Why Do Artists Need Labels When They Have NFTs?

What are the big trends and what are the big areas of disagreement, Bloomberg reports. Lucas Show, who's based in l A, joins me to continue our coverage of crypto and the music industry. Upside with some of these newer technologies is that you can build communities and maybe give fans a sense of greater ownership. Lucas, what brings you

to New York. I'm seeing my family mostly out on the North Fork, a long island that sounds very pleasant and frankly, more fun than trying to convince people that they are misunderstanding and f t s and music, which is what we're going to try to do here. No No Crypto discussion on the North Fork. My relatives they're not up on it. Well, you can send them this

episode and change their minds. But you have spent quite a lot of time in l A and other places really getting into the nuts and bols of like the business of entertainment, and you've written and reports it on various stories around. Well, I would say like there's kind of a theme of how people are misunderstanding the infrastructure of creativity and the network that talent, whether that talent is a musician or a Hollywood actor, are tapping into. And I'd love for the purposes of this episode to

kind of start there. Right, people are hearing if t s are going to solve music full stop. What is your response to statements like that, Well, there's long simmering frustration resentment in the creative industries, but especially in music, that you have a small number of largely executives, largely white male executives, who control the industry and they have for for most of its existence, extracted a lot of

wealth from the work of other creative people. So you've had famous examples like a prince who referred to his kind of record contracts or referred himself as being a slave and a record contract and broke off on his own. On December thirty one, my publishing contract with Warner Chappo expired, thus emancipating the name I was given before birth Prince

from all long term restrictive documents. I will now go back to using my name instead of the symbol I adopted as a means to free myself from all undesirable relations. There's always been this desire for the artist to gain more power, and I think any way of doing so is probably for the net benefit of the creative class.

It would be great if we didn't only have a few gatekeepers who controlled everything, but decentralizing that power is much harder than people realize, and in some cases not good because there are benefits to having kind of infrastructure that most people use. And so I think there's a lot of promise in what cryptocurrencies and n f t s and the blockchain can do for music, but how it will actually be executed is still a little bit

fuzzy to me. We've seen some pretty big names get really excited about music, n f t s, music, and blockchain. I'm thinking here like Snoop Dogg, Steve Aoki, These are people who have created their own platforms or have argued for the importance of music n f t s. And then you have venture capitalist jumping on board as well, who are willing to pour a lot of money into these projects. They're willing to, you know, really back something that we're kind of still figuring out what exactly the

best use for blockchain is in music. So I want to ask you more specifically when you say benefits, like, what are some of those benefits? What do I not get if I, as a musician decide to release my latest album as an n f T on a blockchain. What am I missing out on? Well, for one, you're missing out on most of the audience. Majority of music listeners do not own cryptocurrency, do not use blockchain technology. Most of them probably don't know what an n f

T is if they were pressed to define it. And music is about ubiquity, you know, if you're Harry style is bad, Bunny du a leap. But one of these artists who has a new a new song out, you want it to be everywhere to the whole reason why they've never been able to quit a place like YouTube or now at TikTok places that don't pay them a lot of money, but introduce them to millions of fans.

So the upside with some of these newer technologies is that you can build communities and maybe give fans a sense of creator ownership in what you're doing, or in some cases literal ownership. But you are niche casting and not everyone wants to do that. Does this calculation really depend on if you are literally bad money versus if you're somebody who's up and coming. Yeah, I mean that.

That's definitely one of the reasons people are interested in it because music royalties are incredibly complex, and it is one area where the record labels and the music publishers wield a lot of control and have often signed young artists to rather extractive contracts that it takes them years

and in some cases decades to get out of. And so if there's a way for you to maybe use n f t s to raise money on your own and then use the blockchain as a more transparent or ledger of money, that in like in theory, sounds great to these artists who are used to getting strewed over by the record labels. Again, I think the challenge there is how many people are you going to get to

transact that way? Only the artists at the very very top of the industry make a lot of money from streaming on Spotify and Apple Music and YouTube, and nobody else makes money. Here's a clip from a recent episode that we did about decentralizing the music industry. It featured DJ and CEO of Royal Justin Blow. Justin have this to say about a common misconception in the music industry.

I think a lot of people are stuck in the illusion that music doesn't make money, um when in reality, music generates quite a bit of money, especially on streaming, which makes about of all recorded music income. It's just the people who are capturing that income are our institutions and the institutions that have owned rights over years and years and years and years of time, decades of time.

What if the world was a bit different, What if the public could actually own rights in their favorite artist music? And so, if you are kind of an early adopter that was able to kind of get a lot of attention for what you're doing, you can probably make some money.

