As a hip-hop artist from Tanzania, Man Like Kweks made $1,500 through streaming his music on the blockchain-based Wavlake platform, compared to only $25 on traditional streaming platforms. This is a small part of the reason why musicians are looking into using NFTs and smart contracts to not only create wealth but sustain their lives. With an estimated $424 million of unclaimed royalty income to music creators, there are countless musicians who are forced to wait months or even years (and not receive) checks that will never come. An artist gets around $0.003 to $0.005 per play on Spotify and will need millions of plays to pay rent. Record labels, middlemen, and other distribution points all take percentages off the top of everything, leaving the artist with next to nothing! The potential for musicians using NFTs and smart contracts is to embed or automate royalties into their digital assets without needing other people taking a cut of the profits. There are already demonstrated examples where this technology works, the question now is whether it will be made available for more music creators and allow for new methods of receiving income for their work. There is an already existing framework in place for a simple, quick and easy process for music creators to receive fair compensation for their hard work, now the focus is on how to make it accessible to musicians of all levels. As always, there are still many opportunities for innovation and improvement within this industry, and as we continue to grow, we will continue to look for new ideas and solutions.<h2>How Smart Contract Royalties Really Work</h2>Current models for collecting traditional music royalties require programmers to create complicated mathematical functions so that royalty payments can be divided up by publishers, record labels, and performance rights organizations. The typical process for a song to generate a set of publication rights, mechanical royalties, performance royalties, and master rights involves several distinct companies (each with their own incompatible database), numerous middlemen, and extended periods of time before royalties are actually paid to artists, preventing them from seeing their actual earnings in real time. The use of Smart Contracts enables artists to automate the entire process. By creating a Music NFT, the artist will encode all the royalty terms into the Music NFT. Smart Contracts define the rights and obligations of all parties involved and specify how, when, and who is entitled to receive royalty payments from the Music NFT. In addition, when a Music NFT is sold, broadcasted, and/or licensed, the Smart Contract will calculate and distribute the appropriate percentage of royalties to all parties who own wallets with associated percentage shares of the Music NFT; all of these events will be recorded on-chain for all to verify. DJ 3LAU's newest platform, Royal, allows musicians to sell shares of their streaming revenue (in the form of tokens) to their fans directly. On Royal, fans will be able to buy fractional ownership of tracks from artists such as Nas and Diplo when they release new music on the platform. As those tracks earn streaming revenue, the smart contracts set up for the tokens will automatically distribute the appropriate amount of money to all of the token holders who purchased those tokens. The new model reflects a deviation from the historical distribution of revenue for artists; rather than relying on a record label to advance them money or provide quarterly royalty payments, Royal allows artists to receive the money earned through their music at the time it is streamed. In addition, this model offers complete transparency; all of the transactions are recorded on the blockchain and can be viewed by anyone.<h2>The Machine for Perpetual Royalties</h2>Ongoing royalties from NFT sales do not end with the first sale and artists continue earning from subsequent sales due to royalties programmed into the smart contracts. The royalties artists receive from secondary sales range from 5%-10% of the total price of the NFT. The artist's share on an NFT that was initially sold for 0.5 ETH may be between 0.5-1 ETH, if the NFT sells later for 10 ETH. This allows artists to earn income from their work on an ongoing basis, while in the traditional art market once the sale of a piece is complete, the artist no longer receives additional income. Zora and other early platforms created 'creator shares,' which allow artists a portion of any future NFT sales as well. Artists using platforms such as Sound.xyz and Audius can earn revenue from streaming and NFT sales and take home approximately 90% of these sales, however, on Spotify, artists only receive approximately 1% of their sales once the record label, distribution and platform fees are deducted. As an artist's career progresses, their work will have a growing positive impact in value. As such, NFTs made available as collections will likely continue to rise in value as the artist becomes more established. For example, Early purchasers may have purchased NFTs at 0.1 ETH and then sold for 5 ETH. The artist receives 10% of every resale of their pieces through secondary royalties. Secondary Royalties now exceed Primary Sales and thus provide a continuous source of income for years to come on the Works.<h2>What Really Works</h2>The Recording Academy is working with blockchain companies to create NFT markets for the Grammy Awards. This collaboration will have a tangible impact on Grammy winners by helping them use blockchain to create more meaningfully unique fan experiences through validated and verifiable blockchain-based credentials for authenticating limited edition items. Wavlake has been an example of how independent artists can immediately benefit from the power of blockchain. Artist Man Like Kweks earned $1,500 through Wavlake, where he could only have earned $25 on the alternative platforms he had been using. This equals an increase of approximately 60 times over what he would normally earn based on the same number of streams. Through Sound.xyz and Catalog, independent musicians retain around 90% of their earnings. Ethereum Layer-2 networks will enable the rapid and inexpensive payment of micropayments for less than $0.03 per transaction. The Ethereum infrastructure is developing much faster. Ethereum Transactions were costing 23 million dollars per day in gas fees and are now estimated to be around 6.3 million dollars per day in 2025. Many of these transactions are on Ethereum Layer Two solutions, which have completed over 1.9 million transactions per day allowing artists unable to afford gas fees for mainnet to sell music NFTs to purchasers at only $10.00. By using fractional ownership through Royal, people will have the opportunity to invest in musicians and support them directly. This model creates alignment of interests between investors, token holders, and musicians; therefore, if musicians become successful and increase their revenue, this as well will benefit the token holders financially, creating a vested listener.