Year-end data provides more music NFTs at vinyl-like prices
3D rendering NFT or non-fungible token for music.
The NFT scene in the music industry has gone through some wild swings since its inception in late 2020. Music artists’ NFT activities have begun to coalesce over the past year, and as 2022 draws to a close, there’s finally enough music NFT data to tell tell us something about what they will look like in the coming year.
Water & Music is a company that researches Web3 technologies in the music industry. It maintains a database of music-related NFTs, available to Water & Music subscribers, which is by far the most authoritative source of music NFT data available anywhere. This database allows us to go beyond the hype and anecdotal data and look at how the market is developing. And at the end of 2022, it finally contains enough data to enable us to discern trends and suggest directions that the music NFT market will take in the coming year and beyond.
An NFT is a record of the purchase of something, often, but not necessarily, a digital resource. So what is a music NFT? Although artists have stamped NFTs on such things as stage props (Katy Perry), guitars (John Lennon), and concert experiences (various artists), the usual configuration is an audio file with an accompanying piece of digital visual art. Visual art components are often “generative”, meaning they have an AI component that dynamically creates or adapts the artwork so that it’s more than just a bunch of bits.
Water & Music’s data covers nearly 5,000 NFT campaigns since June 2020, resulting in a total of 2.1 million NFTs sold (not counting resale). The 2021 data reflects that it was a year of massive hype and experimentation. From February to April there were large increases in both activity and revenue from music NFTs, followed by equally steep declines throughout the summer months. Prices for individual NFTs ranged widely from $1 (for “When It’s Dark” by Canadian rapper Tory Lanez) to over $1 million (for a work by electronic music artist 3LAU). The number of NFTs in a campaign ranged from one to one million (for “When It’s Dark”). Even monthly median prices fluctuated wildly, for example from $2 to over $2,000 and then down to $5 between August and December of last year. It is impossible to draw any conclusions from such wild, erratic activity.
2022 has been a different story, as the market has begun to converge. This chart shows the monthly median prices and unit volumes of music NFTs since January:
Music NFT monthly unit volumes and median sales prices, 2022. Source: Water and music.
As the chart shows, the monthly median price of music NFTs has plunged from over $1,100 in January to less than $50 in November. One reason the median price has fallen so much has to do with the so-called gas fees that platforms charge to mint NFTs on blockchains like Ethereum
This means that minting NFTs at lower price points makes increasing sense; it is not practical to create an NFT at a price of $25 when the fees add another $100 on top. This suggests that the November median sale price of $49 is much more indicative of the true market value—that is, the public perception of value—of music NFTs than the $1,151 figure from January. As gas fees (and other NFT transaction fees) continue to drop, the prices of NFT music will also continue to drop.
Therefore, it is likely that the prices of NFT music will end up in the price range of vinyl LPs, ie in the $20-30 range. NFTs are meant to be digital simulacra of physical objects that can be owned and resold, and vinyl has emerged as the most popular type of physical music item. The vinyl analogy has not been lost on the music industry: for example, Warner Music Group recently announced a “Virtual Vinyl” campaign of music NFTs on the Polygon blockchain that will launch next month.
The chart above suggests waning interest in music NFTs. Sales volumes still vary, but they end the year at less than 10,000 per month. (The September 2022 figure is an outlier, attributable to music NFT platform SAN Sound’s drop of 10,000 free NFTs during that month.) Total monthly revenue from music NFTs has hovered around $1 million since August and was only $300,000 in November.
These numbers are microscopic in music industry terms; the commercial impact of music NFTs is orders of magnitude less than their hype. By comparison, mid-year RIAA sales figures for 2022 show that vinyl sales are poised to reach around $100 million per month, with volumes approaching 4 million units, by the end of the year. In other words, the music NFT sales constitute a rounding error on the vinyl market, which in itself amounts to approx. 7% of the total recorded music market.
Other data from Water & Music’s database shows that something else is going on. This chart shows the number of artists who have minted NFTs each month, from the beginning of 2021 to last month, and the total number of NFT campaigns by those artists.
Monthly totals of music NFT promotions and artists, January 2021 to November 2022. Source: Vann … [+]
The chart shows peaks in March and April 2021. These corresponded to peaks in NFT revenue from music around that time: Total revenue in March exceeded $27 million. These peaks show that a small number of artists marked a lot of NFTs. But even as revenue declined toward the end of 2021 — collapsing to less than $2 million in June — more artists began experimenting with NFTs. December 2021 was the peak month: over 200 artists minted NFTs, and monthly earnings rose up to $5 million then. Minting activity has decreased steadily since the start of this year. But it started to pick up again around July and August and has been growing ever since.
Growth in musical artists’ NFT activity is likely to continue in the coming year, as tools and services make it easier to mint NFTs, fees continue to drop, and the content of NFT packages continues to converge into experiences that don’t just resonate with fans, but also separate from other music experiences (streaming, vinyl, MP3 downloads, etc.). Vinyl should serve as a familiar reference point for some time before new approaches to NFTs in music – such as those based on experiences as well as digital assets – emerge. In other words, we’re likely to see NFTs become a slight parallel to the vinyl market—think box sets or other deluxe packages—over the coming year. What happens after that is anyone’s guess.
