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This slide deck is meant to serve as an abridged version of a longform analysis of 2021 music NFT sales that the Water & Music community conducted throughout April 2022.

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You can access the full article — which includes a much more in-depth discussion of case studies, NFT utility, and sales trends beyond what is in this deck — by clicking here.

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The underlying sales data that informed our analysis is available in our music/Web3 dashboard, which is available exclusively to Water & Music members.

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Contributors

👑 🧐 🛠️ 🪣 Brooke Jackson

🧐 🪣 Tony Rovello, Chrissy Greco, Brodie Conley, Lindsey Lonadier

🪣 Cosmin Gafta, Ehren Hanson, Erik Kim, Andres Botero, JHennyArt, Thomas Vieira, Nishant Gairola

🧐 Kristin Juel, Rob Campanell

🛠️ Brandon Landowski, Christina Calio, Cherie Hu

🎨 Ana Carolina

🙌 Mary Maguire, Cathleen Yu, Scott Korchinski a.k.a. HOUNDTRACK

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👑 project lead

🧐 writer/analyst

🛠️ article/deck editor

🪣 data researcher (backfill project)

🎨 visual designer

🙌 other contributors

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📖 Summary

We tracked ~1,500 NFT drops throughout 2021, representing more than $86M in primary sales. These overall sales spiked early in 2021, cooled down in the summer, and then rose strongly in Q4.

  • [LABELS] Indie artists accounted for the majority (64%) of primary music NFT sales.
  • [GENRES] The most popular genre by share of primary sales revenue was electronic (65%), followed by hip-hop (19%).
  • [PRICING] Average music NFT pricing remains expensive, but has fallen over time. Between February and December 2021, the average price per music NFT fell by 46%, from $18.8K to $10.2K per unit; the median fell by 27% over the same time frame, from $1,000 to $825 per unit.
  • [PLATFORMS] Marketplace competition is heating up. Early in the year, Nifty Gateway dominated with over 60% share of primary music NFT revenue. By the end of the year, the leader (OpenSea) had only 28% share of primary sales revenue, facing competition from many new platforms like Sound, Pianity, and Nina.
  • [PROTOCOLS] Ethereum claimed only ~50% share of number of music NFT drops in H2, as alternatives like Tezos, Solana, and Polygon garnered more adoption.
  • [UTILITY] Artists continue to experiment with different forms of utility for NFTs, like royalty shares, usage rights, NFT splits, live music access, and community-building.

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Table of contents

Click to jump straight to whichever section you’d like

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Background + context

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📈 Our Music/Web3 Dashboard

  • At W&M, we’ve been tracking music NFT drops since summer 2020, in a members-only database updated weekly
  • Not exhaustive, but (we believe) the most comprehensive view of music NFT activity that exists in the world today
  • Cited in Bloomberg, Fortune, CNBC, Forbes, Billboard, Rolling Stone, Messari, NFT Now, and many other publications
  • Go-to resource for some of the world’s top venture capital firms, record labels, and artist-management companies to gain crucial market context in an otherwise noisy information landscape

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We last published a music NFT market deck in April 2021; the market has changed dramatically since then, with at least 20 new music NFT platforms launching in the second half of 2021 (including those pictured above)

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At the same time, we ourselves at W&M have since embarked on our journey into becoming a DAO for collaborative research — going through the Seed Club accelerator, launching our $STREAM token, and publishing two collaborative reports on the state of music and Web3 (i.e. Season 1 and Season 1.5), all in the last eight months

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As NFTs continue to pervade the mainstream discourse, we thought now would be a good time to examine what we learned from music NFT sales in 2021, using our new collaborative capabilities as a DAO to paint a more nuanced picture of the market and do the long tail proper justice.

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Scope + methodology

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WTF is a “music NFT”?

We define a “music NFT” as an NFT that satisfies any of the following criteria:

  • Sold directly by an artist or music brand (e.g., Vérité, Billboard)
  • Features cited musical/audio contributions from a recording artist (e.g., The Dreamers)
  • Tied inherently to an artist or music brand in its perceived value (e.g., Leon Bridges / Wrangler, Nas on Royal)
  • Revolves around music or music culture as its core theme or value proposition to collectors (e.g., SpeakerHeads)
  • Released on music-specific NFT platforms (e.g., Royal, Catalog)

This is perhaps a more liberal interpretation of “music NFT” than those at other research organizations. Namely, in our view, an NFT does not have to contain audio to be related to music.

