Is the streaming giant too late for the NFT party?
Spotify has begun its foray into the crypto market, offering users the opportunity to acquire exclusive playlists that can only be unlocked through the ownership of a “non-fungible token” (or NFT) – a unique digital asset that can be sold or traded, but never copied. The move is in line with Spotify’s mantra of always being at the forefront of technology and music, and has been well-received in NFT communities such as Kingship, Fluf, Moonbird and Overlord, with many believing the move could fix the tool problem that web3 users believe has plagued the industry. That said, the latest development has barely been noticed by Spotify’s regular users, who seem to have a lot to learn about the emerging cryptocurrency.
In fact, BanklessTimes.com can reveal that 63% of Spotify users in the US openly admit to not understanding anything about cryptocurrencies, and this figure extends to 68% of Spotify account holders in the UK. These figures come from a YouGov study targeting Spotify users with Android devices in the UK and US – the countries selected to benefit from Spotify’s first NFT pilot alongside Germany and Australia. Currently, users are allowed to preview certain artists’ NFTs when they go to their profile page, and consumers who want to learn more about or purchase an NFT will be linked to an external NFT page. In the future, however, the process will be streamlined and users will be able to link their crypto wallet to their Spotify account.
More than half of Spotify’s US and UK users don’t trust cryptocurrency
With more than half of Spotify users in the US (53%) fearing that cryptocurrencies cannot be trusted, and even greater mistrust in the UK (59%), is Spotify wise to implement such a move? On one point of view, it can be said that the general public is largely uneducated about NFTs, and that attitudes will begin to change as time goes on. There may be something to this, as 42% of the UK public freely admit they have never even heard of an NFT, and while 34% of the US population may have heard of the term, only 12% are able to to explain what it means. However, it appears that education doesn’t necessarily correlate with trust, due to those who know what an NFT is, a disturbing 27% said they would feel much less favorable towards a company that started offering cryptoassets.
Flashy branding has resulted in disdain for NFTs
There therefore appears to be a certain disdain attached to NFTs, and perhaps some of this stems from an oversaturated market, with many brands including Burberry, Playboy and Louis Vuitton eager to jump on the bandwagon, but ultimately taking the mistake of launching low-value, high-volume tokens associated with anything more than an image.
Playboy recently reported a $4.9 million loss on its NFT project, which started life during the NFT boom of 2021. This was driven in part by volatility in the value of the underlying cryptocurrency, Ethereum, with the market price fluctuating from a low of $964 to a high of $3,813 during 2022, but a fall in interest will have contributed to the fall. While Google Trends showed increasing interest in NFTs during 2021, worldwide searches for this term peaked in January 2022 and have been on a steady decline since then, falling by 92% year-to-date. Interest has not been this low since the pre-hype levels of February 2021.
NFTs are largely driven by hype
One of the difficulties with NFTs is that the market is highly speculative and driven by hype rather than intrinsic value. A good example is the Bored Ape Yacht Club project, which gave members access to a secret club based on the purchase of a comic, and which increased in popularity when celebrities such as Eminem and Justin Bieber started buying Bored Apes. But while Eminem may have paid $460,000 for his computer-generated image of a monkey, the floor price today is just $116,000, leaving many frustrated that their investment is simply not paying off.
Hype isn’t necessarily a bad thing in the music business, and the hype surrounding NFTs has helped launch the careers of some previously unknown artists. In 2013 MoRuf, a Nigerian-American recording artist gained underground success with his project Shades of Moobut it wasn’t until he started using the Web3 space in 2022 to launch his single Canal Street that he really took off, scoring a collaboration with Snoop Dogg. Similar luck has befallen Sammy Arriaga, a Cuban-American country artist who thought his music career was over after being eliminated on season 10 of American Idol and subsequently dropped by Sony Records. Less than two months after discovering Web3, his METAGIRL digital hearts brought in more than $250,000 in music NFTs. Sammy even told Business Insider that Web3 is the best thing that has happened to his music career so far.
Bankless Times CEO Jonathan Merry feels that while Spotify is late to the party, there is still potential for NFTs to find their niche.
Despite some of the hesitancy mentioned earlier in this article, a significant minority is already on board with cryptocurrency, with 31% of US respondents and 27% of Spotify Android users in the UK believing it to be the future of online transactions. It seems that music could very well be a breakout application, and while songwriters make 50% of radio revenue, they only make 15% from streaming services like Spotify, so there’s definitely a need for artists to think more about growing their revenue. Before the pandemic, touring was seen as one of the main ways artists could make money, but NFTs could allow musicians to supplement their income while bypassing the array of label, distributor and publisher rights and selling directly to their fans.
Musicians are beginning to see the benefits of NFTS
It seems artists are starting to catch on to the benefits of NFTs, with Kings of Leon recently selling a $1.4 million batch and Grimes selling nearly $6 million worth of NFTs in 20 minutes. But with only one in six Americans (16%) expressing an interest in owning an NFT (a number down 8 percentage points from last year), it seems the public can be convinced of their benefits. Even among the group of consumers who classified themselves as familiar with NFTs, over half (55%) believe it will be less popular in 5 years than today, and such impressions do not bode well for investments.
It seems the real problem with NFTs is the price, and long gone are the days when anyone – let alone a regular member of the public – would be prepared to pay almost $500,000 for a picture of a cartoon monkey. Consumers are now less willing to pay for NFTs, with over two in three (69%) saying they would not be prepared to pay more than $5 for one, up from 60% in Q2 2022. In Q1 2023, only 27% of consumers would be willing to pay more than $5 for an NFT, which is down a whopping 10% from 37% from Q2 2022.
With Spotify currently paying artists three times less than they receive in radio revenue, it’s not hard to foresee the streaming giant seeking to extract significant profits from NFTs that, ironically, have worked so well in the past to put profits back into artists’ pockets . and allows them to interact directly with their fan base. With the corporate middleman added back into the equation, Spotify users will be wary of the future of NFTs.
