How Web3 Redefines Labour, Capital, and Fandom in Music
Notes on the power of 1000 invested fans
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This is a three part series unpacking three fundamental promises made by web3—ownership, community, and legitimacy. You are reading Part 2.
Web3 promises to revolutionize the music industry by enabling ownership, community and legitimacy. A few weeks ago, I wrote an essay largely focussing on ownership. This essay focuses on community. More specifically, web3-native communities aka DAOs, and what they entail for the music creator economy.
DAOs, or Decentralized Autonomous Organizations, unlock radically new ways to organize capital and human resources. Packy McCormick sums it up succinctly:
“DAOs are a new way to finance projects, govern communities, and share value. Instead of a top-down hierarchical structure, they use Web3 technology and rapidly evolving governance and incentive systems to distribute decision-making authority and financial rewards. Typically, they do that by issuing tokens based on participation, contribution, and investment. Token holders then have the ability to submit proposals, vote, and share in the upside.”
DAOs usher in a brand new era of the creator economy. In the Bankless podcast, Variant’s Li Jin framed four distinct chapters of the creator economy:
Chapter 1: The rise of social networks and user generated content which were primarily used for social interaction and communication.
Chapter 2: Certain users started gravitating towards other prominent users, who became socially influential. These socially influential individuals (creators!) started converting their social capital to financial capital by advertising for brands — helping brands sell their products and services, giving rise to what we termed “influencer marketing”
Chapter 3: Creators realized that they don’t need to promote other brands and enterprises when they can become brands and entrepreneurs themselves. Why promote Starbucks when you can launch a coffee brand yourself?
Chapter 4: We are here today. Web3 is blurring the line separating creator (business) and fan (consumer). Structures such as DAOs align economic incentives in a way where the relationship between creators and fans is no longer unidirectional — altruistic fans and enthusiastic consumers are now investors and stakeholders in their favorite creators' businesses.
This new way of organizing capital and labour could latch onto existing practices in the music industry, leading to exciting derivatives:
A group of likeminded artists forming a creative collective.
A group of curious researchers forming a research collective.
A group of fans coming together to finance a new project by their favorite artist.
A group of music-tech enthusiasts coming together to form their own streaming service.
Attentive readers would be quick to point out that fan clubs, artist collectives, record labels, and DSPs are all existing ways of organizing labour and capital in the music industry. But what would each of these organizations look like, if they are structured as DAOs?
Let’s consider the following example:
Let's say you’re really into this emerging techno artist from Berlin—criminally underrated in your opinion. Let’s say this artist has a DAO that she has set up, with a community token $TECH.
You can get involved if you hold $TECH, and there are essentially three ways to do that:
Participation — you are a proactive member of her Discord, participate in community events, share her songs, build hype on Twitter, etc. Participants earn fiat currency (USD) or $TECH based on their involvement.
Contribution — you contribute your skills to the project itself. This could be anything that furthers the project: if you’re a graphic designer you could help with designing a visual NFT, if you’re a promoter, you could help route a tour, if you’re a community manager, you could help with managing the Discord, etc. Again, contributors could be compensated in fiat currency (USD) and/or $TECH
Investment — you can pay the market price (let's say $5 in this case) to buy $TECH.
Over the next few years, due to the work of financially incentivized participants and contributors, this artist gets a coveted spot in a respected showcase festival in Europe. Multiple playlist placements follow, stream counts grow, another successful EP released, and an American Tour announced. As the artist grows, their fanbase does as well, and demand for $TECH does too.
$TECH token-holders are given cool perks depending on how much they hold. Some of them (majority token holders) can decide where that artist’s tour is routed, others get access to exclusive events, meet and greets, exclusive merch, etc.
Okay, these perks are great, but can’t all of this just be done on good old Patreon? Well, yes. But I haven’t mentioned the best part yet.
The value of the tokens themselves has appreciated, due to the increased demand from new fans. It is not a stretch to imagine it growing by 10x or even 100x. Your early participation, contribution and support can pay off exponentially.
