The market has entered a rotation mode. Is the music sector likely to become the next breakout point?

Author: Gala music

1. Overview of the Music Market

1.1 Traditional Music Market Situation

The growth of the global music market has shown strong momentum over the past decade, especially with the rise of digital music and streaming services bringing about disruptive changes. According to the 2023 Global Music Report released by the International Federation of the Phonographic Industry (IFPI), driven by the growth of paid subscription streaming, the global recorded music market grew by 9.0% in 2022, with total revenue reaching $26.2 billion. By the end of 2022, the number of global paid subscription users reached 589 million, with subscription audio streaming revenue growing by 10.3% to $12.7 billion; total streaming revenue (including paid subscriptions and ad-supported) grew by 11.5% to $17.5 billion, accounting for 67.0% of total global recorded music revenue. Other areas also saw growth, with physical revenue slightly increasing by 4.0%, performance rights revenue growing by 8.6%, returning to pre-pandemic levels, and synchronization revenue increasing by 22.3%.

These figures indicate that even in the face of global economic challenges, the music industry continues to maintain strong growth momentum. In particular, streaming services like Spotify and Apple Music have become the primary means of music consumption. According to data released by Statista in 2023, by the end of 2022, the total number of global music streaming subscribers had reached 590 million, with Spotify having 188 million subscribers, accounting for 31.8% of the total global subscribers. Following closely are Apple Music and YouTube Music, with 88 million and 80 million subscribers, respectively.

1.2 Major Market Participants

In the traditional music market, various participants play different roles, collectively forming the ecosystem of the music industry.

(1) Artists

Artists are the core of the music industry, creating musical works and sharing them with audiences through various channels. In the traditional model, most artists need to sign with record companies to gain broader market exposure and commercial success. However, digitization and the internet have provided independent artists with more avenues for self-promotion and direct profit.

(2) Consumers

Consumer behavior in music consumption has changed with technological advancements. From purchasing physical media (such as records and CDs) to downloading music files, and now subscribing to streaming services to listen to music, consumption patterns are rapidly evolving. Consumers not only have more freedom and control over their music choices but are also increasingly inclined to discover and share music through social media and music-sharing platforms.

(3) Record Companies

Record companies, such as Universal Music, Sony Music, and Warner Music, are primarily responsible for the production, promotion, and distribution of music. They provide artists with services such as recording, production, marketing, and legal support. In the traditional model, record companies dominate the music industry chain, controlling the commercialization process of music.

(4) Distributors

Distributors serve as intermediaries connecting record companies and sales terminals (such as retailers and digital music stores). They are responsible for delivering musical works from producers to consumers. With the development of digitalization, the role of traditional physical distributors has gradually diminished, while the importance of digital distribution platforms like iTunes and Amazon Music has increased.

(5) Streaming Platforms

Streaming platforms, such as Spotify and Apple Music, offer a new mode of music consumption. Users can listen to music online without limits through subscription services. These platforms utilize powerful algorithms to recommend music to users, changing the way music is discovered while providing artists with new exposure opportunities.

1.3 User Trends

(1) Digital Consumption

With the widespread use of the internet and smartphones, digital music consumption has become mainstream. Users prefer to subscribe to streaming services rather than purchase individual music works.

(2) Personalization and Social Sharing

The personalized recommendation algorithms of streaming platforms suggest new songs or artists that users may like based on their listening habits. Additionally, social sharing features allow users to easily share their favorite music with friends or others on social networks.

(3) Participation and Interaction

Modern music consumers are not just passive listeners. Many engage in online communities, vote in music shows, and interact with artists on social media, becoming part of the music creation and dissemination process. This participation and interaction provide valuable feedback to artists and build stronger fan connections.

At the same time, the emergence of Web3 signals that the music industry is about to undergo deeper transformations, with user behavior patterns expected to evolve further. The application of decentralized platforms and technologies, such as NFTs, establishes direct connections between artists and consumers, offering a more transparent and fair way of interaction. These changes in user behavior not only affect the way music is consumed but also redefine the value chain and business models of the music industry.