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🔨 Methodology

Phase I: Tracking (Sep 2020–present)

Our core research team has been manually tracking and logging music NFT drops on a weekly basis from multiple sources, including:

  • Automated newsfeeds and alerts
  • Twitter announcements
  • W&M Discord server discussions
  • General desk research of NFT marketplaces
  • Direct data feeds from music NFT platforms

💱 To capture sales data, we use a historical ETH-USD exchange rate to account for volatility, and calculate USD equivalents as close to the mint/sale date as possible.

Artists’ genre and label status are compiled from sources including:

  • Artist websites
  • Streaming sources (e.g. Spotify, Chartmetric)
  • Industry databases (e.g. Rostr)
  • Official music metadata prodivers (e.g. Gracenote)
  • Crowdsourced metadata resources (e.g. MusicBrainz)

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🔨 Methodology

Phase II: Backfilling (Apr 1–Apr 18, 2022)

A major motivation to pursue this collaborative project was to involve our community more in capturing the long tail of music NFT drops, especially ones that our core team may have missed throughout 2021.

Over the course of 2–3 weeks, over a dozen members of our community helped update sales information across hundreds of NFT collections, including:

  • Backfilling our database with new information on missing drops
  • Updating information on the collections that were still for sale at the time of first recording

The result: 300 records from 2021 updated or added to the database — ⬆️ 30% increase in total number of drops accurately represented

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🔨 Methodology

Phase III: Exploratory analysis and synthesis (Apr 19–May 5, 2022)

We spent the final two weeks of this collaborative project embarking on two different kinds of analysis:

🔢 Quantitative —

  • Aggregate sales revenue (USD equivalent) over time
  • Number of drops over time
  • Characteristics around the types of sales, platforms, and artists behind the drops

✍️ Qualitative —

  • Identifying and categorizing select projects in our database with unique forms of utility (e.g. access to in-person experiences, charitable/philanthropic components, token-gated communities), cross-checking with project sites and press releases
  • Contextualizing these drops against our high-level research from our Season 1 and Season 1.5 reports on music/Web3

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🚨 Disclaimers

  • Primary sales only — We are not capturing secondary sales in this database and slide deck (for now).
  • Prioritizing identifiable sales events — For the sake of efficiency and clarity on the market, our methodology prioritizes NFT drops that have generated at least one primary sale.
  • Geographic bias — The database represents the knowledge gleaned by W&M community members who follow certain music-industry trends, artists, genres, and subcultures, and tends to center around North America, Australia, and Europe. We have limited data points for other world regions including Asia, Latin America, The Middle East, and Africa.
  • NOT exhaustive — There’s likely a long tail of music NFT drops that we haven’t captured in our database due to our relatively manual tracking methodology, but we nonetheless believe it is the most comprehensive such resource that exists today.

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Summary stats

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$86M+

In primary sales of music NFTs in 2021, across ~1,500 different music NFT drops

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📊 Overall music NFT sales spiked early in 2021, cooled down throughout the summer, and then rose in Q4

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💧 Looking at the number of drops over time in relation to revenue, there was a significant shift from big-event, celebrity-driven drops earlier in the year, towards relatively lower price-per-unit sales events across a wider range of platforms later in the year

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We noticed a directional rise in drop activity in H2 2021 due to a number of new platforms that focused on music-related NFTs that launched in that period, including Sound, Pianity, and Nina — most of which focus on releases from independent artists

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💼 Indie and unsigned artists comfortably dominated music NFT sales in 2021

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Major-label artists certainly drove a lot of attention to the market early on in the year — but the appeal of the absence of middlemen, along with the direct control of rights and access to artists’ communities, drove a lot of activity to NFTs for the independent sector

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Leading artists in 2021 by primary NFT sales

3LAU (~$18M): Raised $55M as co-founder of Royal

deadmau5 (~$2.7M): Co-founded Pixelynx and invested in MODA

Tory Lanez (~$1M): Faced accusations of “being duped” from fans

Grimes (~$6M): NFTs themed around her WarNymph avatar project

Steve Aoki (~$5M): Currently building the A0K1VERSE

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Featured indie artists in our report

(many more cited in the full piece 😊)

Latashá: Head of Community Programming at Zora + rapper who centers music as the core “utility” in all her NFT drops

Daniel Allan: Electronic artist who raised $135K through six tiers of NFTs on Mirror for his Overstimulated EP

Vérité: Singer-�songwriter and one of the first artists to experiment with royalty-bearing NFTs, most recently on Royal

Maelstrom: DJ/producer who dropped and hour-long mix on Sound, which earned $41K in primary sales split among 14 collaborators

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💻 Early high-priced “event-style” drops on Nifty Gateway dominated H1 2021, with the platform representing over half of the primary sales we tracked during this time period

