An early adopter of crypto, DJ and producer Justin “3LAU” Blau immediately drew a line from blockchain technology to the music industry.
In 2018, he launched a blockchain-powered music festival where visitors scanned QR codes to earn collectibles. In 2021, he commemorated the three-year anniversary of his album Ultraviolet by auctioning 33 NFTs tied to songs from the album, physical vinyl, and unreleased music — all of which grossed $11.6 million in just 24 hours.
“All the people who spent money on that stuff believed in the story I dared for years,” says Blau. “I felt an innate responsibility to watch the technology evolve into what I wanted it to be.”
So last year, Blau, along with entrepreneur JD Ross, founded Royal, a marketplace where artists can sell their music royalties to fans as NFTs — or, as Blau prefers to call them, “limited digital assets.”
“From day one, we never used the word NFT,” said Blau, CEO of Royal. “There is all this baggage carried by this sentence. And when building Royal, the goal was always to give people access to an asset class: music.”
Through Royal, artists sell fractional ownership of their royalties along with their choice of perks such as in-real-life experiences and merchandise, first dibs on future drops, access to unreleased music, and so on. Royal is currently still in beta, but already counts major artists, including Nas, Big Boi, Diplo and The Chainsmokers, in its roster.
Lots of people in crypto touted the music industry as the next wave after art to push NFTs deeper into the mainstream. Along with Royal, there are NFT-native startups such as Catalog and Opulous. RoyaltyExchange, one of the leading song royalty investing platforms, took up NFTs last year. Even more traditional music companies like the major labels Universal Music Group and Sony Music, as well as streaming giant Spotify, are floundering with Web3.
But for Blau, Royal does not compete with many other products on the market. Given his own background as an artist, an early crypto champion, and Royal’s fan-centric approach, Blau believes Royal is in a unique position to take the lead in allowing everyday fans to invest in the people and art they serve. they love.
“People don’t really know what stocks do on average. But they do understand what they like and what their friends like,” says Blau. “Cultural investing is very interesting in itself. Music is a wedge to make that happen, and that’s very interesting. Our job at Royal is to make it easy for everyone to understand that.”
Blau, 31, was a full-scholarship finance major at Washington University in St. Louis with the intention of going into investment banking. But while on vacation in Sweden in 2011, he discovered electronic dance music (EDM). He started producing mashups of songs that he would post online, which quickly went viral. At the end of Blau’s junior year, a recruiter from investment management giant BlackRock offered him an internship with a fast track to Wall Street. Blau chose to fully immerse himself in music, but his financial background would not necessarily be lost.
In 2014, Blau was DJing in Mexico when he met Cameron and Tyler Winklevoss. At the time, they were preparing to launch their crypto exchange Gemini, and it didn’t take much convincing for Blau to see the possibilities of bitcoin and blockchain. Blau made a passive investment in bitcoin that soon gave way to his own crypto music projects. With the rise of NFTs becoming mainstream in 2020, he saw the opportunity to tie music IP rights to NFTs. Initially, he thought about joining the board of a company in this space. But Blau’s friend, Fred Ehrsam, co-founder of the major crypto exchange Coinbase and the investment firm Paradigm, challenged him.
“He said, ‘If someone else builds this idea and it wasn’t you, would you regret it in 10 years if it worked?'” Blau recalls. “And that convinced me.”
† † † it is important that artists stand up and approach the space differently”
Launched last May, Royal has raised $55 million in Series A funding led by a16z, with additional investment from Creative Artists Agency, Coinbase Ventures and artists such as Kygo, Logic, Nas and The Chainsmokers (Drew Taggart and Alex Pall) .
“It was about supporting two great people [Blau and cofounder JD Ross] who really understand the complexity of the space,” says Pall, “and have the operational experience to build something capable of taking over a company that often felt outdated.”
In conjunction with the release of their latest album, So far so good, The Chainsmokers have given away 5,000 limited digital assets on Royal to their most loyal fans. Owners of those LDAs will receive 1% of the album’s streaming royalties, in addition to exclusive content and other benefits. Should fans sell their LDAs on a secondary market, the money will be distributed among the album’s 14 songwriters, excluding The Chainsmokers themselves.
“I think Web3 has gotten a lot of bad publicity around some of these quick, cash-grab token drops and shit coins,” Pall says. “It’s important for artists to stand up and approach the space differently.”
As Taggart mentions, the purpose of The Chainsmokers’ drop on Royal was to go deeper, not wider, with their fan base.
