What are NFTs? Alan Cross explains why the music industry is going crazy for them

Click to play video: 'Grimes to release fifth studio album called Miss Anthropocene'
Grimes to release fifth studio album called Miss Anthropocene
Canadian electronic artist Grimes, otherwise known as Vancouver-raised Claire Elise Boucher, is releasing her first new album in five years on Feb. 21, called Miss Anthropocene. – Feb 18, 2020

Browsing through music stories from the last week, you may have seen that Grimes, the Vancouver-born musician and partner of Elon Musk, made US$6 million through selling NFTs.

And you might have wondered, “Is this some new financial instrument like an RRSP or TFSA?” Then you might have discovered that NFT stands for “non-fungible tokens” — which didn’t make anything more clear.

But NFTs are officially a thing, now, including within the music world.

A “non-fungible token” is a one-of-a-kind virtual asset. It’s a unique thing that cannot be replaced with anything else.

Let’s say you owned the original Mona Lisa by Da Vinci. You could trade the painting for something else, but whatever you got back in return wouldn’t be the Mona Lisa because only one exists. This makes it non-fungible.

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NFTs originated with Ethereum, one of the cryptocurrencies, which has the capacity to store NFTs as part of its blockchain. (For a tutorial on that, go here.)

I know I just lost you, but stay with me.

These unique and rare items, known as “tokens,” are regarded as valuable assets as they cannot be duplicated. They’re every bit as real as the Mona Lisa but only exist in the digital realm and are protected by the Etherium blockchain. (Other cryptocurrencies also offer NFTs, but let’s not make this any more complicated than we have to. Suffice-to-say that say NFTs on other blockchains work more-or-less the same way.)

What’s interesting is that NFTs can take on all kinds of different forms, including images, film and video clips, some kind of animation, and music.

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In Grimes’ case, she offered 10 pieces of digital art for sale. Some were one-of-a-kind while others were available by the thousands. The most expensive piece, a video called Death of the Old, was a piece of conceptual art (flying cherubs, swords, a mysterious glowing light) accompanied by some original music that sold at auction for US$389,000. Wow.

NFT people tell us that this was no different than buying a piece of fine art from Sotheby’s discovered on Antiques Roadshow, except that you can’t touch it, feel it, or otherwise interact with as you would with a real-world object. But it is yours and yours alone.

Most of the US$6 million was derived from selling two pieces, Earth and Mars, which were available to many people, kind of like a virtual lithograph of a painting. Almost 700 of these works (featuring more flying cherubs and original music) were sold for US$7,500 each.

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If you’re confused why someone would pay so much money for something that you can’t hang on a wall or otherwise display, you’re not alone. But from what I can figure, tech types into NFTs consider these digital assets as investments that could appreciate in value, just like a piece of art in meat space.

Then again, purchasers don’t actually “own” these digital works. The artist usually retains the intellectual rights but the purchaser is granted a licence to display the work in something like a digital museum. But when you get right down to it, you’re only really buying bragging rights. You own the original — the master tape, so to speak — and can proudly say that you’re a patron of the artist. Of course, once you put things on display, people will still right-click and “copy image.”

Grimes isn’t alone. Canadian EDM star Deadmau5 also got into the act back in December, selling thousands of digital stickers, pins, and other bits of swag. It’s the digital version of buying an official concert T-shirt or button at the gig.

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Oregon band Portugal. The Man has its own cryptocurrency that they’re using to build a fan club. Want a Shawn Mendes avatar? He’s working with an NFT company called Genies.

And remember Nyan Cat?

A one-of-a-kind version of the GIF of that by original creator Chris Torres sold for US$600,000 last month. Artists with names like Zora, SuperRare, and Nifty Gateway have also sold digital art for huge bucks over the last year. Beeple, another NFT artist, made US$3.5 million.

But back to music. Linkin Park’s Mike Shinoda made tens of thousands from just one NFT. And then there’s 3lau, the current champ, who made US$11.6 million on the sales of NFTs. Again, wow, right?

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This past Friday, Kings of Leon became the first-ever band to release a new album in the form of an NFT. When You See Yourself, the band’s eighth album, is available in the usual digital and physical formats, of course, but fans are able to buy one of three NFTs. The first, on sale for US$50, is a special version of the album, featuring enhanced media (call it a moving album cover), a digital download, and a vinyl copy.

The second includes some concert opportunities like front-row seats when Kings of Leon can go back on tour. The final token offers some specially commissioned audiovisual art, ranging in price from US$95 to $US2,500.

The only place to purchase these items is on a site called YellowHeart, a company that helped The Chainsmokers create their blockchain ticketing startup. Sales end forever on March 19. At that point, all the KoL NFTs will become tradeable commodities. Every time an NFT is resold, the blockchain keeps track of it. That offers the potential of control of scalping and gouging. And even more important, each time the work is sold, the original artist gets a piece of the action.

YellowHeart has also minted 18 Willy Wonka-esque golden tickets, all of which will act as a real concert ticket that comes with a VIP experience. Each includes a personal driver to the show, a concert concierge to get you snacks, a meet-and-greet with the group, and a lounge to hang out away from the unwashed masses. When you leave the show, your car will be stuffed with four giant bags featuring every single item from the merch booth.

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Six of these golden tickets will be auctioned by the band and the other 12 will be held back for use at some future date. Each comes with special Kings of Leon Art, of course. And because this is an experiment, the band is going to donate all the proceeds from the US$50 NFTs and the highest-priced golden ticket to Crew Nation fund, which was set up by Live Nation to help roadies thrown out of work because of COVID-19.

Why go through all this trouble? NFTs offer another type of fan engagement that is also potentially a lucrative revenue stream. If you can sell 50,000 NFTs at a buck apiece, that’s $50,000 in addition to what you might earn from streaming, physical sales, merch, and concert tickets.

There’s also the chance that these NFTs — which, remember, are designed to be ultra-rare — could become even more valuable in the future, kind of like a copy of the Sex Pistols’ 7-inch God Save the Queen on A&M that I want so much for my collection.

If this works — and Kings of Leon are the first to try it — expect NFTs to become an essential part of artist revenues going forward. Already Common, Rancid, and Liz Phair are looking at things.

So $2,500 for a concert poster you can’t hang in your room? You go right ahead.

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Alan Cross is a broadcaster with Q107 and 102.1 the Edge and a commentator for Global News.

Subscribe to Alan’s Ongoing History of New Music Podcast now on Apple Podcast or Google Play

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