<h2>The Problems That Remain</h2>The most significant obstacle hindering the implementation of smart contract royalties is the lack of enforcement (platforms must choose to enforce the smart contract royalties voluntarily). OpenSea, one of the most prominent NFT marketplaces, was the first platform to enable sellers to not pay smart contract royalties. Artists who relied on ongoing payments of artist royalties from the resale of their artwork would have had no other recourse for recovering those royalties if OpenSea and similar marketplaces chose not to enforce smart contract royalties. This flaw presents an issue. While smart contracts enforce their own rules on the blockchain through the smart contract that they create, the enforcement of these rules can only occur on those platforms that choose to enforce the smart contract royalties. If all major NFT marketplaces opt not to enforce smart contract royalties, many transactions will revert to being conducted in a decentralized manner, leading to poor record keeping and an unfair advantage over competitors in terms of sales. The music industry has a metadata problem that's persistent. The two copyrightable parts of music, compositions and sound recordings, do not have a system of linking. Verification via blockchain is meaningless because consistent metadata doesn't exist. Additionally, $424 million of unmatched royalties exists because there is no reliable way of tracking ownership of music. Regulatory uncertainty adds to this problem. The SEC has not clarified whether fractional music NFTs are considered securities, and the platforms that allow for the sale of royalty rights to be fractionalized are operating in a gray area of enforcement and could be forced to close due to a lack of legislation clarifying these points. Scalability is also a concern. The music industry requires billions of transactions per day, but blockchains are not yet scalable to support these types of numbers. Spotify processes billions of streams on a daily basis, yet with Layer 2 scaling solutions, blockchains are still unable to be both decentralized and have low costs at these types of volumes.<h2>The Question of Broad Adoption</h2>It is likely that the real issue is not technical but behavioral since many artists are. Artists who are rooted in the traditional models like to see the development of crypto technologies, wallet management and how to communicate to their fan base. Fans who are already using Spotify and YouTube prefer to have convenience rather than ownership, and would rather have access to large playlists that can be played in multiple locations, rather than purchasing a single NFT with a wallet and gas fees, and trying to determine how those will be used across multiple platforms. NFT content for the music market is for those who want to own the music by interacting with the blockchain. However, the listener's primary consideration is still the fact that they want easy access to their music rather than having to go through the hassle of maintaining a wallet and paying gas fees. Additionally, if fans financially invest in an artist by purchasing a royalty share, they now have a vested interest in the success of the artist and are now compelled to affect and influence their decisions as it relates to their career, including decision on streaming and ad placements, etc. As a result, the artist/fan relationship has shifted from one based on art, to one based on an investment; not all fans will be pleased with this shift.<h2>What Success Might Look Like: NFT Adoption as an Addition, Not a Replacement</h2>Spotify and NFTs serve as complementary parts of an artist's content strategy. NFTs offer the opportunity to engage with fans (and get paid) in a way that is impossible through traditional means. As multiple artists can be discovered via streaming services, but direct access between an artist and their fanbase can happen through NFT transactions, streaming services are geared towards music exploration, whilst NFTs are geared towards direct fan engagement.&nbsp; While not every artist may be suited for NFTs, smart contracts create the potential for universalised royalty payments across platforms even if NFTs do not completely take over. If all streaming services began utilising blockchain-based payment methods, artists would also receive their funds immediately (and with minimal extra work) without needing fans to make any purchases of NFTs.&nbsp; As technology and regulation mature over time, traditional music distribution channels will become automated via smart contracts, enabling fractional ownership, automatic royalty payments, and continual royalty payments to the artist for every transaction within the lifetime of the asset. The true innovation in this case is the programmable payment method as it relates to digital assets. While independent artists with devoted fan bases are already benefiting from the model, its scalability to mega-stars with millions of casual listeners remains to be seen. So far, blockchain platforms have provided real value by generating revenue in excess of thousands of dollars compared to music streaming platforms that typically pay artists four cents on the dollar.&nbsp; As of now, creators who are generating more than 60 times the amount of money on the blockchain than they would if they were still using traditional methods, are creating their own future now through the creation of smart contracts. Based on all of this information, the technology has proven that it can provide transparency and enforce payment divisions through the automation of payments in ways that are impossible through traditional methods.&nbsp; However, it has yet to be determined if enough artists and fans will adapt to the platform to make a significant impact in the long run. Currently, NFTs for music continue to provide a functional framework for early adopters to take advantage of and will remain in this state until wider adaptation occurs.

Blockchain can boost music royalties and automate payouts, but inconsistent enforcement, poor metadata, legal uncertainty, and wallet friction keep adoption slow despite clear creator benefits.

When Musicians Finally Get Paid: NFTs and the Creator Economy Promise


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