2. The Emergence of Web3 Music

2.1 Introduction to Web3 Music

Web3 music represents a brand new model for the music industry, utilizing tools such as NFTs, smart contracts, and DApps to provide an innovative approach to music creation, distribution, and consumption. Compared to the traditional music industry, Web3 music emphasizes the protection of artists' rights, direct and fair distribution of income, and more direct and participatory interactions between fans and artists.

2.2 Market Background

The various pain points of the traditional music market have provided fertile ground for the emergence of Web3 music. Issues such as unfair income distribution, limitations on fan participation, excessive intermediaries, and copyright disputes have long plagued the healthy development of the music industry. Therefore, the emergence of Web3 music can be seen as an innovative solution to these long-standing problems.

• Unfair artist income: Most income is taken by intermediaries such as record companies and streaming platforms, leaving artists with only a small portion of the revenue.
• Limitations on fan participation: Interaction between fans and artists is limited by intermediary platforms, restricting deeper interaction and support.
• Excessive intermediaries: The presence of too many intermediaries in the music industry increases costs, reduces efficiency, and harms artists' interests. According to the Rethink Music report, 20% to 50% of copyright revenue does not reach legitimate copyright holders but is consumed in various opaque processes.
• Complexity of copyright management: Copyright management in the traditional music industry is complex and inefficient, with artists generally receiving only 8% of copyright revenue. In addition to receiving a small share of copyright distribution, artists also face delayed income, with copyright fees often taking one to two years to reach them.

2.3 Significance of Web3 Music

The significance of Web3 music lies in how it leverages technological innovation to empower artists and fans. By ensuring that artists can directly benefit from their works, Web3 music provides a fairer revenue distribution mechanism for music creators. Artists can directly sell music, tickets, or exclusive content to fans through the issuance of NFTs, maximizing their revenue.

For fans, Web3 music enhances participation, allowing them to become part of the artistic creation process by purchasing NFTs, gaining access to exclusive content, and participating in decision-making. This model enhances fans' sense of involvement and belonging, fostering closer connections between artists and fans.

2.4 Explosive Potential of Web3 Music

With Bitcoin and the entire crypto market showing signs of a bull market, investors and market participants have shown significant interest in emerging technologies and applications. Given the clear technological innovation and market demand in the Web3 music space, it is expected to experience a surge during this bull market.

(1) As the cryptocurrency market thrives, more funds and attention will flow into high-growth potential sectors, with Web3 music being one of them.

(2) Artists and creators exploring new platforms and revenue models will further drive the development and innovation of Web3 music projects.

(3) As more successful cases emerge, public awareness and acceptance of Web3 music will increase, attracting more artists and fans to participate, bringing new growth points to the industry.

Therefore, the development potential of the Web3 music sector, combined with the overall bullish atmosphere of the crypto market, presents explosive opportunities for the music sector. In terms of technological innovation, market demand, and financial support, Web3 music is expected to achieve a qualitative leap during this bull market.

3. Changes Brought by Web3 to the Traditional Music Market

With the rise of Web3 music, it has brought profound and positive changes to the traditional music market. By leveraging blockchain technology, Web3 music proposes innovative solutions in areas such as artist revenue, fan participation, and copyright management.

(1) Increased Artist Revenue

A core advantage of Web3 music is its ability to directly enhance artists' revenue. Through NFTs, artists can sell music works, concert tickets, or exclusive content directly to fans without going through traditional music distribution platforms or record companies, allowing them to retain a larger share of the income.

(2) Deepened Fan Participation

Web3 music provides fans with unprecedented ways to participate through NFTs and social token mechanisms. Fans can not only purchase exclusive music works but also engage in the artistic creation process, such as voting on the content of music videos or participating in the production of specific music projects. This interactive approach deepens fans' support for artists while providing fans with a more personalized and valuable experience.

