Music-Tech Jargon: A Beginner’s Guide to NFTs, Music Streaming Algorithms, and Digital Royalties

The fusion of catchy music beats and cutting-edge technology has transformed the music industry and introduced revamped royalty systems, AI-driven streaming algorithms, and blockchain-backed NFTs. While these terms look exciting, they might be equally overwhelming for non-techies.

Let's take a look at these terms and break them down in this guide.

NFTs: A New Way of Digital Ownership

Non-Fungible Tokens, better known as NFTs have been gaining popularity in the digital art and music fields and reshaping how we think about ownership and digitalization. Now, the question arises- what are NFTs, and why are they significant?

What Are NFTs?

An NFT is a unique digital certificate stored on a blockchain, that is used to signify ownership and authenticity. Each NFT is unique and consists of metadata that distinguishes it from other tokens. While cryptocurrencies such as Bitcoin or Ethereum can be used interchangeably with one another, NFTs are one-of-a-kind and can’t be replicated. Owing to this rarity, today NFTs are widely being used to demonstrate ownership of digital art, music, and other creative products.

NFTs in Music

Music NFTS are reshaping the music industry by allowing artists and musicians to emphasize trust and authenticity by copyrighting their work and eliminating the fear of plagiarism and misuse. By converting their music or art into NFTs, creators can sell ownership of their work to their fans, who can then sell them again or hold onto them as collectibles. Apart from unreleased music, NFTs can add more value beyond music by holding additional content like concert tickets and artist collectibles. Not only do NFTs help artists to tokenize their work, but it's also a blessing in disguise for hardcore fans who now enjoy a new level of collectibility of limited-edition albums and even future releases.

While we’ll be covering everything from the basics in this blog, this YouTube video provides a clear overview of NFTs in music —

The Bright Side: A Goldmine for Artists

1. Less Hassle, More Rewards: Being separately minted on a blockchain eliminates the need to establish a record label or the involvement of a distributor who frequently limits substantial profits, enabling the artists to enjoy the rewards of their labor directly.
2. Sense of Ownership: NFTs in the music industry not only grant musicians exclusive ownership of their work but also give fans a sense of ownership by allowing them to collect unique artifacts from their favorite artists. This serves as a certificate of authenticity while establishing a more direct connection between artists and their fanbase.
3. Income Avenues: From token-gated experiences to digital collectibles, tokenizing music can generate new income avenues for artists beyond conventional methods like streaming or physical album sales. In addition, artists can incorporate exclusive benefits into their NFTs, such as unique content, limited-run merchandise, or access to VIP events.

The Down Side: Hurdles You Might Face

1. Prone to Scams: It must be noted that NFTs are frequently represented on digital marketplaces, which are highly prone to fraud schemes like phishing scams and fake giveaways. These scams either target people directly out of money or by gaining credentials of their digital wallet or cryptocurrency wallet.
2. Environmental concerns: The minting process and maintenance of NFTs leave a sizeable carbon footprint and have a high energy consumption, which contributes significantly to greenhouse gas consumption and climate change.
3. Legal Issues: Frequently, copyright and record deals can be cumbersome and could land you in legal trouble. The unauthorized use of copyrighted material and lack of clarity regarding the rights of NFT ownership can result in serious legal charges and potential lawsuits.

Creating NFTs: One Step at a Time

1. Create Your Unique Content
    — Produce your audio file (MP3, WAV) or combine it with visuals (video, animation, GIF, or art). 
    — Make sure your file format is supported by NFT marketplaces.
2. Establish an Ethereum Wallet
    — Download and set up MetaMask (a widely-used Ethereum wallet). 
    — Create your wallet using the MetaMask Chrome extension or the mobile app. 
    — Protect your wallet with a strong password and save your recovery phrase securely.
3. Fund Your Wallet with Ethereum
    — Buy Ethereum (ETH) from a cryptocurrency exchange like Coinbase or Binance. 
    — Transfer ETH into your MetaMask wallet to cover minting (gas) fees.
4. Create an Account on an NFT Marketplace
    — Sign up on platforms such as OpenSea, Rarible, or Foundation. 
    — Connect your MetaMask wallet to the selected marketplace.
5. Mint Your NFT
    — Click “Create” and upload your audio file or visual content. 
    — Enter metadata: title, description, and royalties (to earn from future sales). 
    — Decide if it’s a one-of-a-kind NFT or part of a larger collection.
6. Cover the Gas Fee
    — Approve the transaction fee in your MetaMask wallet to mint the NFT. 
    — This fee is necessary for blockchain validation during your token’s creation.
7. List Your NFT for Sale
    — Opt for a fixed price or auction style. 
    — Specify royalty percentages for subsequent sales. 
    — Confirm and complete your listing.
8. Market & Sell Your NFT
    — Promote your NFT on social media and with your audience. 
    — Interact with NFT communities to boost visibility.

After minting, your NFT is active and ready for collectors to buy!

Music Streaming Algorithms: How Playlists Are Created

Have you ever wondered how music streaming apps like Spotify and SoundCloud often recommend tracks that are specific, relevant, and unique to your music taste? The science behind this is pretty genius- Music Streaming Algorithms that analyze data and recommend curated playlists as per user preferences and behavior.

