They show the inexhaustible desire to improve technical progress: shellac, vinyl, cassettes, CDs, MP3s, streaming. Music has always sought new forms as a medium. The hype surrounding NFTs has recently made the industry sit up and take notice. Blockchain should open up new sales structures and new sales markets. Split royalties and licenses into tokens and trade them. The music industry is about to take another leap forward.
music in transition
Even though sales have recovered somewhat thanks to the cult of retro records, the digital sales market has been ahead of the physical for years. In the age of streaming, royalties are an increasingly important part of revenue opportunities in the music business. According to CISAC, the international umbrella organization of collecting societies, revenue from music licensing will rise to 9.6 billion euros in 2021. 5.8% more than the previous year.
And although the share of digital royalties has already increased by “28%”, CISAC attests “much more room for growth”. Especially with music creators, i.e. artists and performers. According to GEMA, the largest share, around three-quarters, of streaming revenue is retained by labels and platforms. License revenue is therefore not distributed. CISAC therefore calls for “emphasizing the value of creative creations in the digital market”. One way to do this is tokenization.
GEMA enters the tokenization sector
Using smart contracts, royalties can be mapped and traded through the blockchain and compensation can be transferred directly from them. Tokenization means the naming of assets, such as real estate, vintage cars, watches or music licenses, for a large number of (small) investors. The idea is a win-win situation: for artists who can sell rights directly and generate additional revenue. And for investors who can enter the market at affordable prices.
Gradually, the established music industry is also discovering this niche. For the first time, GEMA was the first collecting society in the world to announce the sale of a security token for music licensing. In cooperation with 360x Music AG, the licenses of film composer Hans Günter Wagener (auslandsjournal, Terra X) were tokenized and sold. A model that could do the trick.
“We will see how much the trend develops”
“For GEMA members, tokenization opens up the possibility for the first time to monetize their music independently and at the same time to be able to own 100% of the rights”, explains GEMA’s legal advisor, Dr. Tobias Holzmüller to BTC-ECHO. For several years, “a strong tendency to invest in musical rights has appeared”. Therefore, there must be “a transparent and direct business opportunity for music authors and publishers” at GEMA, says Holzmüller.
Will the works be symbolized more often in the future? “We will monitor the development strength of the trend”. According to Holzmüller, “in times of rising interest rates and tensions in the crypto community,” it will become clear “which use cases are sustainable and in demand.” The music industry is unlikely to ignore the opportunities of Web3: “It can already be said that the music industry is looking very closely at how Web3 and NFTs can be integrated as part of digitization.”
Creation of fair value
For Jan Denecke, CEO and co-founder of 360X Music AG, it is clear: “The tokenization of assets is a strong trend”. Blockchain technology allows “to make tradable assets that are not really tradable,” Denecke told BTC-ECHO. This applies in particular “to asset music as an alternative asset class”.
Ultimately, tokenization empowers everyone involved, says Denecke: “Rights holders in the music industry, such as labels, publishers, and artists retain their rights, while investors and, at In the future, fans can also participate in and benefit from the success of a specific IP.” As an “alternative asset class”, music is “generally only accessible to a few”. Tokenization now opens “access to alternative financing options” for a “middle class of rights holders.” Denecke reveals that further collaborations with GEMA are already planned for next year.
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