If your favorite artist has a Patreon subscription priced at $10 per month. You have supported this artist for one year, which means you have spent $120 to support them over this time. This $120 is an expense for you, an altruistic act to support an artist you love. Great!
If this same artist sets up his business as a DAO, the $120 you spend could be a potential share in their creative business, which would (or won’t) appreciate over time. Yes, the $120 you invested could become $12 with time. But it could also become $12000. Not too bad for your early act of support.
Moreover, as fans, we could actually financially benefit from the “I knew them before they were big!” spiel that we (not so) subtly flex about. Through DAOs, supporting your favourite artist could be transformed from an expense to an investment. Early supporters = early investors.
Some of the most successful and culturally relevant DAOs today, like Friends With Benefits, started out with a token price of $5. Today, new members need to hold 75 $FWB to be a part of the community, with each $FWB priced at $88.
This is one of many things DAOs can enable. Let us now look at more specific use cases. What does community-first, top-down music creation, distribution, and consumption look like?
Historically, labels have been a source of early capital for artists. They justified their lopsided and highly unfair contractual terms by claiming that they provided early capital to help fund the creation of music and get it heard globally.
Today however, creators have multiple ways to raise capital without labels—direct monetization on Patreon, regular crowdfunding, equity crowdfunding, etc. have all existed for a while, and even though every conference has a spiel about artists not needing labels anymore, the label model has still persisted. Why?
This is because there exists a misleading narrative wherein labels are framed as solely capital providers. Actually, what labels do incredibly well is fuse capital with labour. Even though these new direct monetization methods solved the need for capital, artists lacked the resources to deploy this capital in an efficient way. It’s not just about the money. It’s also about how you use it. The major label model is successful because they use capital and leverage it through labour — extremely talented (and highly underpaid) individuals who use their domain specific expertise, coordination, and cooperation to ensure that a creator’s music gets heard across the world—whether that means fighting for shelf space pre-Napster, or a banner ad on the homepage post-Napster.
Let us now imagine a label structured as a DAO.
DAOs not only act as a source of capital, they also have embedded financial incentives that lead to coordination among members — fusing capital and incentivized labour to help music creators grow. DAOs tick both boxes.
The community collectively decides which projects to financially support. For example, the Dreams Never Die Records DAO is a record label that is aiming to “become an incubator for brand-new artists and aspiring music business talent alike, built around an incentivized and aligned community that participates in discovering, developing, distributing, and promoting the roster.”
Participants and Contributors in the label will have a direct upside in the label’s success. Imagine every employee at UMG getting a financial upside in the label’s success. Overworked and underpaid employees as financial investors in Universal. The accumulation of wealth won’t be restricted to Vivendi executives and shareholders.
For independent artists, their 1000 true fan community could be structured as DAOs that use a shared treasury to collectively hire managers, agents and other music business professionals to help develop the artist they’ve invested in. To reiterate, DAOs can be a source of capital AND labour.
For example, Artists like Daniel Allan and Ibn Inglor have successfully crowdfunded their upcoming releases via Mirror. Daniel raised 49.3 ETH ($224,000) for his project, Overstimulated, and has subsequently released music on Catalog — funneling the proceeds back to his artist DAO treasury.
Artists like Daniel have also set up token-gated Discord communities. Imagine a world with token-gated creative input — token holders in a specific artist, or early supporters, could be entitled to give creative input for their favorite artist’s next song. Like shareholders having a say in a company’s decisions.
This type of crowdsourced creativity is already being enabled by the likes of SONGCAMP, a collective of music creators, which has hosted two cohort-based camps, where members of the community came together and created music.
In fact, one of their camps, called Elektra, spun off of the initial project to form their own DAO, the ElektraDAO. The Elektra camp had an initial funding goal of 20 ETH, around $82,000. They ended up raising 41.05 ETH, or $169,000. The collective of 42 music creators, visual artists, developers and strategists are planning to use the funds to build Elektra: “an interactive choose-your-own-adventure web3 game with music at its core.” The project was backed by 145 backers, with the highest contribution coming in at 5.4 ETH made by Brett Shear, also known as BlockchainBrett.