The question then becomes how scalable is that. One of the things you've also highlighted is people have always paid for merch, right, they will go to a call certain then save the tickets and they'll buy the T shirt, or they'll buy the album cover, the vinyl printing, the rare vinyl printing. Like, a lot of music and a lot of fandom is about stuff, and some n f

t s are really trying to tap into that. So when we spoke to Hannah Miller in another episode, she mentioned, you know, she talks about the deal that the Chain Smokers did with Royal where if you got one of their n f t s you got access to merch. It strikes me that this is a more complex way to have access to merch. But are you hearing any musicians say, actually this is benefiting them more than just the T shirt sales. Well, the benefit has less to

do with the basics of the transaction. It is much easier if you're if you're an artist, it's much easier to have your label, your tour promoter, someone you hire take care of the merch. Right. That's what a lot of this debate over what role kind of crypto will play in the music industry comes down to, is how much as an artist do you want to control and dictate and if you want to take ownership of that process.

The odds are that if you execute properly, you will make more because there will be fewer middlemen, or those middle men will work for you. And you can also do so in a way with an an n f T or with regular merch where you're you're interacting more directly with your fans. The issue then becomes do you want to do that? There are a lot of forward thinking artists who do like that, and you know, musicians more so than almost any creative or sort of like

a small business, because everything stems from them. But the vast majority of artists over time have have ultimately chosen to have someone else do it for them right there, like I'm going to be in the studio the shirts or I want to I want to be in the studio and then after you know, two months of recording or whatever it is, I want to go hang out on a beach for a bit before I tour. I don't want to have to then spend a week or two weeks coming up with the merch plan for my tour.

One of the other ways that we're seeing music record companies artists interact with n f T s is through intellectual property. So you've reported on an n f T supergroup,

tell us more about us. There is an executive at at Universal Music Group, which is the biggest music company in the world, named Selin Joshua, who is very zealous about n f T s. I mean, all these record companies, you know, they tend to have these digital divisions where those folks are more forward thinking and looking to push the envelope, and the people who actually run the companies are more traditional because they see all the money just

coming in from streaming or record sales or whatever it is, and they give their their team a little bit of money or in some cases a lot of money to fool around. And so Selene has both. She bought an n f T for UMG, and she had this idea to make a group that consisted of several board ape n f T s. I assume listeners of this podcast know what that is, probably more so than I, and I think again, her idea was to try to facilitate

a community around this group. They did their kind of first mint and raised a bunch of money that way and have have built something of of a fan base for this group. Before they've put out any music. When she first told me about this, I was a little confused because I'm a luddite when it comes to all this, and I was like, okay, so, how like, who are the band? Is this like a gorilla's situation? And how are they going to make music? And what will the

visual aesthetic be? And so you know, she bristles at comparisons to the Gorillas, but I do think it's fairly apt, and that there will be people that you will literally yeah, but there will be there will be people you don't know behind the scenes making the music. The virtual manifestation of this group will be these ape characters that she has loaned or had worked out some commercial relationship with the owner of those nfs. I have several questions, but

first I will start with why. Oh, I mean, if you're one of these executives in a digital department and trying to find a way to put your company into crypto in some real way, I think this is a good experiment, I guess if you will, and it's it's a way to test and improve a lot of different theories that she and others have around how kind of music and cryptocurrencies can play together, and if you form

it in the guise of of a group. It's certainly a way to kind of get attention of fans, and it's you're putting something together in a way that your bosses understand, like Lucy and Graine who runs Universal Music Group, like he understands what a music group is. Yes, I would hope it seems fair and other than these being you know, I P licensed apes. I think it was like three board apes and a muse and ape and some musicians behind them who will hopefully be making interesting music.

Is there anything blockchain native about it? So is it that to listen to this you have to be on one of these decentralized music platforms or is it that too by the music you're going to be doing it on a decentralized music platform. They haven't shared a ton about the plans for that, in part because unless something has changed in the recent few turn I don't think

it has. There's no music yet, and they're really slow playing it because you know, when they first announced this group, it was near the zenith of cryptom November and obviously some of the optimism has faded, and so I think they're trying to properly navigate how best to position it.

They may have waited a little bit on the minting because it has now gone well, but they had to time it correctly, and so I think a lot of the rollout of this group will depend on what we're seeing in cryptocurrency markets, and of course on the creative side. Thank you, Lucas. We'll be right back if you are

in you know, artists discovery or whatever. Those kind of specialized functions of things are in the same way that sometimes like reporters just feel like they have to have a lot of fans on Twitter in order to get a job in media. Are you seeing any kind of similar metrics for up and coming arts? Are people saying, hey, it really helps if you have a crypto community or aboard eight or is this still like a fairly niche

as you said earlier, like a niche casting proposition. I think it's having a big following on social media is the baseline. If you were to talk to someone who works in artists in repertoire an R which sort of the scouting and creative side of a lot of these record labels, you know they are finding acts based on what data they're seeing in Spotify, streams, YouTube, and and a lot of that's given by a lot of that

is given by TikTok exactly. So one of the things that's different, I mean to go back to this idea of decentralization putting more power in the hands of the artists. One thing that has given artists more power is they do get a following on social media with their music often now before they get signed. It used to be or often that you'd have to get lucky and hope that some A and R would walk into some club.