“We’ve released a lot of music and we’ve been lucky enough to have worldwide success. But when something like that happens, you can lose touch with your fanbase,” he says. “We really wanted to find a way to get back in touch with them. And I feel like we did that on this album.”
Royal gave them an extra ability to connect. “We found a way with this technology to double down on what our premise was, musically, and how do we create something for our fans that they own?” says Taggart. “We can also see how they interact with each other and build more things that we can give to these token holders. It just really felt like a symbiosis.”
† † † don’t buy this if you can’t lose $150″
The Chainsmokers didn’t use their licorice to make money, but singer-songwriter Vérité tapped into Royal’s earning potential, which was especially crucial as a smaller performer.
Vérité has long been a supporter of Web3 technology, if only for a reason other than that it offered another avenue to grow her audience.
“I just saw the trend shift to, if you want to make it [in the music industry], you have to go viral on TikTok,” she says. “I don’t dance on TikTok. I don’t have the personality to do that shit.”
Vérité tried out her own NFT drop last April, which she now describes as “a very clunky experiment.”
Vérité auctioned off a percentage of her streaming royalties for her $1 million song “By Now”. She sold 2.3% for about $23,000, but she realized that the price of those NFTs, which ranged from $1,800 to $20,000, was too high for most of her fans. Around the same time, Blau Royal was starting to take off, and the fractional ownership market approach was exactly what Vérité was looking for.
She was able to split her royalties into more affordable tokens starting at $145. And her drop of “By Now” on Royal brought in about $90,000.
“The power of all this is that artists can determine their own valuation,” says Vérité, the second artist on Royal after Nas. “And fans and collectors can get involved at any level they want.”
That said, Vérité is clear with her audience that participating in her drops is more about being a patron and less about an investment opportunity. Her last issue of her song “He’s Not You” had three tiers for LDAs: $145 for 0.0520% ownership; $400 for 0.2262%; and $950 for 0.8580%. Indeed, because Vérité is independent and owns her masters, she gets a bigger share of the streaming revenue. So, in theory, if her song becomes a mainstream hit, those who bought a token could get a decent chunk of change.
But as Vérité herself admits, that’s unlikely. “I had a town hall on Discord for my drop and I was like, ‘Don’t buy this if you can’t lose $150,’” she says.
Vérité sees Royal as a tool to cater to a specific subset of her fans who are willing to pay for more than just streaming her music and attending her shows. Even though it’s a niche group for any artist, she sees tremendous value in the ability to connect with her audience on a deeper level.
“Let’s face it, it’s a luxury to pay extra for art,” says Vérité. “Most people are focused on paying their bills, so it’s very important that the baseline is free. Admission is free for me, for the art. Then for the people who can pay, what can I do for them? How can I create experiences for them?”
In turn, artists – especially smaller, independent artists – have new sources of income. In Vérité’s case, she was able to fund her next album because of her drop on Royal. “Getting capital in general is inherently predatory. It’s just very blatant in the music industry,” she says. “I’ve always advocated for artists to start their own seed capital so that when they talk to labels, publishers, and so on, they’re conducting those negotiations from a position of power and influence.”
Investing in the future
No one can argue that independent artists having another source to fund their art and living sustainably is a bad thing. But do a few examples of success suggest that Royal, or something similar, will be a viable path for artists in the long run?
Alaister Moughan, a music catalog consultant, sees the potential of NFTs in the music industry, especially as they involve engaging fanbases with exclusive benefits. But he pauses at the idea of NFT-based investments in music. “Sometimes you wonder if having a market value of something like an artist or a work is something people long for?” says Mouhan. “Or is it an interesting idea in theory that you agree with, but you realize no one is really asking for it?”
Blau echoes Vérité’s sense of being candid with fans about the feasibility of substantial income from fractional ownership. That said, in the near future he plans to bring historical streaming data to fans so they have a better idea of what a potential payout could look like.
“We don’t pretend to know how something will perform in the future. But we can keep the past transparent,” says Blau. “It’s something that a lot of people in crypto land don’t do very well. It’s super important to show what people actually buy.”
Right now, Royal’s marketplace is a curated selection of artists, but Blau wants to open it up to any artist, of any genre.
“If we are championing this technology as the future of music culture, we have to lean on it,” he says. “To be very blunt, we can’t just spend a bunch of male white DJ tokens every week. That is not representative of the culture.”