters can get a total of 8%, while singers are mostly settled by record companies. If the lyrics and music are represented by multiple layers, the royalties will also be divided layer by layer, which will be less in the hands of the author.
Traditional music distribution industry chain
5. Traditional musicians have less copyright distribution, delayed income and opaque distribution
In addition to less distribution of copyrights, musicians also have phenomena such as delayed income and opaque distribution in terms of copyrights. Record companies, publishers, etc. usually publish information on copyright royalties on a quarterly basis, but the real revenue to musicians often needs to be deferred for a year or two. Current users only need a mouse click to download related music on streaming platforms, and countless middlemen take a year or two before distributing the royalties to copyright holders. On the one hand, the laws of the copyright industry are quite complicated, and secondly, there are many industrial chains and middlemen. Secondly, according to the Rethink Music report, 20%-50% of copyright revenue will not go to the legitimate copyright owners, but will be embezzled and swallowed in various opaque processes.
Music Copyright Involves All Parties
资料来源：RETHINK MUSIC, FAIR MUSIC:TRANSPARENCY AND PAYMENT FLOWS IN THE MUSIC INDUSTRY 26 (2015).
2. What Problems Does Web3 Music Solve?
1. The essence of Web3 music is to reshape the industry chain
The essence of Web 3 music is to reshape the industry chain. Compared with the extremely complex industry chain of traditional music described above, the Web3 Music Project reshapes the industry chain and simplifies it as follows: musicians directly cast music into NFTs and submit them to downstream consumers through creative projects or MusicFi / NFT Marketplace. hands.
By reshaping the industrial chain, the main benefits are:
1. Reduce redundant intermediary fees. As described above, in streaming media platforms, musicians can only get about 8% of copyright revenue, and the remaining 92% are exploited by record companies, operating systems, and streaming media platforms. The most direct benefit of simplifying the industry chain for musicians is to obtain higher income to support them and a better life.
2. Make royalty income more transparent and timely. It was also mentioned above that in the traditional music market, copyright fees are delayed for one or two years before they are received, and the distribution process is extremely opaque. Most long-tail musicians have low bargaining power and can only endure such a situation silently. Phenomenon. By casting music on the chain into NFT, the royalties earned by the works can be transparently and instantly fed back to the musicians. However, it is a problem that needs to be solved how to truly and fairly transmit the income obtained from the music works off-chain on the chain.
3. Fans can share the benefits of growing up as musicians. Musicians who are optimistic about fans can enjoy the benefits of royalties on the one hand after purchasing NFTs in the early stage, and on the other hand, they can also enjoy the premium of the continuous appreciation of NFTs. The potential benefits of both are beneficial for Web 3 users (especially NFT enthusiasts) to keep buying musicians’ NFT products.
4. Fundraising is more convenient. Taking the American market as an example, the traditional artist/musician’s publicity + marketing costs are around $500,000 to $2 million. This is a high cost for small and medium-sized and independent musicians, but through the issuance of the NFT primary market, artists can easily raise hundreds or thousands of ETH through white papers + community operations + personal influence to finance the completion of works, and then continue to let the works Appreciate the value and give back to the community.
Investment required for new artists in the US market
2. Web3 music does not solve the problem of low income of long-tail musicians
Although the above mentioned web 3 music can reshape the industry chain, it cannot solve the problem of low income for most musicians. From the perspective of the supply side, after the 21st century, the cost of music distribution has become lower and lower, so a large number of online musicians have sprung up, intensifying market competition.From the demand side, users have limited entertainment time, and now they have to compete for customer time with short videos such as Tiktok + long videos such as Bilibili. Secondly, the number of Web 3 users is relatively small, and the number of people who are willing to listen to music on the Web 3 music platform is very small. Therefore, for most long-tail musicians, the music they publish is likely to be zombie work, so it is also true that the income is less. Web 3 music just reshapes the industry chain, making the industry chain more transparent and efficient. It helps musicians become richer, not for musicians to cut leeks.
Most Web3 music plays very low
3. Sub-tracks are mainly divided into streaming, trading, royalties, and creation, etc.
At present, the main sub-tracks in the entire Web 3 music track are divided into streaming media playback platform, NFT trading platform, royalty platform and creation platform. The imagination of these four sub-tracks is relatively large.
The creation platform is the upstream of the track, supporting users to create the first generation of music NFTs, and to create second and multiple creations of the first generation works. Users can easily create new memes based on JPG, but it is difficult to create two music itself, and it is more difficult to create two. The birth of the music creation platform greatly facilitates users to create secondarily, which is more conducive to users to spread community culture and improve the liquidity of music NFTs.
The NFT trading platform is the upstream/midstream of the track. It is mainly a platform for musicians to issue NFT to fans through the primary market and to trade NFT in the secondary market between fans.
