DJ and crypto startup founder 3LAU explains the value behind music NFTs – TechCrunch

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When peo­ple think of NFTs, the first use case most of them like­ly think of is visu­al art. From Beeple’s $69 mil­lion sale of a dig­i­tal col­lage at Christie’s to the Bored Apes Yacht Club col­lec­tion, visu­al art has seemed to be most promi­nent use case for NFTs due to close sim­i­lar­i­ties with tra­di­tion­al fine art invest­ing. The fact that dig­i­tal art can be viewed and repli­cat­ed end­less­ly online has led to some con­fu­sion for plen­ty of con­sumers with what exact­ly they’re buy­ing, however.

The idea that some­one can just say, ‘hey, this is mine now, I just saved the image to my lap­top, and I’m using it as my back­ground,’ — it seems real­ly obvi­ous. But then when there’s a real, true own­er, and you can val­i­date that on-chain, it makes that oth­er per­son look kind of fool­ish, at least with­in the web3 com­mu­ni­ty,” DJ and NFT art col­lec­tor Justin Blau explained in an inter­view on the TechCrunch pod­cast Chain Reac­tion.

Blau, who is bet­ter known by his stage name, 3LAU, co-found­ed Roy­al, a start­up that uses NFTs to allow users to buy “shares” of songs through its mar­ket­place and earn roy­al­ties as those songs gain pop­u­lar­i­ty. The com­pa­ny raised a $55 mil­lion Series A round from Andreessen Horowitz’s cryp­to invest­ment arm last Novem­ber, less than three months after bag­ging $16 mil­lion in seed fund­ing led by Founders Fund and Paradigm.

NFTs sold on Roy­al rep­re­sent two things, Blau said. First, they rep­re­sent the intrin­sic val­ue of copy­right own­er­ship, and sec­ond, the emo­tion­al val­ue of own­ing some­thing scarce that’s asso­ci­at­ed with your favorite artist. Blau sees util­i­ty in use cas­es for NFTs beyond the visu­al art world, but said he doesn’t think the same form fac­tor and man­i­fes­ta­tion for those NFTs will apply to every dif­fer­ent form of media.

Music, for exam­ple, is invis­i­ble, so it wouldn’t make sense for music NFTs to be applied the same way as NFTs for visu­al art, he said.

“It’s not a com­modi­tized type of asset. The only way peo­ple have col­lect­ed music in the past is with CDs and vinyl, and right now with a stream­ing ser­vice. Everyone’s music col­lec­tion is the­o­ret­i­cal­ly the same, right? You pay the sub­scrip­tion, you get access to every­thing,” Blau said.

To eval­u­ate whether an NFT project makes sense, Blau likes to use the frame­work that if a behav­ior exists in real­i­ty and can be repli­cat­ed in the dig­i­tal world, it will like­ly be a suc­cess­ful use case for NFTs. If a behav­ior doesn’t already exist, it prob­a­bly isn’t the best man­i­fes­ta­tion for NFTs, he added.

“I think the music exam­ple is specif­i­cal­ly the most inter­est­ing, where col­lect­ing an actu­al audio file for thou­sands and thou­sands of dol­lars just doesn’t seem to make sense, because no one would do that in the real world,” Blau said.

That’s why at Roy­al, Blau and his co-founder JD Ross (who also co-found­ed home­buy­ing start­up Open­door) have cho­sen to apply NFTs to the copy­rights behind songs. The copy­right of a song is what’s scarce, not the audio itself, which can be streamed by any user, Blau explained.

Stream­ing income rep­re­sents about 84% of all income gen­er­at­ed by music, he added. The rea­son artists receive so lit­tle of that income, in Blau’s view, is because of mid­dle­men like record labels tak­ing a cut, not because stream­ing itself is not lucrative.

As an inde­pen­dent artist him­self, Blau shared the exam­ple of his song “Is It Love,” say­ing that he turned down a deal that would have paid him $15,000 for 50% own­er­ship of the song, which he said end­ed up tak­ing off and gen­er­at­ing upwards of $700,000 in revenue.

“My fans prob­a­bly would have giv­en me a bet­ter deal. They prob­a­bly would have been will­ing to pay more than the $15,000 … and should that song have suc­ceed­ed, they all would have had some sort of return — both from a pure asset val­ue appre­ci­a­tion stand­point and from a cash flow stand­point,” Blau said.

Royal’s plat­form will even­tu­al­ly allow dig­i­tal asset hold­ers to be able to engage direct­ly with artists and access exclu­sive perks, such as token-gat­ed shows, he noted.

You can lis­ten to the entire inter­view with Blau on our pod­cast, Chain Reac­tion. Sub­scribe to Chain Reac­tion on AppleSpo­ti­fy or your alter­na­tive pod­cast plat­form of choice to keep up with us every week.

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