Dollar One of Sale One: How Independent Musicians Are Rewriting the Record Industry (part 2)
by MacEwen Patterson, Gauss CBDO
I recently wrote (in part 1 of this article) about the traditional structure of recording contracts and how difficult it is for recording artists to thrive financially under those arrangements. Here we’ll look at new financial models artists can strike to put themselves in a better position.
In recent years, many recording artists have sought alternative distribution models that allow them to retain more control over their earnings, bypassing some of the traditional deductions associated with recoupment, shrinkage, and breakage since digital products don’t have the same issues as physical ones. This shift has empowered artists to access their revenue more quickly and enjoy a fairer share of their music’s success.
While there have been historical challenges with traditional music industry contracts, some recording artists have been able to negotiate more artist-friendly deals or explore alternative arrangements that allow them to participate in the revenue from the very beginning of their music sales. Here are some examples of how recording artists can benefit from partnering with distributors or labels and participate in “dollar one of sale one”:
1. Distribution Deals:
- Recording artists can negotiate distribution deals with distribution companies or independent record labels. In such deals, the artist typically retains ownership of their music while the distributor handles the distribution and marketing. Artists receive a larger percentage of the revenue from music sales since they are not signed to a major label with significant overhead. This way, they can start earning from the first sale.
2. Digital Distribution Platforms:
- Many digital distribution platforms, such as TuneCore, DistroKid, and CD Baby, allow artists to upload and distribute their music directly to streaming services like Spotify, Apple Music, and Amazon Music. Artists retain control over their music and receive a significant portion of the revenue generated from streams and downloads, often from the first sale or stream.
3. Revenue-Sharing Streaming Models:
- Some streaming services offer revenue-sharing models that allow artists to earn a portion of the revenue based on their share of the total streams. While the per-stream payout may be small, artists can start earning from their music as soon as it’s available for streaming.
4. Crowdfunding and Fan Support:
- Artists can leverage crowdfunding platforms like Kickstarter and Patreon to secure funding directly from their fans. This way, they can cover recording and production costs upfront and retain control over their music. Fan support models enable artists to participate in the revenue generated by their music sales or other creative projects immediately.
5. Independent Labels with Artist-Friendly Terms:
- Some independent record labels offer more equitable contracts that prioritize the artist’s financial well-being. These labels may provide advances, but they are often recouped more quickly, allowing artists to start earning a fair share of their music’s revenue sooner.
6. Licensing and Sync Opportunities:
- Artists can explore licensing and sync opportunities for their music in films, TV shows, commercials, and video games. These deals can provide upfront payments and royalties, enabling artists to benefit from their music’s use from day one.
7. Direct-to-Fan Sales:
- Artists can sell their music directly to fans through their websites or at live shows. This allows them to retain a higher percentage of the revenue and start earning immediately without going through traditional distribution channels.
By considering these examples and exploring various distribution and revenue-sharing models, recording artists can find ways to participate in the earnings from the very beginning of their music’s release, which can be more artist-friendly than traditional contracts with major labels.
More recently with the advent of blockchain, artists have the potential to partner with platforms to provide innovative solutions for releasing and managing their digital assets, ultimately helping them achieve greater financial stability.
Here’s how such a partnership could benefit recording artists:
1. NFT Music Releases:
- Blockchain can facilitate the distribution of NFTs (Non-Fungible Tokens) for music releases. Artists can tokenize their music albums, singles, or unique content as NFTs on the blockchain. This allows artists to retain ownership of their work while offering fans a unique and collectible way to support their favorite musicians.
2. Direct-to-Fan Engagement:
- The chain can enable direct engagement between artists and their fans through NFTs. Artists can sell limited edition NFTs that grant exclusive access to behind-the-scenes content, virtual meet-and-greets, or even future concert tickets. This provides artists with a new revenue stream and strengthens their connection with fans. It can also eliminate usurous third-party fees that are notorious in the industry.
3. Smart Contracts for Royalties:
- Smart contract capabilities can be leveraged to automate royalty payments to artists. Smart contracts can be programmed to distribute a portion of the revenue generated from NFT sales, streaming, and merchandise directly to the artists in real-time. This ensures transparency and immediate compensation, eliminating delays associated with traditional royalty collection processes.
4. Royalty Tracking and Transparency:
- Blockchain technology offers transparency and traceability for all transactions. Artists can easily track the sales and distribution of their NFTs and music on the blockchain. This transparency builds trust and ensures that artists receive fair compensation for their work.