The streaming media playback platform is the downstream of the track, similar to QQ Music and NetEase Cloud Music. It is a Web 3 music playback platform and one of the core platforms for musicians to expand their community influence. The logic of its development is related to Web 2 streaming media playback. The platform is the same.
On the basis of realizing NFT royalties, royalty platforms usually also have DeFi functions. Web 3’s music royalty platform serves musicians and fans, and was born to solve problems such as opacity and deferred royalty.
At present, the different sub-tracks of Web3 music are divided
3. Project Mapping
1. List of track star projects
2. Audius: The largest Web3 streaming music platform
Audius is currently the largest Web 3 streaming music platform. Audius adopts the method of Web 2 mailbox registration + Web 3 wallet login, which is friendly enough to traditional Internet users and avoids the large threshold for wallet login. As a music platform, the entry of top music stars will bring huge traffic to the platform, and Audius is working hard to attract musicians through token rewards. In the early days, the platform absorbed some musicians as consultants or creators to issue a large number of airdrops. In the airdrop in October 2020, each person received an average of 5 million tokens (currently worth 3.5 million US dollars) to encourage big Vs to create works and Feedback platform.Secondly, Audius also released an incentive plan to attract long-tail musicians to settle in. For example, the creators of the five most popular songs every week can get 100 tokens, and the producers of the most popular playlists can also get 100 tokens.
At present, the vast majority of Audius users may be Web 2 users, not encrypted users. Judging from the current token holding addresses of Token, the recent token holding addresses have reached about 24K. Compared with the current users (about 100K daily active users), most of the users (75%+) are not token holders, but Web 2 users. Indigenous residents or users interested in crypto/music. Similarly, it can be seen from the community atmosphere that there is a channel in Discord that is only open to token holders, while in other channels, discussions on currency prices are prohibited, and most of them are discussing music creation itself.
Token unique holding address
Audius daily active users
3. Audius: Token empowerment is acceptable, but the economic model needs to be improved
Overall, token empowerment is acceptable. The main functions of token are:
Staking participates in node operation. Audius’ music files are stored on IPFS. The nodes are divided into content nodes, which are mainly responsible for storing user data, images and audio files, etc.; and search nodes, which are responsible for searching playlists, users, etc. Among them, 200,000-10 million tokens need to be pledged to become a content node, and 200,000-7 million tokens need to be pledged to become a search node, and the overall cost is relatively high (retail investors can choose proxy pledge)
Participate in the platform economy. However, the overall economic model of the platform is weak, and the token is only used as a reward, and the reward amount is not large. In addition, since the platform has no income plan, there is no way to adopt the model of pledged income.
Audius is both good and bad. The advantage is that it strives to move closer to decentralization, allowing users to upload works without reviewing, using Web 2 mailbox + Web 3 wallet login method. The open API can call songs, etc. to external APPs. The disadvantages are also obvious. Since music can be uploaded without review, it may be suspected of infringement and content security. Secondly, the music on Audius cannot be protected by copyright, and there is no clear creator income plan. All in all, Audius still needs to improve its economic model.
Audius Future Circulation
Audius price changes
4. Pianity: Music NFT trading platform built on Arweave
Pianity is a MusicFi NFT trading platform built on Arweave, which mainly involves the primary market offering of NFTs. Pianity currently does not support the sale of related NFT products between users, but will open the secondary market in March, in which musicians can receive 8% royalties. NFTs on Pianity are divided into four tiers, each with a different number, and the number of releases and prices depend on the artist. At present, Pianity’s music NFTs cannot enjoy copyright dividends either.
At present, Pianity has a circulating token PIA in the platform, which has not yet been issued, and the price is always US$0.1. Users can purchase NFTs on the platform through ETH, USDC, etc., and then the official will regularly divide the total value of personal NFTs by the total value of users’ NFTs on the platform to distribute PIA tokens as dividends. PIA tokens are mainly used to purchase NFT, and the project party will often issue activities such as purchasing NFT with PIA and then returning it. At present, there is little information, and the platform economic model is acceptable, and the project party needs to gradually improve the relevant information.
Volume since Pianity went live
5. Sound.xyz: Dramatically improved income levels for musicians
Sound.xyz is the first release platform for Web 3 artists. Sound.xyz currently only supports primary market transactions. NFTs purchased can only be traded in the secondary market such as Opensea. At present, MusicFi NFTs have insufficient liquidity and the trading volume in the market is relatively small. In addition, the highlight of Sound.xyz is that after users purchase NFT, they can post public comments to let the public know their thoughts on the work and enhance the interaction between artists and musicians.
