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

When people think of NFTs, the first use case most of them probably think of is visual arts. From the sale of a digital collage at Christie’s for $69 million by Beeple to the Bored Apes Yacht Club collection, fine art seems to be the most prominent use case for NFTs because of its strong similarities to traditional investments in fine art. The fact that digital art can be viewed and replicated endlessly online has led to some confusion among many consumers about what exactly they are buying.

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 a wallpaper’ seems very clear. But if there’s a real, real owner, and you can validate that on-chain, that other person looks a little silly, at least within the web3 community,” DJ and NFT art collector Justin Blau explained it in an interview on the MovieUpdates podcast Chain Reaction.

Blau, 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 raising $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 copyrights, and second, the emotional value of owning something scarce associated with your favorite artist. Blau sees use cases for NFTs outside the visual arts world, but said he doesn’t think the same form factor and manifestation for those NFTs will apply to every different form of media.

For example, music is invisible, so it wouldn’t make sense to apply music NFTs in the same way as visual arts NFTs, he said.

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

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 is likely to 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 the most interesting, where collecting a real audio file for thousands and thousands of dollars just doesn’t seem to make sense because nobody would do that in the real world,” Blau said.

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

Streaming revenue represents about 84% of all revenue generated by music, he added. The reason artists receive so little of that income, according to Blau, is because middlemen like record labels are cutting back, not because streaming itself isn’t lucrative.

As an independent artist, Blau shared the preview of his song “Is It Love,” saying he turned down a deal that would have paid him $15,000 for 50% ownership of the song, which he said eventually got off the ground and raised more than $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 if that number had worked, they would all have had some sort of return—both from a pure asset appreciation standpoint and from a cash flow standpoint.” said Blue.

The Royal platform will eventually allow digital asset holders to interact directly with artists and access exclusive benefits such as token-gated shows, he noted.

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

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