A Guide to the Benefits and Risks

The incentives of being a music fan have been waning through the years. Ticket costs continue to skyrocket because of monopolized ticket marketplaces, and streaming costs are also rising. Because of this, attendees are discovering it much less rewarding to point out up for his or her favourite acts, and artists are having an more and more troublesome time mustering connections with their core audiences.

All in all, the music economic system feels extremely constricted.

That is exactly why creators and shoppers have been turning to the blockchain. It’s a approach to circumvent a number of the worst options of the music trade. Now, a number of the NFT-enabled options conceived over the previous few years have began trickling outward to the mainstream.

From NFT ticketing to decentralized group constructing, all kinds of token-gated endeavors have made their approach to the lots. Now, token-gated streaming has reached mainstream audiences because of Spotify’s current product updates.

What ought to followers and the normal music trade count on from the rise of token-gated streaming? What are the advantages and dangers? We turned to trade specialists and holders of the Now Pass — the entry go to the Now Community, the inspiration for all of our initiatives to construct the way forward for tokenized media and pioneer a community-centric media mannequin — for enter. 

However first, what’s token-gating?

Token-gating, in essence, is any occasion the place a blockchain token — usually an NFT, however it could possibly be one other type of crypto token — is used as an entry go. Token-gating has change into well-liked in Web3 as a result of it’s a technique of rapidly and simply limiting entry to content material, occasions, collections, Discord servers, and extra to those that maintain a selected token.

Though token-gating is as a rule used for allow-listing functions, it has not too long ago change into a software for creators within the Web3 music house to create a layer of exclusivity surrounding their content material. For instance, Spottie WiFi token-gated a number of of his music NFT drops, and Daniel Allan and Reo Cragun launched token-gated sample packs. At this level, in terms of streaming, token-gated success tales abound.

And now, the legacy streaming trade has caught on.

Spotify and token-gated streaming

In February of 2023, Spotify began testing “token-enabled playlists,” which let holders of particular NFTs use their wallets to entry curated music. For the primary a part of the rollout, Android customers in choose international locations gained entry to the function in the event that they held NFTs from Fluf, Moonbirds, Kingship, or Overlord.

Talking to nft now concerning the rise of token-gated streaming, Thomas Fiss, Head of Music NFTs on the eco-conscious NFT music platform OneOf, mentioned he sees Spotify’s curiosity in token-gating as a web optimistic for Web3.

“When huge gamers like Spotify begin exploring with cryptocurrency-based fashions, it’s good for all of us within the house and for mass adoption basically,” mentioned Fiss. “On the core, we’re speaking about attribution of streaming (engagement), and artists and labels being given extra transparency to their followers’ listening behaviors, and rewarding them for it.”

From the angle of a basic NFT fanatic, extra distinguished manufacturers staking their declare on the blockchain absolutely looks like a win for the NFT group. But, as promising as these kind of activations might sound, token-gating nonetheless has a approach to go earlier than established gamers like Spotify place their bets.

“At Spotify, we routinely conduct a lot of exams in an effort to enhance our consumer expertise. A few of these find yourself paving the trail for our broader consumer expertise, and others serve solely as necessary learnings,” a Spotify spokesperson mentioned in a press release concerning the platform’s token-gating options. “We’ve got no additional information to share on future plans at the moment,” they added.

However whereas Spotify might have extra time earlier than committing to Web3, others have already seen the promise of token-gating and have pivoted their platform and merchandise accordingly.

Lower than a month after Spotify’s announcement, Audius went reside with NFT-gating features that enable artists to make songs, mixes, stems, and extra accessible to followers who maintain a selected NFT.

In an interview with nft now, Audius CEO and Co-Founder Roneil Rumburg mentioned he understands the real worth of token-gating streaming for artists and followers. “The chance to establish your most extremely engaged followers, after which type of hyper serve them — present them an expertise that they’ll’t in any other case entry with different artists — is a good way to drive extra buying exercise and engagement from these followers,” he mentioned.