Sound.xyz has dramatically improved the income levels of musicians. According to the sales of Sound.xyz in the past 30 days, among the 69 musicians, more than 54 musicians have a monthly income higher than the minimum income of US$1,400 in the United States, and more than half of the musicians have an income of more than US$6,000 in the 30th day. People did not release new works this month, and their monthly royalties have been as high as 3ETH or more. Compared with traditional streaming music platforms, Sound.xyz has indeed greatly improved the income level of musicians. However, the musicians of Sound.xyz are invited to settle in, so some of the musicians who settle in can be considered as new stars or leaders in the industry, and they do not have universality to improve the income of all musicians.
Sound.xyz Music Review
More than 54 musicians earn more than the lowest monthly income in the U.S.
6. Opulous: royalty platform, MusicNFT+DeFi
Opulous features a royalty platform and Music NFT+DeFi. Opulous’s main business is primary distribution of music NFT + secondary market + royalties + DeFi. After the user owns the NFT, he will automatically obtain the musician’s royalties on the music, which is a business that other music trading platforms have not been involved in at present. The second highlight of Opulous is its DeFi loan, that is, musicians can use the 1-year royalties of future created projects as collateral to borrow assets from the platform. In addition, the platform also supports mortgages with stable royalty music NFTs to obtain corresponding loans. This DeFi product has greatly enhanced the liquidity and application of the head music NFT, and began to build the application-level music NFT LEGO.
The overall empowerment of $OPUL is acceptable. The main functions of OPUL are: 1. In-platform trading & Mint settlement tokens 2. Staking 3. Liquidity mining 4. Governance, etc. Overall, token empowerment is acceptable, and the staking function has not yet been launched. After the launch of the pledge function in Q2 to share the platform revenue, the token value will rebound to a certain extent.
Opulous Economic Model
OPUL’s current empowerment is low and prices are weakening
7. Melos: Support the second creation and stimulate the development of MusicNFT Lego
Unlike other Music NFT exchanges on the market, Melos focuses on streaming music creation. Its trading part is the same as the exchange model on the market, listening to music is free, but holding NFT does not enjoy additional benefits such as royalties.
The wonderful part of it is its creation and the second creation. Users can upload a piece of music/or create a piece of music with electric steel to generate the first generation of NFT (New Forge). Then the user can create a new child NFT (Jam Forge) by creating a second generation of the music NFT. The Musicblock on-chain records the associated DNA and GEN generations of each NFT. DNA includes author, creation, traceability, etc. Gen stands for generation level. Melos stimulates the development of music NFT LEGO to a large extent, and ensures the process of use right confirmation through on-chain traceability.
Melos music creation interface
At present, the trading volume is rapidly increasing, and the liquidity is enhanced
8. Melos: token empowerment is better, and the price of NFT transactions will start in the future
Melos token empowerment is better, and in the future, with the rise of music NFT prosperity, the price will rise.
1. 50% of the transaction fee obtained from Melos’ music NFT market will be used to purchase Melos and destroyed, and the remaining 50% will be allocated to the national treasury.
2. Users can buy NFTs minted by other users in the creation room, and then pledge the NFTs as nodes, and pledge certain tokens in the nodes to get additional rewards. Node rewards for staking NFT and additional rewards for staking tokens will be distributed daily according to the staking situation of the entire platform.
3. 20% of the tokens in the above pledge pool will be put into Uniswap to provide liquidity.
4. Token holders will regularly distribute the transaction fee dividends to the exchange.
5. Users who mint music NFT will get a certain token reward.
6. KOLs and community contributors will be rewarded with tokens.
Overview of Melos Economic System
4. Review from DeFi to SocialFi
1. Where is the Web3 music road: from the perspective of DeFi and GameFi
Web 3 Music has 4 sub-tracks + Music NFT has a total of 5 tracks, we think carefully, how will Web 3 Music NFT develop?
Before analyzing this problem, let’s take a look at the successful/failure experience of the mature application layer track DeFi, GameFi and some mature SocialFi.
After the summer of DeFi in 2020, DeFi began to explode on a large scale. The core reason why DeFi did not explode before 2020 is that:
1. How to find initial users and start-up funds
2. The cost of listing on CEX is high, and the price and liquidity will increase by a level after listing. The real solution to the above problems is liquidity mining. Liquidity mining continues to expand through the snowball of “tokens rise — APR rises — more users buy tokens after seeing APR rises quickly — tokens continue to rise”, but in the middle logic chain When there is a collapse (usually less users enter the market, selling pressure > entering the market), the left foot stepping on the right foot will become a death spiral of the right foot stepping on the left foot
Therefore, the star projects we have seen so far are projects that users have a real demand for the product after the subsidy is removed. Such projects address the real need of users for financial products in Web 3, rather than creating an environment where they need it.
2021 will be the Autumn of GameFi. The core factor of the outbreak of GameFi is that users from the third world have reduced their income due to the epidemic, and they need to obtain income to subsidize their families. At this time, Axie happened to provide such users with the opportunity to make money. After Axie’s revenue surpassed that of King Glory in July 2021, GameFi has completely entered the world of encrypted users. GameFi’s Ponzi color is stronger, and the growth logic used is similar to stepping on the right foot with the left foot and going to the sky “Users enter the market – the token rises – the gold income rises – attracting new users to receive tokens and NFTs to enter the market – The coin continues to rise”.