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… but Nifty then quickly lost dominance in H2, as new platforms like Sound and Nina that were geared explicitly towards music rose in prominence

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🎧 The early-adopter electronic genre dominated music NFT sales in 2021, with hip-hop taking a distant second

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While this trend stayed true throughout the year, we also saw new platforms launching geared toward new audiences that may change that distribution in the future — e.g. Solo, which focuses on country music

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🌐 Ethereum was the preferred blockchain for music NFT sales in 2021, accounting for 79% of drops and 90% of primary sales we tracked that year

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As we covered in our Season 1 report on music/Web3 tools, Ethereum is one of the most truly decentralized blockchains in terms of both the network itself and users’ access to the network — which has led to one of the most flourishing Web3 developer communities

  • The fundamental concept of NFTs comes from developments first put forth by people building on Ethereum

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❗ That said, Ethereum’s share of the drops we tracked decreased from 92% in H1 to 53% in H2

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There was a major push in H2 towards alternative blockchains, including Layer 2 solutions like Polygon and proof-of-stake blockchains like Tezos and Solana, rather than the proof-of-work mechanisms that Ethereum* and Bitcoin currently do

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*Ethereum does plan to move to PoS later this year, so this trend may reverse

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💰 Pricing trends over time

  • H1 was all about hype; of the 163 drops we tracked in 2021 that yielded more than six figures in primary revenue, 80% of them occurred in H1
  • In contrast, H2 saw an increasing number of high-volume collections dropping thousands of editions at a time, from the likes of Doja Cat and Frank Dukes (pictured right) — mimicking a PFP drop structure
  • Between February and December 2021, the average price per music NFT fell by 46%, from $18.8K to $10.2K per unit; the median fell by 27% over the same time frame, from $1,000 to $825 per unit
    • These are still extremely high price points that fail to appease concerns around financial accessibility and inclusion, which are shared by both fans and the music industry at large

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wen utility?

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Overview

Defining #️⃣ Utility: For the purpose of this report, we define utility as any measure of value that collectors derive from owning an NFT.

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That value can correspond to different types of benefits:

  • ⚙️ functional - ability to do something
  • 🥲 emotional - feel a certain way
  • 📈 financial - monetary upside

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Those benefits can also be realized:

  • ⛓ on-chain (i.e. built into an NFT’s smart contract, such as NFT revenue splits or on-chain music storage)
  • 🎪 off-chain (i.e. delivered and experienced outside of blockchain-specific environments, such as in-person events, physical merch, and general community-building).

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Music NFT utility, pt. 1: On-chain

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🎵 The basics

One of the simplest forms of #️⃣ Utility for music NFTs is… the music file itself

  • The NFT acts as a ledger and provides provable ownership of the token, attracting collectors by providing a sense of personal connection and/or social status
  • Locates emotional value at the forefront of what is being sold, while also holding some potential for future economic value (such as secondary sales)
    • This is what distinguishes an NFT from, say, a vinyl record: The smart contracts used to build NFTs allow creators the ability to offer fans more benefits directly over time, in a modular fashion

(pictured: Waveform of the NFT for Disclosure’s song “N . F . T . - N . R . G,” which was minted on Zora and offers no utility beyond the embedded music itself; sold via auction for 43WETH)

❗️ The audio portion of music NFTs is not always stored directly on-chain. often, it lives on a third-party site such as IPFS or Arweave and is linked from the metadata of an NFT’s smart contract.

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Music rights overview

  • Music NFT utility also comes in the form of music rights, which may include artists’ music royalties 👑 and ownership rights ✍ as part of the NFT sale
  • 👑 Royalty-bearing NFTs provide a way for artists to directly cut their fans and collectors in on the revenue streams from the monetization of the songs attached to their NFT offerings, from streaming revenues to rights to the sound recordings and more 🌊
  • ✍ Closely related to royalty-bearing music NFTs are projects which provide purchasers with specific ownership rights to use the music, or access to tracks attached to music NFTs to produce remixes or other derivative works
  • The impact of these projects revolves around #️⃣ Network effects - the more that collectors produce and market derivative works from a music NFT project, the more attention and interest flows back to the original project itself
    • Snowball effect where both the original music creators and the community of collectors are incentivized to continue producing new works and generating interest around the project

🧑‍💻 At the technical level, whether royalty-bearing functionality is captured and executed fully on-chain depends on the NFT in question.