Breaking Down How Streaming Algorithms Work: A Case Study on Spotify

Streaming algorithms keep track of your activities like which songs you often listen to, what your favorite tracks are, and how often you skip tracks to recommend music, tailored to your liking. Furthermore, these algorithms are integrated with machine learning and coding technologies to enhance their effectiveness as time goes on.

Let's understand how streaming algorithms work with the help of a systematic breakdown of various algorithms involved in one of the biggest music streaming giants - Spotify.

1. Data Collection and Storage: First and Foremost, the relevant data is collected and analyzed to create a user-specific profile. This involves user-based data like likes, skips, streaming history, search queries, and song data like lyrics and music acoustic properties. Additionally, user-behaviour patterns like listening time, duration, and preferred genres are also monitored to deliver an improved song curation experience. To streamline the data processing process and analyze large datasets effectively, Spotify deploys advanced technologies like Apache Spark and Apache Hadoop, benefitting from the former’s high speed and the latter’s robust storage capabilities.
2. Algorithm Implementation: Spotify incorporates Machine Learning models like TensorFlow and the extended TensorFlow Ecosystem (TFX, TensorFlow Serving, and so on) into its algorithms to increase efficiency. The platform also uses a Collaborative Filtering algorithm, which identifies users with similar listening habits as yours and recommends music that similar users have played and enjoyed- much like music recommendations from your friends! Furthermore, it integrates Natural Language Processing (NLP) in which songs’s lyrics are fed to the NLP model, and weights are assigned to keywords to analyze how people describe music online and identify the user’s mood, emotions, and even the context in which they’re listening to music.
3. AI Optimisation and Personalisation: Spotify is widely known for its tailored playlists like “Discover Weekly” and “Daily Drive.” While Discover Weekly rewards its 200 million users with 30 new songs that they’ve never heard before, Daily Drive combines relevant news talk shows and podcasts, along with the tracks you generally enjoy listening to. Spotify refines its recommendations based on new user interactions and is particularly known for its annual feature “Spotify Wrapped”, which deploys AI which analyses users’ listening habits throughout the year and provides statistics at the end of each year. The “AI Playlist” feature of Spotify, which launched in 2024, allows its users to generate playlists using AI with the help of prompts containing a combination of genres, moods, artists, or decades.

Why is Spotify’s Streaming Algorithm So Popular?

Spotify not only provides a personalized user experience but also improves recommendations based on user feedback. It takes into consideration all that the users like, skip, and replay to analyze what to recommend and what not to recommend. While Spotify is known for its accurate recommendations, it aims to improve itself with each app update to understand its users better and refine its recommendations better.

Digital Royalties: How Artists Get Paid Online

With the shift from buying music in physical format in the form of CDs and cassettes to streaming it online, how artists are being paid for their work has also changed altogether. Let us dive deep into a concept that needs to be understood by artists and their fans to value their work fairly- Digital Royalties.

What Are Digital Royalties?

Digital royalties are the fees that are paid to songwriters, artists, and rights holders for the licensed use of their music on digital platforms. These payments are made after specific intervals, say quarterly or monthly and are prioritized over payments made to company executives and stockholders. These can be classified as:

1. Mechanical Royalties: These royalties are paid to songwriters and publishers whenever any of their copyrighted music is streamed or downloaded, either physically or in a digital format.
2. Performance Royalties: These royalties are paid to rights holders and artists when their music is performed in live concerts, on radio, or on any streaming service.
3. Synchronization (Sync) Royalties: These are paid when a song is used in visual media, like movies, TV shows, and commercials.

Availing the Benefits: The Complete Process

The process of earning royalties is fairly simple. As soon as the music composed and recorded by artists is streamed for at least 30 seconds, the rights holders receive payment.

1. Copyright Creation: Once a song is written and recorded, copyrights like Master rights and Publishing Rights are monetized. To move forward, let us first understand these terms; While Master Rights are created automatically once a song is recorded and the rights of the composition are exclusively owned by the record label, recording artist, or anyone who has financed the composition, Publishing Rights are the rights to the composition of a melody, lyrics, and arrangement of a song usually owned by the composer, lyricist, and songwriter. Once these copyrights are created, the artist signs an agreement with the publisher (for publishing rights) and a record label (for master rights).
2. Registration and Distribution: To ensure that your music earns royalties when streamed or downloaded, it is important to register your songs with Performance Rights Organization (PRO) organizations like ASCAP, BMI, and SESAC which track and monitor performance royalties.
3. Collection and Payment: The distributor and Performance Rights Organizations act as an intermediary, by collecting royalties, establishing ownership of your music, and paying the proper rights owners and administrators whenever your music is publicly performed.

The Bottom Line

While the music-tech world is constantly evolving, it becomes essential for music fans and artists to keep up with the pace and have a clear understanding of these tech terms. By understanding terms like NFTs, streaming algorithms, and digital royalties, you can easily move around this world and make smart decisions about how you make, enjoy, and support music. Let's welcome the change, and let the music keep playing!

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