DOS_patos
Unverified Legion of Trill member
By now, you should have heard of non-fungible tokens (NFT) and the change they are driving in the art and music world.
The space is moving very rapidly, and economic models for scarce digital media are emerging. Musician Grimes has sold her art print for $6 million, DJ 3LAU sold out a crypto-digital music album for $11.6 million, Beeple’s NFTs are currently in auction for $3.5 million at art-house Christie’s while Nifty Gateway had a single one of his pieces go for over $6 million. Even more interesting is the impact on royalty models and intellectual property ownership.
People who understand modern media, like Mark Cuban and Gary Vaynerchuk, are also both in. We are not saying that we should just listen to influencers and blindly follow. For example, John McAfee was very … vocal … about promoting token offerings in 2017, and has now been charged with a $13 million fraud. But the core difference here is that McAfee was shilling projects for personal gain. In today’s cycle, industry participants are realizing the core change in market structure, and describing it to others. So let’s break down what that change really is.
Understanding the economic impact
We are over 20 years into the internet revolution. What is clear is there is not just one technological change, but multiple waves of transformation. Each carries with it a social and philosophical outcome.
We thought that open, endless access to the world’s media would be fantastic and freeing. That we would have an intellectual and scientific Renaissance as a result. And to some extent, that has indeed happened. But it has happened at deep cost.
First, let’s just describe the “it.”
(Lex Sokolin/ Fintech Footprint)
Starting with the chart on the right above, picture the Supply and Demand of music. You can use the same shorthand for other information, like books and newspapers. This is supply and demand in the physical world at the aggregate level for the industry. So you might sell 1 million CDs for $12.99, but only 500,000 CDs for $15.99. Based on those slopes and elasticities, some aggregate amount of production and commerce occurs.
Now we introduce Napster. The price of an individual CD or song goes to $0 for those who know how to use peer-to-peer file-sharing software. That averages out to non-$0 in the population, but we know a revenue pool collapse of 50% or more actually occurred. The shape of the supply curve is remade by “democratizing” technology. At the much lower price, we shift down the Demand curve to a much larger consumption of media. Today, that includes all of YouTube, TikTok, Spotify, and the long tail of services. There has been a massive demand side expansion along the curve from technology.
As a result, there has also been a collapse in artist revenue pools (i.e., quantity times price). We won’t belabor how little musicians earn from Spotify too much, but an illustration is provided below. You get $4 per 1,000 streams, and would need about half a million streams to make a living wage in the United States.
We also footnote that the digital rights management efforts of the 2000s was an effort by the music labels and the publishers to take back control of p2p distribution. Despite Metallica’s best framing, it was *not* a grassroots effort by the artists that directly benefited the creators. DRM was an attempt at preserving intermediation.
Now a lot of creators actually love the huge audiences they are able to access and are allergic to any sort of capitalist overlay for the remix culture of the internet. Part of being techno-literate over the last 20 years has meant being pro-file sharing. It has meant supporting the destruction of walled gardens, going open source and removing legal barriers, and even ending the concept of ownership.
Blockchain-based NFTs reintroduce the concept of property rights into digital media markets, and they do so through software-enforced capitalist logic. One can own art again. Is that good? Is that bad? That remains a philosophical question.
(Lex Sokolin/ Fintech Footprint)
The space is moving very rapidly, and economic models for scarce digital media are emerging. Musician Grimes has sold her art print for $6 million, DJ 3LAU sold out a crypto-digital music album for $11.6 million, Beeple’s NFTs are currently in auction for $3.5 million at art-house Christie’s while Nifty Gateway had a single one of his pieces go for over $6 million. Even more interesting is the impact on royalty models and intellectual property ownership.
The Eulerbeats project, which pairs algorithmically generated music with artworks, has driven nearly $2 million in royalties paid to owners of the original musical collectible, separate and apart from the initial issuance.Lex Sokolin, a CoinDesk columnist, is Global Fintech co-head at ConsenSys, a Brooklyn, N.Y.-based blockchain software company. The following is adapted from his Fintech Blueprint newsletter.
People who understand modern media, like Mark Cuban and Gary Vaynerchuk, are also both in. We are not saying that we should just listen to influencers and blindly follow. For example, John McAfee was very … vocal … about promoting token offerings in 2017, and has now been charged with a $13 million fraud. But the core difference here is that McAfee was shilling projects for personal gain. In today’s cycle, industry participants are realizing the core change in market structure, and describing it to others. So let’s break down what that change really is.
Understanding the economic impact
We are over 20 years into the internet revolution. What is clear is there is not just one technological change, but multiple waves of transformation. Each carries with it a social and philosophical outcome.
We thought that open, endless access to the world’s media would be fantastic and freeing. That we would have an intellectual and scientific Renaissance as a result. And to some extent, that has indeed happened. But it has happened at deep cost.
First, let’s just describe the “it.”
(Lex Sokolin/ Fintech Footprint)
Starting with the chart on the right above, picture the Supply and Demand of music. You can use the same shorthand for other information, like books and newspapers. This is supply and demand in the physical world at the aggregate level for the industry. So you might sell 1 million CDs for $12.99, but only 500,000 CDs for $15.99. Based on those slopes and elasticities, some aggregate amount of production and commerce occurs.
Now we introduce Napster. The price of an individual CD or song goes to $0 for those who know how to use peer-to-peer file-sharing software. That averages out to non-$0 in the population, but we know a revenue pool collapse of 50% or more actually occurred. The shape of the supply curve is remade by “democratizing” technology. At the much lower price, we shift down the Demand curve to a much larger consumption of media. Today, that includes all of YouTube, TikTok, Spotify, and the long tail of services. There has been a massive demand side expansion along the curve from technology.
As a result, there has also been a collapse in artist revenue pools (i.e., quantity times price). We won’t belabor how little musicians earn from Spotify too much, but an illustration is provided below. You get $4 per 1,000 streams, and would need about half a million streams to make a living wage in the United States.
We also footnote that the digital rights management efforts of the 2000s was an effort by the music labels and the publishers to take back control of p2p distribution. Despite Metallica’s best framing, it was *not* a grassroots effort by the artists that directly benefited the creators. DRM was an attempt at preserving intermediation.
Now a lot of creators actually love the huge audiences they are able to access and are allergic to any sort of capitalist overlay for the remix culture of the internet. Part of being techno-literate over the last 20 years has meant being pro-file sharing. It has meant supporting the destruction of walled gardens, going open source and removing legal barriers, and even ending the concept of ownership.
Blockchain-based NFTs reintroduce the concept of property rights into digital media markets, and they do so through software-enforced capitalist logic. One can own art again. Is that good? Is that bad? That remains a philosophical question.
(Lex Sokolin/ Fintech Footprint)