However, with the collapse of Cryptomines, which accounted for 1/4 of the daily trading volume of BSC, GameFi 1.0 has gradually come to an end, and the remaining old GameFi is still lingering. Unlike DeFi, which truly solves the financial needs of users, GameFi 1.0, represented by Axie, is more of a special product born under the Fomo mood of the bull market. It is a PPT product made to cater to the APR addiction of Web3 users. Most of the GameFi that still exists are platform + Metaverse games with grand narratives.
2. Where is the Web3 music road: from the perspective of SocialFi with the same purpose
The logic of SocialFi is different from DeFi and GameFi, but it is similar to MusicFi. It is based on the use of love for big V/musicians to generate electricity to purchase related fan tokens/NFTs. The logic of SocialFi is simplified to – if a big V wants to realize his social capital (obtain tokens), he needs to spend time and money to prove the value of his social capital (POW proof of work). Similar to the logic of BTC/ETH, this also shows that the blockchain-based Web 3 is very suitable for the development of SocialFi. That is to say, the essence of SocialFi can be understood as a big V (or an individual), through its own influence, based on blockchain technology, on the one hand, builds its own social capital (that is, personal brand reputation), and on the other hand builds its own fans. They seek benefits.
But it is precisely because of the above logic that SocialFi also has major problems:
1. Want decentralized social networking, but cannot be decentralized in nature (a few celebrities can bring a very powerful social monopoly)
2. For social platforms, content mining is very difficult to define.
3. For social platforms and token distribution platforms, the empowerment of platform token value is more important.
4. Fewer users. At present, SocialFi still needs a long way to develop. Its track scale is still small, its mechanism is relatively primitive, and there are few aborigines in Web3, and there are very few SocialFi users who are willing to use the product experience.
The entire encryption track is replayed
Based on the above analysis, the four sub-tracks of Web 3 music + the music NFT itself have a total of five tracks. The more certain track may be based on platforms such as royalties, streaming media, and creation. For music NFTs, its role is to listen, collect, support idols, and distribute royalties, etc. Apart from the music NFTs with royalty distribution issued by leading musicians, the display scenes and show-off attributes of most music NFTs will be weaker than JPG NFT-like. However, after the top musicians issue NFTs with royalties, and users have obtained greater benefits, the music NFT track will usher in an explosion.
The imagination of the entire Web 3 music track is more powerful. Streaming media and creation platforms can cooperate with major well-known musicians on the IP side, and use token incentives to achieve Listen to earn and Create to earn, becoming the Spotify of Web 3 or QQ Music. The birth of the royalty platform is to solve the complexity in the traditional music industry chain, to provide better tools for musicians, and to solve the phenomenon of low, deferred and opaque royalty distribution in the industry chain. The music NFT trading platform is limited by the fact that the music NFT itself is weaker than the JPG NFT, and Opensea continues to be a dominant player in the short term, and the development path may be relatively unclear.
The problem with the entire track still exists:
1. From the perspective of the user side, there are still fewer users of the entire Web 3, fewer users are willing to spend the limited time to listen to Web 3 music, and fewer users are willing to spend real money to buy NFTs without royalties. .
2. From the perspective of IP, the current Web 3 musicians are relatively long-tailed due to the lack of leading stars such as Taylor Swift and Jay Chou .
3. From the perspective of the project, the economic model of many project parties is not perfect, the empowerment of tokens is weak, and the whole project is more like “I created this environment, so users want this demand”. Music projects with a strong social nature are similar to SocialFi. When SocialFi’s project tokens are poorly empowered and content mining is adopted to start a cold start, the consequence is that users start to create unrestricted spam content, and they are limited to a death spiral of mining and selling. Therefore, when the music project starts Listen to earn and Create to earn, if the token value is not assigned, the death spiral will also be the final result.
When we look at projects, it is difficult for us to judge the number of users in the crypto world, but we are able to judge:
1. Whether the project party can have a star IP. Without star IP, the cold start effect of many long-tail musicians alone will be very bad (that is, the NFT transaction volume will be very low)
2. When the project party has a star IP, do they understand Web 3 or not. If you take the music model of Web 2 and apply it to Web 3, there is a high probability of failure.
3. Whether the economic model of the project party is reasonable. At present, the economic models of most projects are not particularly outstanding. The empowerment of tokens is governance or mining in addition to pledge, and few transactions can be paid or very popular. The winning part can be transaction payment, some tokens required for listening to songs, platform income dividends, various rewards, etc.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/web-3-musics-experimental-innovation-of-the-traditional-music-industry-chain/
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