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NFTs and the Music Industry: A Financial Opportunity with Many Legal Issues

The music industry is constantly changing. Over the last twenty years, the way audiences consume their music has spanned mediums, outlets, and now, platforms, all of which have created not only different ways of monetizing music but also a whole host of significant legal issues. The recent popularity of Non-Fungible Tokens (“NFTs”) in the marketplace, for example, adds yet another complex layer to this already intricate dynamic.

First, with many floating the term as experts, you may be asking, “What is an NFT?” An NFT is, “An NFT, or “non-fungible token,” is a unique unit of data stored on a public ledger of transactions called a blockchain. The unique data could represent an image, an electronic deed to a piece of property, or a digital ticket for a particular seat at a sporting event. In contrast to these “non-fungible” tokens, cryptocurrencies such as Bitcoin and Ether—just like U.S. dollars, British pounds and other “fiat” government-issued currencies—are fungible; one penny in your pocket has the same intrinsic value as the penny under your couch cushion.”[1] An NFT offers the uniqueness found in tangible collectibles and places it in the digital realm meaning the NFT purchased in the market, despite an artist being able to create several of a given work, will be the only one of its kind. This, obviously, generates considerable value for artists and NFT owners to capitalize on, both digitally as well as financially.

However, creators, especially musicians, must know by now that with every unique piece of art, with every song comes numerous legal questions which can place a damper on these novel creative forces. NFTs present those issues and more. These questions may include the following:

  • Artists must be extremely sure what bundle of rights they possess early in the creation process. If those rights do exist, are they complete? In other words, do they give them full permission to tokenize a piece of music and later authenticate the final NFT product on their own or do they need the blessing of other artists, songwriters, producers, recording companies, etc.?

  • What if an artist decides to create an NFT alongside a piece of video or digital art? Do the latter two parties—the digital videographer or visual artist—have some say in how the NFT is created and marketed?

  • And even if the artist crosses all those hurdles and makes a sale, who receives the proceeds of that first sale, and, then, whatever future income streams the NFT produces?

  • Who else beyond the artist and owner can use an NFT and for what other creative or value producing purposes?

  • Who protects against the unauthorized tokenization of an NFT’s underlying songs/content and how?

To the extent these questions and many others that arise from the creation and use of each NFT are answered, artists find incredible value in this medium. From Kings of Leon[2] to Steve Aoki[3], from rock to hip-hop, the all-encompassing, direct value forming nature of music NFTs does not seem to be a passing fad. Rather, they represent a potential springboard towards yet another modernizing evolution of the industry.


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