“As this project evolves, the lines between creator and audience will blur. Game builders will play the game they are building; and game players will build the game they are playing. The $ELEKTRA token will come to establish the contribution graph of this project, and once the camp is finished — the ElektraDAO will be born.”
Crowdsourced creativity can be baked into music creation tools themselves. Arpeggi Labs for example, is an on-chain music creation platform which acts as a browser-based DAW. Music created on Arpeggi can be minted on the Ethereum blockchain.
Side Note: Crowdsourcing creativity may seem dystopian to a few artists, since it’s the ultimate manifestation of the capitalist ideal: the customer is always right. Mike Shinoda did this on legacy tech, when he live streamed himself creating his next album on Twitch, and accepted fan inputs on how it should be produced.
If the creation of music becomes community-driven, the distribution of music will also be supercharged. Creation and ownership lead to evangelism. They are the most potent marketing forces in the music industry. Imagine the enthusiasm of a fan promoting a song that THEY helped create!
Fan communities have always been a very powerful force in the music industry. Communities of enthusiastic early fans have supercharged careers. But historically, these early supporters have largely been unsung heroes. Beyond some degree of pithy recognition by the artist, they haven’t really benefited from sticking their cultural and social limb out there; for believing in the artist when nobody did.
While we obsess about micro influencers and nano influencers to help promote an artist’s song — we forget that engaged, distributed fan communities are the most powerful influencers. Especially those fans who are financially invested in the song’s success. A DAO with 1000 true fans promoting a song that they are financially invested in is much more powerful than the most carefully orchestrated micro-influencer campaign. What web3 really does then, is not just acknowledge but also reward these early fan communities.
The music industry may start resembling the videogame industry, as web3 augments ownership and community on top of music consumption. Currently though, we’re way behind the curve. Recently, Matthew Ball posted a fascinating chart comparing the historical revenue of the music industry versus the gaming industry. The difference is staggering.
According to a16z’s Chris Dixon, the reason for this significant difference is that the video game industry has figured out an optimum balance between free offerings (that help with viral distribution) and paid offerings (that monetize that viral distribution). Most successful games such as Fortnite are free to play, but in-game goods and upgrades are paid.
In the music industry’s web3 future, music creators will distribute on web2 and monetize on web3. Spotify, Apple Music, YouTube, and other DSPs enable universal, ubiquitous access to music, for free or $9.99. We’re too busy trying to extract money from these legacy models — debating about pennies — whether payouts should be 0.08 or 0.09 cents per stream. But trying to monetize legacy web2 models is futile. By augmenting an ownership and community layer on top of web2, web3 offers significantly better monetization to support music creators.
Music creators should think of their Spotify Artist Page as their Google Business listing. It’s just a search tool that helps potential fans explore artists’ value propositions.
Web3 native music services such as Audius, are helping layer community and fandom on top of consumption, recently implementing an engagement system built on Solana to gauge and potentially reward fan involvement. Audius currently has 6.5 million MAUs.
Web3 and the communities it spawns will lead to the convergence of creation, distribution, and consumption. But I’d like to add a note of caution here, so as to not let ourselves be seduced by what Marshall Mcluhan used to call “rear-view mirror” thinking.
When faced with a radically new and uncertain technology or future, we tend to seek comfort in looking at the new and unfamiliar as an extension of the old and familiar. The new medium is seen merely as an extension of the old one. Neil Postman famously wrote that “we tend to think a car is a faster horse and a light bulb is a powerful candle.”
The creation, distribution, and consumption of music may look radically different in the future. This was my attempt to make sense of it all, with a pinch of skeuomorphism.
Thank you so much for reading! If you want to get in touch, you can respond directly to this email or reach out on Twitter. Always excited to meet like-minded humans!
Until next time,