(3) Reduced Influence of Intermediaries

A notable feature of the Web3 music model is the reduction of intermediary influence. Through decentralized distribution and sales platforms, artists and fans can transact directly without going through third-party platforms. This disintermediation lowers costs and indirectly increases creators' revenue.

(4) Innovation in Copyright Management

Web3 music achieves transparency and automation in copyright management through blockchain technology. Smart contracts can automatically execute copyright agreements, ensuring that relevant revenues are distributed instantly and accurately to artists and other rights holders each time music is played or purchased. This mechanism not only improves the efficiency of copyright transactions but also safeguards artists' earnings.

Although the Web3 music market is still in its infancy, it has already attracted a large number of tech enthusiasts, blockchain investors, independent artists, and forward-thinking music consumers. The uniqueness of this market lies in its decentralized nature, operating without relying on centralized platforms or institutions. Artists can interact directly with fans, providing them with unique music experiences and digital goods. Additionally, the Web3 market advocates for transparent and fair revenue distribution, allowing artists to receive a larger share of income.

4. Representative Projects of Web3 Music

4.1 Gala Music

4.1.1 Project Introduction

Gala Music is a pioneering platform that utilizes Web3 technology and digital tokens to reshape the music industry. It aims to provide a fair and transparent environment for artists and fans, breaking the long-standing control of the traditional centralized model over the industry. The main advantages of Gala Music include a fair revenue distribution system, transparency, and a token-based reward mechanism, all of which encourage active fan participation and build stronger relationships between artists and fans.

Gala Music is backed by the Gala ecosystem, forming the cornerstone of the Gala ecosystem alongside Gala Games and Gala Movies. The CEO of Gala Music is Leila Steinberg, who was the artist mentor and manager of the legendary rapper 2PAC, and the platform collaborates with superstars like Snoop Dogg.

4.1.2 Platform Operation Model

The Gala Music ecosystem consists of four basic roles: artists, NFT owners (collectors), (jukebox) node operators, and fans.

(1) Artists

Artists are the core of the Gala Music ecosystem. They are not only the main creators of music but also the starting point of the entire platform's value chain. Artists earn revenue by releasing music NFT works on the platform. This includes directly selling NFTs, earning royalties through transactions in the secondary market, and selling music-related merchandise. Artists can interact directly with fans, gather feedback to optimize their works, and earn additional rewards by referring new users to join Gala Music.

(2) NFT Owners

NFT owners, or collectors, become holders of a song by purchasing music NFTs. NFT owners host their NFTs on jukebox nodes and earn MUSIC tokens based on the play volume and popularity of the songs. Additionally, they can sell NFTs in the secondary market for profit. Collectors help artists' works gain more exposure by participating in music playback and promotion while also earning revenue for themselves.

(3) Node Operators

Node operators support music playback on the Gala Music platform by purchasing and operating jukebox nodes. Node operators need to maintain an online status of at least 20 hours per day to support music playback and distribution. They earn MUSIC tokens as rewards based on the play volume of the hosted music.

Operators can choose to host more popular music to increase their earnings and can also spend MUSIC tokens to upgrade nodes to increase the number of hosted music, thereby enhancing their competitiveness and revenue potential.

(4) Fans

Fans are the consumers and participants in the Gala Music ecosystem, supporting their favorite artists by listening to music. They can also purchase artists' albums, merchandise, and concert tickets. On Gala Music, the interaction between fans and artists is more direct and personalized, allowing fans to gain deeper insights into the artists' creative processes and even participate in music creation and promotion.

Through this multi-role interaction model, Gala Music builds a music ecosystem that incentivizes creation and rewards participation, allowing each participant to find their value and position on this decentralized platform.

4.1.3 Token Information

Name: MUSIC

Total Supply: The maximum supply of MUSIC is 1 billion, with an initial circulating supply of 150 million. The initial 75 million MUSIC tokens come from test tokens, while the official also minted an equal amount of MUSIC tokens for ecosystem operators to use for ecosystem partners and platform participation activities.

The current token price is $0.15, with a market cap of approximately $15 million.

