Games have raced ahead to build Web3, but it’s not too late for music

The following statement comes from Bruno Guez, CEO of digital rights management company Revelator. MBW published an op-ed from Guez in July last year asking what it would take to diversify the music industry.

It’s been quite a year for decentralized technology, musical NFTs and Web3. There’s been all kinds of buzz in the music industry, from announced jobs to announced collaborations, indicating how this technology is changing and will change music. But don’t let the seeming activity fool you: music companies have been too slow out of the starting gate.

Already, the race is on to define and shape Web3. Game companies have surged ahead, grabbing major music companies, resources, technology and talent as they go.

The big players in the music industry are unlikely to catch on easily. At this point, all signs point to them needing to adapt to gaming leadership, rather than trying to lead themselves, if they want to play a viable role in the future of Web3.

How did this happen? While music companies struggled, game companies worked. It was easy for them; Their products are built on communities – aggregating them, maintaining them, monetizing them – at its core, Web3 is about community. Signals and DSPs are not. Labels have struggled to build fan communities for artists. DSPs have struggled to build a community of fans, to an almost embarrassing degree. Subscribers and playlists just aren’t enough to build fan communities.

Still, of course, this doesn’t mean the end of the music business. The industry will adapt and likely thrive if it can adapt to Web3 culture and rethink business models.

Games without borders

Just watching the deal slip through is enough to see the legacy of a leading gaming company in the music players. Tencent has taken majority or controlling stakes in gaming companies outside of China, including a recent movement associated with Ubisoft.

Epic bought Bandcamp. Microsoft is buying Activision. Kids are discovering music not through Spotify, YouTube or even TikTok, but through games. Napster hired a former Roblox boss to reboot it. Roblox swears Fortnite been the scene of major musical events.

This slice of recent examples shows just how far game companies have already moved toward the immersive, interactive virtual world where music becomes part—an important part, but just a part—of the experience. (AI generated music is already being developed for playback.) “Active” is a big part of interactive, and active communities are more important than size in web3. Game companies already know how to do community; for many of the popular games, gameplay is secondary for players who join to meet friends and talk to others.

Game companies also know how to create digital characters and avatars that resonate culturally with these communities. They know how to sell digital collectibles and virtual goods in the game and ignite virtual economies. Music companies have a lot to learn to achieve the same level of expertise and engagement that is perfectly positioned to thrive in Web3.

Creative license

This is not advice for Web3 despair. It’s a call for realism about what music companies and streaming platforms need to do to be strong partners in this growing Web3 world, where they are unlikely to take notice.

Despite many maximalists’ dreams of decentralization of a direct connection between artist and fan that would end the need for all middlemen, labels will still exist and have an important role to play. However, they have never been good at building communities. Labels don’t build; they market. They see the market in a way that is difficult to reconcile with Web3. They see it as a series of distribution channels that need to be monetized. Web3 is about incentives translated into new represented business models, like listening to earn money. Snoop is on to something.

Labels seem to be applying their legacy marketing-centric model to Web3, do offer with NFT marketplace, for example. Web3 marketplaces are simply a new distribution channel. In fact, there is nothing new about it. it’s the same way labels have always done, the same way they’ve always made money.

Brands need to undergo a serious culture shift to thrive in Web3. They need a different mindset and new tools; the question no longer becomes “how do we sell this?” but “how do we grow an artist community?”

Part of the answer to this is licensing, specifically a Web3-friendly licensing framework, one that accommodates methods like CC0. Web3 communities want to create to earn, similar to the play-to-win model. This means a new business model for labels, when primary copyright claims are dropped to let a community create derivative works and build long-term community and artist brand value. The industry, so loathe to deal with derivative works like remixes, needs to completely change its view of licensing and copyright.

DSP, interrupt yourself

DSPs own the current digital music market and all the listeners in it. This approach makes it easy to postpone change, even more complicated to accept it. But as the much larger gaming industry accelerates and drives Web3 innovation and adoption, DSPs need to act now, to effectively disrupt and manage two interconnected shifts. One is generational and the other cultural.

For music lovers, Gen Z and younger, gaming is part of their upbringing. In their world, everything is gamified, even once staunch bastions like stocks, thanks to rock-loving Robin Hood users. Younger fans aren’t interested in click-and-flow models. They want and expect more, which is why TikTok has so much music effort.

The next generation will be Web3 native. Yet culturally, DSPs are built as Web2 products, which may turn out to be the right strategy to put the next 100 million wallets into Web3. (For a great example of this, see Reddit’s latest moves by adding 3 million new wallets for their NFT avatar.) For artists, DSPs need to foster token economies around artists and their digital creations, economies that can handle dynamic community-owned content. Younger listeners are going to expect things like creating to earn and listening to earn incentive tokens. There is no indication of this yet from DSP.

This change will be difficult to implement in terms of product. Most DSPs don’t want to build Web3 products inside their platform and create huge complexity like Facebook. This challenge is an opportunity: Because they have a strong position in Web2, they can open the Web3 market to the mainstream. By necessity, this will be a hybrid approach for some time to come. Web3 natives, young artists with young audiences, will get it. For older artists and their audiences, this change may prove more difficult. DSPs need to accommodate them.

The world to come

There’s a lot more to say about what’s already happening, both in games and in the grassroots Web3 music community. Suffice to say, music companies will have to contend with a world where protocols capture the value programs as they are captured.

This new approach is shaking up existing business models, including licensing, artist financing, and music fan experiences and expectations. Web3 innovation is developing rapidly, at an ever faster pace. Platforms and labels will need to act quickly and decisively to stake their claim in Web3.

Worldwide music business

Leave a Comment

Your email address will not be published. Required fields are marked *