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🪙 Royalty-bearing NFTs

  • Both individual artists and platforms have begun experimenting with cutting fans and collectors in on artist royalty streams 🌊 as part of their NFT offerings
  • Early experiments from the likes of Jacques Greene and Vérité have spurred the launch of multiple new NFT platforms trying to execute on the same utility at scale, like Royal, Opulous, and Decent
  • Caveats:
    • 🤷 Questions still remain as to whether royalty-bearing music NFTs might be classified as securities
    • 📈 or 📉? Web2 streaming royalties are already paltry, producing questions around whether buyers will ultimately generate a return on their investment
    • 🔗 Royalties and licensing terms are generally established through a “dumb” legal contract that exists off-chain and separately from the NFT smart contract

(pictured: token options for Nas’ NFT drop on Royal, which generated nearly $400K in primary sales)

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Music usage rights

Tokenized licensing models — which grant NFT holders commercial rights (usually in full) to exploit the creative works embedded in the NFTs — have been slowly gaining momentum in music:

  • Arpeggi Labs — building an on-chain DAW and CC0 sample library
  • STEMS DAO — partners with artists to release the stem-layers as their own unique NFTs, which give holders ownership rights to the fully mixed song and “full rights for composability” into remixes/other art
  • omgkirby — released a genesis collection of lo-fi generative music NFTs (pictured at right), which gives buyers complete song ownership, including both rights to the sound recording and publishing for the song
    • wallyPDF, an initial NFT purchaser, released two of the tracks on traditional DSPs — they have now been included in the lofi beats curated playlist on Spotify

🤷 It is still too early to evaluate the benefits and implications for open licensing for music NFT projects. We will continue to watch this space to better understand the outcomes and efficacy of new and open licensing approaches.

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🌓 Splits protocols

Emerging splits capabilities around music NFTs allow creators to easily share NFT revenues with collaborators (or whomever they like 🙋), by sending the proceeds from sales directly to multiple wallets

  • ➗ The rise of open splits protocols like 0xSplits and Slice have provided the modular building blocks for NFT platforms (such as Sound) to incorporate splits as platform features

Splits have no direct utility benefit to fans/collectors — BUT publicly declaring NFT splits on-chain could drive additional demand by:

  • ➕ Activating the fan bases of the entire range of collaborators on a music NFT as potential collectors
  • ✔ Signalling underlying values around compensation that an artist holds (e.g., building a more equitable community of creators), driving like-minded fans to collect

(pictured: revenue split among collaborators on Soulection's UNTITLED 001 drop on Sound.xyz, powered by 0xSplits)

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Music NFT utility, pt. 2: Off-chain

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👋 Community-building

One of the first off-chain utilities we observed involved using NFTs to cultivate long-term communities by continuing to add value to token-holders post-drop

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Different kinds of community-driven utility include:

  • Online experiences (e.g. access to private Discord servers)
  • Direct artist-fan interactions (e.g. VIP meet-and-greets)
  • Offline experiences (e.g. first dibs on concert tickets)
  • Governance rights (e.g. multisig wallet signing privileges)

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A new crop of startups like Unlock, Temple, Highlight, and Medallion have recently emerged with the explicit focus on helping artists launch NFT-gated online communities

(pictured: Avenged Sevenfold’s Deathbats Club NFT drop includes “first dibs on concert tickets, giveaways, airdrops in-person and virtually, no lines into Avenged Sevenfold concerts [when applicable], Discord authentication and much more”)

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🏟️ Live music

Much of the music NFT hype revolves around the concept of digital scarcity; it’s no surprise, then, that a recurring theme in music NFT utility is exclusive access to IRL concert and festival experiences — one of the last bastions of scarcity in the traditional music business

Pre-event — Free and/or VIP tickets; memorabilia such as commemorative art, photography, and lineup posters from prior shows

  • e.g. “golden ticket” package from Save Our Stages

During event — Backstage passes, token-gated VIP lounges, NFT galleries, and meet-and-greets

  • e.g. B Real (of Cypress Hill)

After event — Commemorative art, NFTs featuring show highlights

(pictured: screenshot of video art for B Real x Mister Cartoon’s “Gold” NFT, which dropped on Blockparty in April 2021 and includes backstage passes as a benefit to collectors)

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📦 Physical + digital merch

Physical and digital goods comprised another frequent off-chain utility bundle — in line with a common framing in the music industry of NFTs as “digital collectibles”

Back-catalog support — Archival footage, never-before-seen live sets

Current releases — Standard signed prints, CDs, vinyl records

  • E.g. Eminem, Katy Perry, Kings of Leon

Future/pre-releases — Access to exclusive previews via private communities or VIP chats (see Slide 39: “Community-building”)

(pictured: screenshot of video art for Eminem’s “STANS’ REVENGE” NFT, which dropped on Nifty Gateway in April 2021 and includes a signed vinyl record of Eminem’s debut studio album Infinite)

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🎗️ Philanthropy

In our previous market analyses, we highlighted philanthropy as one of the top use cases for music NFTs, as artists sought to use the technology for good while addressing fan concerns about environmental and financial costs

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Unsurprisingly, this utility has carried on strongly throughout the rest of 2021 and well into 2022, with examples including:

(pictured: screenshot of video art for Billboard’s Change Awards NFT, which dropped on Bitski in May 2021)

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🥴 wyd???

