Having made a splash in the art world, NFTs are making inroads into music as both pieces of art and investments. Royal, a music-focused NFT platform that allows artists to sell a share of their royalties, raised $55 million in a Series A round from a crowd of investors including Andreessen Horowitz, CAA, NEA’s Connect Ventures, Founders Fund and Coinbase Ventures, the venture capital arm of crypto exchange Coinbase.
Celebrity backers include musicians Nas, Kygo, The Chainsmokers, Stefflon Don, Joyner Lucas and Disclosure. The company raised $11.7 million in seed funding in August led by Founders Fund and Paradigm.
Led by co-founders JD Ross and Justin Blau — the EDM artist 3LAU — Royal is a platform that “mints” NFTs that give fans, collectors or speculators a share their royalties. “My long-term vision is that digital collectable will eventually grow into actual ownership in a song’s master revenue rights, enabling artists to disintermediate the music industry, capturing value alongside their fans,” 3LAU wrote in September when announcing that a few hundred early Royal users would receive the song “Worst Case” as an NFT that gives owners 50% of the track’s streaming revenue. 3LAU raised eyebrows in February when he sold 33 collectible NFTs for $11.7 million, a “wildly successful” experiment that “will be very difficult to replicate again,” he told Billboard.
Royal’s NFTs are effectively securities that pay owners a share of a track’s royalties and can be bought and sold on a marketplace. For “Worst Case,” Blume retained 100% of the recording’s copyright and composition, and did not assign royalties from other sources such as download sales or synchronization licenses, according to the document on the assignment of sound recording royalties. He gave Royal a letter of direction to distribute only streaming royalties from the recording — not publishing royalties — to token owners in one of two cryptocurrencies, Ethereum or USDC, a stablecoin pegged to the U.S. dollar. Owners have the right to sell the NFTs, while 3lau, Royal or the token’s designer receive 5% of the resale value. Token owners are not allowed to take loans or advances to be recouped from future royalties.
Andreessen Horowitz general partner Kathryn Haun tweeted on Monday (Nov. 22) that Royal “has the promise to transform the music industry in a way that hasn’t been possible until now. NFTs have shaken up the art world— improving the experiences of artists and fans alike…But digital art and collectibles are just beginning. Music is another industry that we believe over time will be meaningfully transformed by NFTs.”