5. Collaborations and Remixes:
- Blockchain can enable secure and transparent collaborations between artists. Smart contracts can govern revenue-sharing agreements for collaborative projects and remixes, ensuring that all parties receive their fair share of the earnings.
6. Digital Merchandise and Collectibles:
- Beyond music, artists can tokenize their merchandise and digital collectibles as NFTs on the blockchain. This opens up opportunities for artists to monetize their brand, artwork, and fan engagement in unique ways.
7. Financial Stability and Diversification:
- By leveraging blockchain technology, artists can diversify their revenue streams. They are not solely reliant on music sales but can also generate income through NFT sales, collaborations, and engagement with their fan community. This diversification can lead to greater financial stability.
8. Global Reach:
- Blockchains allow artists to reach a global audience without the need for intermediaries. This can result in broader exposure and revenue potential for artists.
Why aren’t more artists utilizing this technology to build their audience and grow their revenue?
“Blockchain has a bad reputation in most people’s minds, and rightly so,” shares Gauss CEO Gary Paull Jr., “it’s been riddled with fakes, dupes, and scams. The minute an artist puts their NFT on a public chain it gets copied, damaging the reputation of the artist and injuring their fan base.”
Gauss is a curated layer 1 determined to bring legitimacy and reliability to the space. You can read more about Gary’s take on that in an article he recently posted. Curation is important because it means every project launching on the platform has to meet criteria and standards that protect the end-user from getting scammed.
The Gauss platform takes their partnerships further by providing a network of service-providers who can support the business needs of the artist, from design and development to marketing and back-office.
Ultimately, the platform plans to hold bad actors accountable on and off their ecosystem.
‘In a word: yes! The meteoric rise of the popularity of NFTs and the metaverse in 2020 and 2021 has made the market attractive for scammers who nab unsuspecting victims through fraud and plagiarisms,” Binance wrote to their blog in December of 2022.
Gauss is geared up for the legal battles that may arise on other platforms as theirs becomes increasingly popular and populated by in-demand artists. If and when fakes of Gauss powered NFTs appear on another public chain, Gauss will take legal action.
How this technology can change the music industry, forever!
Let’s use an example. An artist who has recorded some material they want to share can be vetted by Gauss and start marketing their album as an NFT. They might need to put a bit of their own money into the development of their smart contract, album recording, art, and marketing, but the moment their first album sells, they’re earning 95% of that sale and only breaking off 5% to Gauss.
Say for grins the artist decides to use digital marketing to drive traffic to their NFT/album sale. They might spend up to $3 acquiring a customer while their album sells for $10 (retail, not wholesale). They’re out of pocket $3.50 per album from record 1. In part 1 of this article we looked at how many albums an artist would have to sell to make back $20,000 (or just under).
In the traditional model it was over 400,000 units. In this model it’s just 3,077!
Even if they put $5,000 of their own money up for recording, smart-contract development, and art, they’d only need to sell 770 additional units to cover that cost bringing the total to just 3,847.
Selling less than 10% the number of units in this example as the previous yields the same financial result to the artist with them still owning the entire creation.
So you can see how much of a game changer this arrangement is for artists. And, they still own their masters (recordings) and their publishing (the intellectual property behind their music).
Plus, they have a direct relationship with their fans. Now they can engage more regularly with those fans to deliver variations on the list above.
Not only that, if a fan decides to sell that album on the secondary market, the artist has access to the new fan and receives a portion of that sale. The artist can use on-chain tools to manage royalties, manage licensing into television, films, and gaming, collaboration agreements with other artists, and event ticketing, merch, among many other things.
Part of the vision I hold as a business development primary here at Gauss is to empower more artists to be in charge of their entire career and start earning dollar one from sale one.
A big reason new media companies fold so quickly is they’re handing out advances to swaths of artists (who never expect to recoup) and not getting the traffic or traction to stay in business. It’s a waste of money for both parties really because the artist might get some pocket change but they don’t end up releasing to a broader audience or having a lasting impact in culture.
A partnership between Gauss and recording artists can provide innovative solutions for the music industry. We can empower artists with greater financial stability, transparency, and direct engagement with their fanbase through NFTs, smart contracts, and blockchain technology. This can be a transformative step towards a more artist-friendly and equitable music ecosystem.
