Business

Who’s Buying Music NFTs Anyway? The Fans and Crypto Whales Fueling the Craze

Who is buying NFTs
Illustration by Ryan Inzana

Tim Kang, a 28-year-old software engineer from Los Angeles, became wealthy by investing early in the cryptocurrency Ethereum. But he sees more potential in blockchain, the digital-ledger technology that enables the existence of cryptocurrencies. “I’ve been waiting so long,” he says, “for something that communicates to the world that it’s about more than just cryptocurrency.”

Kang found that something in NFTs, the non-fungible tokens that use blockchain as authentication and have become digital collectibles -- as well as a booming new business for musicians. And he’s putting his digital money where his mouth is: So far, Kang estimates that he has spent about $2 million on art and music NFTs, which he does not intend to sell. His collection includes one of the 33 NFTs that mark the third anniversary of electronic musician 3LAU’s Ultraviolet album, which he bought for $333,333. (3LAU earned a staggering $11.7 million on the drop.) Kang says he initially was reticent to talk to his less-techy friends about his purchases, but more recently, as public interest in NFTs has exploded, he’s “coming out.”

Over the past few months, dozens of musicians have entered the NFT fray, such as Grimes, who in February sold some $6 million worth of digital artworks in one auction, and the more mainstream Kings of Leon. From Feb. 27 to March 29, the top 10 crypto collectible markets by sales volume accounted for over $338 million, according to industry tracking site CryptoSlam. Since purchasers are usually anonymous, however, it’s hard to tell who’s buying these NFTs. Based on Billboard’s interviews with collectors, however, it would appear that buyers run the gamut -- from the crypto-rich to fans looking for new ways to engage with artists they love to flippers hoping to turn a profit.

There’s also a nagging question about whether all buyers are legitimate, as opposed to investors or members of the artists’ camps involved in ploys to boost NFT prices. “That could happen,” says Jimi Frew, co-founder of Blockchain Music, whose NFT brand RAREZ delivered deadmau5’s first digital collectibles. “Has something like that happened? Highly likely. Can we point fingers? Not without solid proof.”

So far, the sweet spot audience for NFTs seems to be music fans who are also crypto evangelists, like Kang or Cooper Turley, a 25-year-old Angeleno who handles crypto strategy at music streaming/sharing platform Audius. (Kang and Turley happen to be friends.) Turley has purchased NFTs that include works by Mike Shinoda and Grimes with the intent to keep them, because “these NFTs really resonate with me on an emotional level,” he says. “Using them as a profit opportunity kind of clouds the collection experience. I hope that they will be worth more, but it’s more about supporting the artists.” Turley says that he often sets the creator share -- the percentage an artist will get from a resale -- higher so that if he does let go of one, the artist will reap additional income.

Frew says that right now NFT collectors tend to be more like Kang and Turley. “Ninety percent of them are very wealthy crypto holders,” Frew says. “That leaves out the fans that can’t afford these high-ticket items.”

Pam Taylor sees these sorts of divides more clearly than most. A 17-year-old high schooler from Rockland, NY, she recently purchased a Steve Aoki art NFT for $2,500, only to sell it shortly thereafter for a slight loss. Though she does hold crypto and trades stocks online -- which is how she could afford the Aoki NFT in the first place -- she is a young woman involved in what by all accounts is a male-dominated pursuit. She’s also Black. “There aren’t many Black and brown people in the space because there’s a major financial gap, and word about these type of things doesn’t travel as fast,” she says

Even when tokens are relatively affordable -- such as the Kings of Leon NFTs, which cost around $50, plus substantial fees -- purchasing them isn’t always easy. (Most NFT platforms require that purchases be made with a form of cryptocurrency.) Longtime Kings of Leon fan Nathan Sanchez, a 29-year-old architectural engineer from Austin who considers himself a crypto novice, says his NFT purchase took him a couple of hours due to the complicated, multistep process of setting up a crypto wallet and dealing with unexpected marketplace fees -- and he might have given up if it didn’t come with a vinyl record. “I saw a number of threads and conversations on Reddit where people just didn’t know what to do,” Sanchez says. “I’m not sure an average person can do it.”

Kang, for one, has faith that problems of accessibility and affordability will be solved by improved technology and market saturation, respectively. “The whole goal of blockchain is global accessibility and open access for everyone,” he says. “So the fact that there is a huge financial barrier is concerning to me, but it’s going to be fixed.”

Kang has become friendly with 3LAU, with whom he talks or texts almost daily. “If there’s one person that should go down in history in the music industry for being a pioneer, it’s 3LAU,” says Kang. “He has been advocating for NFTs since 2017, when nobody else was listening. Just seeing his leadership in the space is why I dropped a large sum of money.”

Kang is a true believer, but the lines between fandom and investment aren’t always clear. Alexander Labanon, a 25-year-old rental-car branch manager and crypto newcomer from Richmond, Texas, recently spent about $800 on an NFT of a previously unreleased track by rapper Tory Lanez. He hopes to buy more Lanez NFTs and sell them as a package. “I’m a fan of Tory Lanez,” says Labanon, “but if there’s money to be made, I’m going to take my money.”

A version of this article originally appeared in the April 3, 2021, issue of Billboard.