Token Uses:

(1) Purchase Music NFTs

Users can use MUSIC tokens to purchase music NFTs on the platform, which is one of the main sources of revenue for artists.

(2) Purchase Merchandise in the All Access Store

MUSIC tokens can be used in Gala Music's All Access Store to purchase artist-related merchandise, such as albums, T-shirts, hats, etc. This not only provides artists with an additional revenue stream but also enhances the connection between fans and artists, increasing fans' sense of participation and belonging.

(3) Node Purchase and Upgrade

Jukebox node operators need to use MUSIC tokens to purchase and upgrade nodes to host more music NFTs and earn playback rewards.

(4) Incentivize Ecosystem Participation

MUSIC tokens are used to reward behaviors that contribute to the ecosystem, such as artist creation, fan listening, user referrals, etc.

(5) Token Burning

In specific scenarios, such as transactions in the All Access Store or STGE tips, some MUSIC tokens will be used for burning, meaning they are permanently removed from circulation. The burning mechanism helps reduce the market supply of MUSIC, increasing the potential value of holding MUSIC.

4.1.4 Social Media

Official Website: https://music.gala.com/

Twitter: https://twitter.com/gogalamusic

Discord: https://discord.gg/gogalamusic

Gala Music can be said to represent the music sector. In fact, the current operation model of Web3 music projects mainly focuses on expanding artist revenue, enhancing interaction between artists and fans through NFT empowerment, and increasing artists' revenue potential. The specific form is basically that artists release music works in the form of NFTs, and fans use tokens to directly purchase works or other merchandise to support the artists.

Since there is little possibility of significant differentiation in operation models or economic models in this sector, the real competitive point lies in resources. Taking Gala Music as an example, its strong support from the Gala ecosystem, the majority of its executive team coming from the music industry, and collaborations with rap superstars like Snoop Dogg make it more attractive than other competitors.

Next is the economic model, with the MUSIC token serving as the medium for circulation and rewards on the platform, directly supporting artists' creation and revenue while providing fans with opportunities for participation and rewards, increasing its investment value in the crypto music market. With further development of the platform and growth of the user base, Gala Music is expected to become an important bridge connecting artists, fans, and investors, driving innovation and growth in the entire Web3 music industry.

4.2 Audius

4.2.1 Project Introduction

Audius is a decentralized music sharing and streaming platform where artists can upload and distribute their songs through decentralized nodes, while listeners can directly support artists using the native cryptocurrency AUDIO. Audius aims to allow artists to retain more income and establish direct connections with fans.

Audius grants artists exclusive ownership of their music, allowing them to decide how to monetize their works. According to Audius platform regulations, music curators will receive 90% of AUDIO token revenue, with the remaining 10% going to node operators (stakers) supporting the Audius network.

Artists have multiple ways to earn from their works on Audius:

• Uploading content for the first time after verifying social media
• Getting works onto popular playlists
• Active interaction with fans
• Reaching a certain number of listeners
• Issuing personal merchandise, etc.

4.2.2 Token Information

Name: AUDIO

Total Supply: Initial issuance of 1 billion, with an annual increase of 7%, no issuance cap, currently valued at $360 million.

Token Uses:

• Ensure network security; anyone can become a node by staking AUDIO tokens, and they can earn AUDIO by assisting in running protocol operations from ongoing token issuance and total fee pools.
• Community governance; only those running nodes can propose on-chain proposals, and to pass a proposal, at least 5% of staked AUDIO must vote on it, with over 50% in favor.
• Access exclusive content or features; fans can unlock exclusive content and unique experiences, such as listening to unreleased tracks or participating in remix contests.

4.2.3 Social Media

Official Website: https://audius.co/

Twitter: https://twitter.com/audius

Telegram: https://t.me/Audius

Discord: https://discord.gg/audius

4.3 Pianity

4.3.1 Project Introduction

The Pianity platform allows artists to profit by selling music NFTs, with all music NFTs permanently stored in Arweave. Fans can purchase, collect, and trade these limited edition music works. Pianity not only provides a new way to collect music works but also creates new revenue sources for artists and builds an active community where fans can discover new music and interact with other collectors.

