A guide to benefits and risks

The incentives to be a music fan have diminished over the years. Ticket prices continue to skyrocket thanks to monopolized ticket markets, and streaming prices are also rising. As a result, attendees find it less rewarding to turn up for their favorite acts, and artists find it increasingly difficult to forge connections with core audiences.

All in all, the music economy feels incredibly constricted.

This is precisely why creators and consumers have turned to the blockchain. It’s a way around some of the worst features of the music industry. Now, some of the NFT-enabled features developed over the past few years have begun to trickle out into the mainstream.

From NFT tickets to decentralized community building, a wide variety of token-gated endeavors have found their way to the masses. Now, token-gate streaming has reached mainstream audiences thanks to Spotify’s recent product updates.

What should fans and the traditional music industry expect from the rise of token-gate streaming? What are the benefits and risks? We reached out to industry experts and Now Pass holders—the access pass to the Now Network, the foundation of all our initiatives to build the future of tokenized media and pioneer a community-centric media model—for input.

But first, what is token gating?

Token gating is essentially any case where a blockchain token – often an NFT, but it can be another type of crypto token – is used as an access pass. Token gating has become popular in Web3 because it is a means of quickly and easily restricting access to content, events, collections, Discord servers and more to those who have a specific token.

Although token gating is more often than not used for permission purposes, it has recently become a tool for creators in the Web3 music space to create a layer of exclusivity around their content. For example, Spottie WiFi token-gated several of his music NFT fallsand Daniel Allan and Reo Cragun launched token-gated sample packs. At this point, when it comes to streaming, there are many success stories.

And now the older streaming industry has caught on.

Spotify and token-gated streaming

In February 2023, Spotify began testing “token-enabled playlists”, which allow holders of specific NFTs to use the wallet to access curated music. For the first part of the rollout, Android users in select countries gained access to the feature if they had NFTs from Fluf, Moonbirds, Kingship, or Overlord.

Speaking to nft now about the rise of token-gate streaming, Thomas FissHead of Music NFTs at eco-conscious NFT music platform OneOf, said he sees Spotify’s interest in token gating as a net positive for Web3.

“When big players like Spotify start exploring with cryptocurrency-based models, it’s good for all of us in the space and for mass adoption in general,” Fiss said. “At the core, we’re talking about streaming attribution (engagement), and artists and labels being given extra transparency into their fans’ listening behavior, and rewarding them for it.”

From the perspective of a general NFT enthusiast, more prominent brands betting on the blockchain seems like a win for the NFT community. Still, as promising as this type of activation may sound, token gating still has a ways to go before established players like Spotify place their bets.

“At Spotify, we routinely carry out a number of tests in an attempt to improve our user experience. “Some of these end up paving the way for our broader user experience, and others just serve as important learning,” a Spotify spokesperson said in a statement about the platform’s token-gating features. “We have no further news to share about future plans at this time,” they added.

But while Spotify may need more time to commit to Web3, others have already seen the promise of token gating and have changed their platform and products accordingly.

Less than a month after Spotify’s announcement, Audius went live with NFT street features that allow artists to make songs, mixes, strains and more available to fans holding a specific NFT.

In an interview with nft now, Audiu’s CEO and co-founder Roneil Rumburg said he understands the genuine value of token-gate streaming for artists and fans. “The ability to identify your most engaged fans, and then kind of hyper-serve them – give them an experience that they can’t otherwise access with other artists – is a great way to drive more buying activity and engagement from those fans,” he said.

“There is a lot of precedent there. But what we’re really excited about is the opportunity artists have to engage these fans, give them unique experiences that keep them coming back, and then be able to reinforce that fandom through benefits,” he added.

And the value is?

Rumburg’s statements strike at the heart of what is arguably the most important benefit of token gating. While that can help increase financial rewards for platforms and artists, Rumburg notes that the real benefit is giving users new experiences — and artists new use cases — that they can’t get anywhere else.

“There is a perspective on is growing the cake vs. better allocation of the pie that already exists. Where I think [traditional music] the industry gets concerned when they see things cannibalizing what they have — just mixing the percentages of the existing pie, Rumburg said.

“I think Web3 technologies, as a general rule, grow the pie. The usage happening at Audius doesn’t compete with, or really relate to, the activity happening at the big DSPs […] The casual listener is one who should be served as well, right? It’s just not who we are,” he clarified.

Similarly, Fiss noted that the main benefits of token-gated music lie in its ability to offer new forms of engagement and connection.

“Labels, managers and artists can form deeper insights into passive versus active fans and implement retargeting tactics to activate these audiences accordingly. Artists can reward fans who move the needle while continuing to nurture any passive fans,” he said. “The bottom line here is that music marketers need to remove the stigma surrounding ‘Web3’ as a walled garden and focus attention on the insights and opportunities the technology provides to supplement legacy data and marketing tactics,” Fiss added.

The risk of token-gated streaming

However, it doesn’t work everyone sold on token-gated streaming. Even those within the Web3 music space are on the fence about the features. As noted by Sean BonnerNow Pass Holder and member of 8 taritoken-gating, in its current form, seems almost a step backwards at times.

“The promise of Web3 isn’t stopping people from enjoying your work, but rather allowing anyone to enjoy it and taking ownership of what’s rare,” Bonner wrote in the nft now Discord. “With music, ownership can be limited and come with special benefits, while still allowing anyone to listen. Requiring people to buy something before they hear it feels like a great way to lose fans. Better to let people fall in love with your art and then buy in for more,” he added.

Requiring people to buy something before they hear it feels like a great way to lose fans.

Sean Bonner

This sentiment was echoed by the Now Pass holder and audio/multimedia artist Michał Milczarekwhich highlighted the upside of music NFTs improving the fan-artist relationship, but also the potential downsides of token gating as part of the Web3 music ecosystem.

“Modern listeners live in Spotify’s world. Music should be easy to get hold of and free. For many who support artists on Bandcamp, [tokenized music] is too ‘complicated’ or ‘expensive’,” Milczarek wrote in the nft now Discord. “In this context, it is even tougher to use NFT platforms, considering educational issues and the general image of blockchain and Web3,” he continued.

What does the future hold?

While there’s still some debate about whether there’s more risk or reward when it comes to token-gated streaming, that’s the whole point of Web3.

Ultimately, token-gating allows artists to dictate how their intellectual property is disseminated and who can interact with it or collect it. Creators are free to use or ignore the tools, which is a win for sovereignty in general.

That said, these tools may ultimately not be a good fit with many of the world’s largest platforms, as their current models are not based on building niche audiences and communities. Instead, platforms like Spotify rely on as many users engaging as possible. So it remains to be seen whether the legacy music industry will be willing to change. But if the tools meet the needs of artists and consumers, they may not need legacy brands to help them ensure widespread use anyway.

Editor’s note: Want to share your thoughts and insights with nft now readers? We are working to build a more community-centric media model. Head over to the Now Pass website to learn more.