Sustaining communities online takes significant time and labor contributions, as well as intentional curation and evolving purpose of the community

Yet, we saw several NFT sales in 2021 offer gated fan communities as a carrot — but with vague (or even nonexistent) descriptions of the community’s overarching purpose or what fans would get once they joined

  • Especially the case with off-chain offerings, such as guestlist access to concerts or signed vinyl records — which, as many music-industry pros would tell you, are already coordination-intensive to execute for fans without introducing Web3 😓
  • Repeatedly saw open-ended terms like “access to future perks or events,” “chances to win future prizes and merchandise,” “tokens with abilities that have not yet been revealed,” and “early access to special fan perks, tickets, experiences, and more” 🤷

We’re left to wonder what personnel resources and accountability mechanisms are in place to ensure artists and their teams follow through with promised in-person benefits, especially when the terms of purchasing an NFT terms include a “chance to win”

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Outstanding questions + directions for future research

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🔎 ~Metadata~

  • Free-for-all nature of decentralization makes on-chain financial activity — as “transparent” as it is — nearly unreadable to laypeople across Web3 environments
  • Due to a lack of standardized metadata across platforms for music NFTs, we at W&M still need to find, verify, and interpret drops on a manual, case-by-case basis
    • Also creates major discoverability pain point for artists and fans
  • Projects we’re following closely:
    • musicOS (interoperable metadata/context layer for music NFTs)
    • Future Tape and spinamp.xyz (consumer-facing discovery and consumption layers combining multiple music NFT platforms)
    • MODA (new licensing and monetization standards for music NFTs)

(pictured: chart of top music NFT collectors by ETH spent across Sound, Nina, and Catalog combined, as calculated by Future Tape)

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❓ Expectations vs. reality for big brands

  • We found several drops in our backfilling phase that seemed to have plenty of hype, but ultimately didn’t perform as well as expected
    • e.g. Gov Ball x Coinbase, which has only sold a single-digit % of its available drops to date
  • Prior brand recognition and reach alone is an insufficient indicator for a successful NFT drop
    • Rather, other factors such as the diversity and thoughtfulness of NFT utility, or the strength and frequency of preexisting interactions within a fan community, may be more relevant predictors of success

(pictured: IRL activation for Gov Ball’s partnership with Coinbase in September 2021)

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🤝 Customer growth + fan journeys

Building Web3 communities is challenging for artists and requires additional team support, not to mention basic knowledge of the technology

There’s a clear need for resources or frameworks for savvy artists to think strategically about their fan journeys in a Web3-native context

  • Prospects ➡️ new fans: How can an artist attract/onboard new fans by driving awareness, providing tech education, or otherwise lowering barriers to entry?
  • New fans ➡️ active fans: How can artists drive early adoption and ongoing engagement of a core audience through utility, content, community, and culture?
  • Active fans ➡️ superfans: How can artists retain a loyal premium audience, with contributors and promoters who drive referral and virality in the community?

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🔄 Secondary sales

Secondary sales are often touted as a key means of supporting long-term sustainability for artists in Web3

… But due to ongoing technical challenges, secondary sales splits are currently not interoperable across platforms

For this reason (and others), our database does not currently address secondary sales — but we will be publishing an analysis shortly analyzing secondary sales activity around several high-profile NFT drops. Stay tuned :)

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Each NFT costs 0.3ETH and gives you lifetime access to W&M, with all proceeds going to supporting our contributors and community treasury.��(You can also tip our treasury directly: 0x3D7009399B9BF7a2321f2C363f31F3f68ed34915)

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🕵️ Fact-check us

If you think we’re missing 2021 sales from a specific music NFT platform, protocol, or artist that would significantly alter the output of our research (e.g. total sales numbers or distribution charts), please let us know by filling out this form.

  • Under “Database for Consideration,” please select “Music/Web3 Dashboard," which is where we track music NFT sales.
  • Under “Additional context,” please reference this deck and any specific charts or findings that you think should be modified. The more on-chain evidence you can provide, the better.

As a W&M member, you can also reference our music NFT database as a whole and let us know if we’re missing any drops. We plan on hosting regular backfill parties in our community in the future, so please feel free to join us and stay posted about upcoming events!

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📚 Appendix