In February 2021, news reports showed that NFTs, also known as digital collectibles, had made more than $100 million in sales over thirty days via different entertainment formats. So what is an NFT, and how does it affect the music industry?
How NFTs Work
Non-Fungible Tokens (NFT) is a digital file with a distinctive identity substantiated on a blockchain. NFTs are founded based on cryptocurrencies like bitcoin and ethereum; however, they are non-fungible where bitcoin is fungible. Fungible means that you can exchange one thing for a similar thing because they are the same thing.
For example, you can exchange one bitcoin for another without losing value. NFTs are non-fungible which means that you cannot exchange them because the assets are unique and cannot be exchanged since they are different in composition and value.
What NFTs Are
NFTs are under the Ethereum blockchain. Its blockchain supports NFTs, which keep additional information that is different from the way cryptos work.
NFTs are digital and can be music, art, videos, video game items, tweets- basically anything that exists in a digital form or digital art that is real and represented digitally. They have distinctive details which are used for identifying and transferring during sales. In a nutshell, an NFT is a blockchain-based digital type of certificate of authenticity.
NFT Copyright Laws
To purchase or sell an existing NFT, you must have a digital wallet that can receive and store those NFTs, which you can then purchase or sell using cryptocurrencies on platforms such as Mintable, OpenSea, and others.
An artist can create an NFT from their music. With an NFT sale, the artist still holds the original copyright to that music, but the buyer of the NFT will have some rights. The artist is also able to get resale royalties from the NFT platforms.
A creator of an NFT has the digital certifiable copy of the music, but they do not have copyright ownership of the original version. When you create or buy an NFT, you have a digital authenticated version of the music or art but not the original music or art itself.
Can Anyone Create An NFT From An Artists Copyrighted Music Or Sample Of The Same Music?
Anyone looking to create an NFT from a music artist's work should get permission from the copyright owner. It is covered under copyright laws that grant some exclusive rights, which are the bundle of rights. Under these rights, only the copyright owner has the right to reproduce, distribute copies, prepare derivatives, publicly perform, and publicly display. These laws are why anyone cannot create an NFT or use copyrighted work and embed it as part of an NFT without receiving permission to do so.
Even with many music stars such as the rock band Kings of Leon and DJ and EDM artists 3LAU having sold their NFTs for seven figures, record labels seem to hesitate to jump on the new trend.
NFTs are still new even though they have been around since 2014. Many copyright law gaps can be exploited, especially when it comes to earnings.
As a music artist, if you are looking to create an NFT, you need to ensure that you are the copyright owner of what you intend to embed in an NFT.
You may not have exclusive copyright laws, and some of these rights may be shared by your record label in some form. For example, you may not have rights to the song's lyrics but to the melody, as these can be copyrighted separately. It is important to have an attorney look over your contract and inform you of any possible contractual breaches that may occur if you create an NFT with material that you do not have full copyright ownership over.
NFT Benefits For Artists
Laws aside, one of the benefits of NFTs is that music artists can make and keep all the revenues. In traditional music sales, revenues are shared between the artists, agents, lawyers, record labels, and others. But with NFTs, the artists get the bulk of the money earned from the sale and still keep the original copyright ownership which is a plus.