Unlike in the visual arts, music is not something one can really invest in. It is difficult for fans to buy something from their favourite artist that has lasting - and growing - value. The introduction of Non-Fungible Tokens (NFTs) into the music world is changing this. Pioneer in this field is DJ Justin Blau (3LAU), who sold his new album as NFTs to fans. This month he launches Royal: a marketplace where other artists can do the same.

3LAU's first album saw the light of day in February 2021, on crypto rails. The NFT went for a staggering $11.3 million. An unexpectedly large sum, which 3LAU says he would never have earned in the traditional music industry. He sold the album as a collection of 33 NFTs on Dshop, a decentralized marketplace based on Ethereum.

Why 33 NFTs? In an interview with Raoul Pal on Real Vision, he explains this concept of a ranked auction: "In any physical auction there can only be one winner, the scarcity of that item is coveted. But you're missing all the other bidder's willingness to pay on the demand curve. So, I said to myself, in the digital world, you can play with that a little bit, and capture everyone's maximum willingness to pay with a leaderboard. So, the auction that we built had 33 winning slots. And depending on your position in the 33, you got a different bundle of NFTs from the album.” As far as Justin Blau could tell, this was the first time such a ranked auction had been held.

Fans can now earn too

The reason Justin Blau owns the rights to his music and is issuing NFTs is his dissatisfaction with the traditional music industry. There, artists only get about 12% of the total revenue and the rest is left to middlemen. In 3LAU's revenue model, musicians get a far larger share. But perhaps more importantly, this model is also much better for music fans. Fans have traditionally been the best "sales reps" for an artist's music. But fans don't get anything out of it financially. That changes in this new earnings model. As an unannounced bonus, the 33 highest bidders for 3LAU’s album each received 1% of the music rights to the album retroactively.

3LAU: “But where I think it's going is fans can be your record label. When fans own your music, they're now incentivized in a completely different way to share it, and to be a part of a community that is larger than just a consumption community. And that's the principle behind all tokens.”

And there's a lot more possible. 3LAU continues: "Imagine being able to give your top 1% listeners something for free. Give them ownership over what they've listened to so much."

The same principle could apply to other business in the music industry. Say you are an online singing teacher who also sells online courses and memberships. You could hand out your buyers and members NFT's to create loyalty... and potentially future royalties. This will incentivize your customers to promoto your business - as the value of their NFT's will benefit from your success.

Royal: the OpenSea for music

3LAU's platform Royal connects musicians with fans the way OpenSea does for visual artists (think CryptoPunks). But as explained, Royal shows that NFTs can be more than just collector's items. Royal's core idea is to sell intellectual property, packaged as music or not. 3LAU "Now, for the first time ever, a group of fans can invest in music as an asset class: the access suddenly is democratized."

3LAU was also experimenting with this aspect of intellectual property: recently, 50% of the ownership rights to a new song (Worst case) were given away as NFT to 333 of Royal's new accounts, based on how many referrals they had done.

Since his album sale as NFT, 3LAU's phone has been red hot with interested musicians. Sometime in the next few weeks, his platform Royal will go live. He says he already has some big names in the music industry on board.