When people think of NFTs, the first use case most of them likely think of is visual art. Some define them as unique cryptographic tokens that exist on a blockchain and cannot be replicated. and can represent real-world items like artwork and real estate.
The fact that digital art can be viewed and replicated endlessly online has led to some confusion for plenty of consumers about what exactly they’re buying, however. From Beeple’s $69 million sale of a digital collage at Christie’s to the Bored Apes Yacht Club collection, visual art has seemed to be most prominent use case for NFTs due to close similarities with traditional fine art investing.
“The idea that someone can just say, ‘hey, this is mine now, I just saved the image to my laptop, and I’m using it as my background,’ — it seems really obvious. But then when there’s a real, true owner, and you can validate that on-chain, it makes that other person look kind of foolish, at least within the web3 community,” DJ and NFT art collector Justin Blau recently explained to the media in an interview.
Blau, who is better known by his stage name, 3LAU, co-founded Royal, a startup that uses NFTs to allow users to buy “shares” of songs through its marketplace and earn royalties as those songs gain popularity. The company raised a $ 55 M Series A round from Andreessen Horowitz’s crypto investment arm last November, less than three months after adding $ 16 million in seed funding to its kitty.
NFTs sold on Royal represent two things, Blau said. First, they represent the intrinsic value of copyright ownership, and second, the emotional value of owning something scarce that’s associated with your favorite artist. Blau sees utility in use cases for NFTs beyond the visual art world but said he doesn’t think the same form factor and manifestation for those NFTs will apply to every different form of media.
Music, for example, is invisible, so it wouldn’t make sense for music NFTs to be applied the same way as NFTs for visual art, he said.
“It’s not a commoditized type of asset. The only way people have collected music in the past is with CDs and vinyl, and right now with a streaming service. Everyone’s music collection is theoretically the same, right? You pay the subscription, you get access to everything,” Blau said.
That’s why at Royal, Blau and his co-founder JD Ross (who also co-founded homebuying startup Opendoor) have chosen to apply NFTs to the copyrights behind songs. The copyright of a song is what’s scarce, not the audio itself, which can be streamed by any user, Blau explained.
Streaming income represents about 84% of all income generated by music, he added. The reason artists receive so little of that income, in Blau’s view, is because of middlemen like record labels taking a cut, not because streaming itself is not lucrative.
Royal’s platform will eventually allow digital asset holders to be able to engage directly with artists and access exclusive perks, such as token-gated shows, he concluded.