The next frontier for Web3 and the music industry

The music industry is at the beginning of a profound transformation as the rise of streaming services is changing the way music is consumed.

According to data from Forbes earlier this year, music streaming accounts for 84 percent of the total music industry revenue, which is more than $17 billion annually.

However, streaming isn't the only digital tool changing how the music industry works. Web3 tools like blockchain and tokenization are slowly changing opportunities for artists, fans and distributors.

Sergio Mottola, CEO of Music Protocol and Web3 Music Association, envisions a future where music catalogs will transform and create a new paradigm for the industry.

In an interview with Cointelegraph at the Talk 2024 conference in Paris, Motorola explained how blockchain technology could change music distribution, intellectual property (IP) management and revenue generation.

FTW streaming

“In the booming industry of streaming, that's the biggest problem — how do you convince people to buy music?” Mottola asked.

“Music revenue can't compare to the billions made off-stream in terms of buying tracks.”

The current model, which relies heavily on streaming, presents challenges for artists and industry stakeholders to monetize their work effectively.

He highlighted this with reference to Web3 tools such as non-fungible tokens (NFTs) used by artists to drop new tracks or offer exclusives to fans.

Professionals in the music industry, such as DJs, still buy tracks, but this practice is less common for the average consumer.

“Or you have a fan base, so you go into collector fandom, but that has nothing to do with the IP of the music,” Mottola explained. While traditional models like Patreon create additional revenue streams, they don't directly address the core issue of music distribution and IP monetization.

According to Mottola, the solution is to bring music into the chain.

The only thing we can do is sit down with the leaders of the music industry and help them understand how we can bring them up the chain. Onchain means massive catalog distribution in Web3 and then allowing people to build other offerings.

Related: Polygon Labs and Warner Music Group Drive Music Industry's Web3 Evolution

By introducing music intellectual property, the industry as a whole – such as Universal Music, Warner Music and Sony – can digitize and distribute catalogs on the blockchain, creating an infrastructure where users can purchase licenses and use the IP for various creative projects.

Virtual reality needs music

One example of this is the potential impact on virtual environments such as the Metaverse.

“If you have the Metaverse today, there's no music,” Mottola said. “You can't bring music as it stands, so if you have a big catalog on Web3, people can go and listen to concerts. Music, whenever you have an idea, you don't need to negotiate 1-on-1 with the music industry.

Simulating music IP allows for seamless integration into virtual worlds, enhancing user experiences and unlocking new revenue streams.

He gave examples of possible collaborations with Metaverse developers in the Web3 space, such as Animoka Brands and Mythical Games.

“We talk to everyone who does Metaverse projects and, listen, starting today you have this catalog of thousands and thousands of songs that people in your area can connect to.”

“That's how we want to build the case study, and then hopefully with the case study, that's where they get to general adoption,” he said.

This, backed by real-world asset tokenization and licensing, will be implemented in 2024, with the Music Protocol launching an open innovation campaign from July.

Token IP

The tokenization process for this music catalog involves identifying the IP on-chain, licensing it so anyone can buy it, and allowing users to create unique experiences with the music.

“We need to digitize music intellectual property, so we need to completely digitize the industry.”

According to Mottola, this approach not only makes music accessible, but also creates an information delivery and monetization framework.

The future of music has a lot to do with artificial intelligence, which has already proven to be a challenge for the industry's biggest labels and artists in terms of copyright infringement.

You'll have more people bringing more IP to market because of AI. With blockchain, a music protocol, you record the IP, license it, and easily distribute it throughout the value chain.

Mottola says this system can provide better capital efficiency and liquidity in the music industry by using blockchain and digital assets, while also transparently tracking rights.

Mottola admits that other music apps have a different vision for the future of the industry. However, he insisted.

We are not debating how the music industry does business between partners. But we are helping them by using a new tool called blockchain to improve conflict and problems and protect them in the future.

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