You probably moved to a major city because that would give you a higher probability of that they find you, they sign you, and at that point you're nobody, and so they have the leverage. But now if you're big artist, if you're a little nos X who goes viral out of nowhere, you can dictate some of the terms because everybody wants you, because you have proof that people like you. And that has given artists more power to to dictate terms. I mean, it's probably not the majority of cases, but

it's it's a good number. I haven't heard a lot about music companies wanting people who have large followings in the crypto community. I'm sure there are some examples of it, but I think a lot of the big music companies are also a little wary. A lot of the promise of these new technologies has the potential to erode their power, and so their job is to figure out how they can kind of co opt it and not lose any

of that authority. I think this is a key point. So, just to go back what you said previously, you know, TikTok is a deeply centralized platform, right, and so so as Twitter is always Instagram. These are things that are run by companies that are themselves trying to make plays

in music, and they have relationships with labels. And part of what we've heard folks say is well, in a decentralized few, sure you could have fans that would be listening to one thing over here and something else over here. The centralization and scale are like opposite to each other, and it strikes me as something that would be a challenge for folks in A and R if they had to go to fifteen different places to look at stream

data rather than a handful. Yeah, I have a question on that note for you, though, Do you think so you brought up those social media platforms, right, And they started off by offering people a chance to speak too, smaller communities of fans. Right. It didn't seem like the big scale play at first, but then as people had success and really connected people that way, more and more users wanted to come onto Facebook, Instagram, TikTok, whatever. Exactly.

Do you see a similar pattern of playing out in the crypto space where it starts off as this decentralized notion and then you just end up having three or four or five companies that really run that part of the Internet. We are definitely seeing it in like the financial part of crypto, for better or for worse. But I think the point on the social media side is one there's like almost no fully functioning proof of concept.

Here is a desentralized social media platform based on crypto that is used by anybody who is not like a gigantic crypto nerd. Right now, I always think of, like, what are people in my group text talking about Nobody's like, Hey, I was on this one thing and I signed up with my wallets and it's great and you should all get there. Like it has not even hit the point at which those niche communities are bigger than micro micro niche.

What I do think will be interesting is if you do start to sort of realize network effects outside of the as you mentioned before, the tiny universe of people who do have a crypto wallets and are comfortable in these spaces, then we might be having a very different conversation. And as I think we know because we've you know,

we've we've been in and around technology and entertainment. Sometimes it's like slowly and then all at once, right, but right now it is so early and so slow that there just hasn't been a lot of evidence of it. To your question, it would be a drag if you're an an R to have to follow people along fifteen different platforms. The part that I think has the most potential to make things a little bit cleaner and easier

would be blockchain, because music royalties are so thorny. You know, you have artists who will wait months or years to get paid because everyone's trying to track it down. Now that's all potential. Right now, I think it's also muddled, and you'd have to get everyone on the same technology that it could be years before this gets adopted, if

it ever does. But that's certainly one where there needs to be a simplification of the payment process, and a lot of startups have come around and try to do it, and I don't think the industry was ready, and so then they had to change what they're doing. Right, So, in an ideal world, you would be able to track in real time on this public ledger how much money you made from like record sales in Japan and the concert tour that you did in Austin, and your merch yeah,

and your share. I mean, songwriting is the one where it gets really complicated because it gets split like oftentimes fifteen different ways. And so any time your song has listened to on any platform in the world, if you had a ledger that could immediately put that into your wallet, that would be would be much better than what happens right now. It's got it. Well, thank you so much for joining us today. I really appreciate it. Thanks for having you. Can find more of Lucas's reporting on the

Bloomberg Terminal, on Bloomberg dot com and on Twitter. He's at Lucas Underscore Shore. That's s H a W. On the next episode of Bloomberg Crypto. While the link between n f T prices and the prices of other tokens or coins like Ether and Solana is not always straightforward. It's true that non fungible tokens haven't been entirely spared

from the chill of this crypto winter. To better understand n f t s and where they stand in crypto's recent downturn, I'll be joined by Bloomberg Report Pratana Prakash. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net

or find us on Twitter. We're at Crypto. The supervising producer of Bloomberg Crypto is Vicky very Galina. Our senior producer is Janet Babin. Our producer is Sharon Burriro, associate producer is Ty Butler. Desta wonder At is our engineer. Original music by Leo Sidrin. I'm Stacy Marie Shmal. We'll be back tomorrow.