The Pianity platform has three main functions:

• Pricing Sales: Pianity provides music NFT sales services for artists and collectors, allowing them to initiate listings at fixed prices in the NFT market.
• Auction Function: In addition to pricing sales, Pianity also offers an auction function for music NFTs, where artists and collectors can auction their collected music NFTs in the secondary market.
• Bounty Function: The bounty function allows artists to distribute free NFTs to fans as a reward, which can be sold in the secondary market and generate value. For artists, distributing bounties is a win-win approach, rewarding fans with unique digital assets while helping to build and expand their community.

4.3.2 Token Information

Name: PIA

Total Supply: 1 billion, currently not listed for trading.

Token Uses:

Holding locked PIA means gaining voting rights; every 1 PIA locked for two weeks earns 1 vote, allowing users to vote for their favorite music works on the platform. In the future, when the PIA token is listed, it can be traded or used to purchase music NFTs on Pianity.

4.3.3 Social Media

Official Website: https://pianity.com/

Twitter: https://twitter.com/pianitynft

Telegram: https://t.me/joinchat/KQrVv1c_WLcwZWU0

Discord: https://discord.gg/pianity

5. Future Outlook

As Web3 technology continues to penetrate and mature in the music industry, the potential of the Web3 music market is enormous, with broad investment prospects, but it also comes with certain risks and challenges.

The market potential of Web3 music is primarily reflected in providing artists and fans with new interaction methods and revenue models. The introduction of blockchain technology, NFTs, and smart contracts not only allows artists to benefit more fairly from their works but also enables fans to participate more directly in artistic creation and value sharing. With technological advancements and increased user awareness, more innovative applications are expected to emerge, driving growth across the industry.

However, it is important to note that, like all emerging markets, this field also carries risks. Investors considering entering this market need to fully understand the maturity of relevant technologies, the market's acceptance level, and potential changes in laws and regulations.

Despite these uncertainties, we remain optimistic about the long-term value and potential of Web3 music projects based on the following points:

• Technological Innovation: Web3 technology and NFTs have brought revolutionary changes to music copyright protection and revenue distribution, providing artists with more autonomy and income sources, addressing the most pressing concerns of creators.
• User Engagement: Web3 projects deepen the connection between artists and fans by providing unique fan participation mechanisms, such as NFT ownership and social tokens.
• Market Demand: There is a strong demand in the current market for a fairer and more transparent music industry model, which Web3 music projects meet.

Taking Gala Music and Audius as examples, they provide decentralized platforms that allow artists to directly benefit from their works and enhance interaction with fans in innovative ways, demonstrating clear market potential and attractiveness. The success of these projects is based not only on their technological advancements but also on their precise grasp of market demand and continuous development of innovative capabilities.

6. Conclusion

In exploring the future outlook of the Web3 music industry, we not only see the possibilities brought by technological innovation but also re-examine the core value of music itself. Borrowing the viewpoint of the author Zhong Wen from the WeChat public account "Yinwan" ------

"No matter the scene or form, the core attribute of music does not change ------ music is a way for us to empathize with the world, a language that transcends time and culture. This may be the most attractive aspect of the music industry. In any era and civilization, we need music and will be moved by similar rhythms."

It is this understanding of the unchanging value of music that forms the fundamental reason for optimism about the development of the Web3 music industry. Although Web3 technology has brought unprecedented changes to the music industry, its ultimate goal remains to better serve music itself and its social functions. By providing a fairer revenue distribution mechanism, deeper fan participation methods, and more efficient copyright management systems, Web3 music is helping artists and fans rediscover the charm of music.

Although the development of the Web3 music industry still faces many challenges and uncertainties, just as every technological innovation in history has brought about industrial transformations, these challenges will ultimately be resolved. With further technological maturity and deeper market development, we have reason to believe that the Web3 music industry will be able to fully realize its potential, bringing a brighter future to the global music industry.