“There’s numerous precedent there. However what we’re actually excited for is the chance that artists have to interact these followers, give them distinctive experiences that maintain them coming again, after which have the ability to reinforce that fandom by advantages,” he added.

And the worth is?

Rumburg’s statements hit on the coronary heart of what’s, arguably, essentially the most important benefit of token-gating. Though it may well assist improve monetary rewards for platforms and artists, Rumburg notes that the actual profit is giving customers novel experiences — and artists novel use instances — that they’ll’t get anyplace else.

“There’s a perspective of rising the pie vs. higher allocating the pie that already exists. The place I believe the [traditional music] trade will get involved is after they see issues which can be cannibalizing what they’ve — simply shuffling the chances of the present pie,” Rumburg mentioned.

“I believe Web3 applied sciences are, as a basic rule, rising the pie. The utilization that’s occurring on Audius shouldn’t be competing with, and even actually associated to, the exercise that’s occurring on the key DSPs […] The informal listener is somebody that must be served, too, proper? It’s simply not who we’re,” he clarified.

Likewise, Fiss famous that essentially the most important benefits of token-gated music lie in its means to supply new types of engagement and connection.

“Labels, managers, and artists can type deeper insights into passive vs. lively followers and deploy retargeting techniques to activate these audiences accordingly. Artists can reward followers which can be shifting the needle whereas persevering with to nurture any passive followers,” he mentioned. “The gist right here is that music entrepreneurs have to take away the stigma round ‘Web3’ being a walled backyard and refocus consideration on the insights and alternatives the expertise supplies to complement legacy information and advertising and marketing techniques,” Fiss added.

The dangers of token-gated streaming

Nonetheless, it appears not everybody is bought on token-gated streaming. Even these throughout the Web3 music house are on the fence concerning the options. As famous by Sean Bonner, Now Move Holder and member of 8tari, token-gating, in its present type, appears at instances to nearly be a step backward.

“The promise of Web3 isn’t stopping individuals from having fun with your work, however somewhat to let anybody take pleasure in it and make possession the factor that’s uncommon,” Bonner wrote within the nft now Discord. “With music, possession may be restricted and include particular perks whereas nonetheless letting anybody pay attention. Requiring individuals to purchase one thing earlier than they hear it seems like a good way to lose followers. Higher to let individuals fall in love along with your artwork after which purchase in for extra,” he added.

Requiring individuals to purchase one thing earlier than they hear it seems like a good way to lose followers.

Sean Bonner

This sentiment was echoed by Now Move holder and sound/multimedia artist Michał Milczarek, who highlighted the upside of music NFTs as enhancing the fan-artist relationship, but in addition the potential disadvantages of token-gating as a part of the Web3 music ecosystem.

“Fashionable listeners reside on the earth of Spotify. Music must be straightforward to get and at no cost. For many individuals supporting artists on Bandcamp, [tokenized music] is just too ‘sophisticated’ or ‘costly,’” Milczarek wrote within the nft now Discord. “On this context, utilizing NFT platforms is even harder, contemplating academic issues and most of the people picture of blockchain and Web3,” he continued.

What does the long run maintain?

Though there’s nonetheless some debate about whether or not there’s extra threat or reward in terms of token-gated streaming, that’s the entire level of Web3.

Finally, token-gating permits artists to dictate how their mental property is unfold and who can work together with it or acquire it. Creators are free to make use of or ignore the instruments, which is a win for sovereignty general.

That mentioned, ultimately, these instruments might not sit effectively with lots of the world’s largest platforms, as their present fashions aren’t primarily based on constructing area of interest audiences and communities. As a substitute, platforms like Spotify depend on as many customers participating as attainable. So it stays to be seen whether or not or not the legacy music trade will likely be prepared to vary. But when the instruments meet artist and client wants, then they could not want legacy manufacturers to assist them safe widespread adoption anyhow.

Editor’s word: Need to share your ideas and insights with nft now readers? We’re working to construct a extra community-centric media mannequin. Head over to the Now Pass website to be taught extra.