Is the Future of NFTs… Free?
Written by djfrosty on March 13, 2023
It’s been more than two years since news of multi-million dollar NFT (non-fungible token) sales first hit the music headlines. In 2021, Grimes made $6 million overnight with a collection of audiovisual NFTs, 3LAU raised $11.6 million in a record-breaking auction and Steve Aoki claimed to have made more money from NFTs than 10 years of record label advances.
For a moment, it looked like NFTs were a new way to value music, unlocking seemingly enormous sums of money for artists. Now, in the cold light of a crypto bear market where NFT trading has fallen 85% from previous highs, those sales figures were unsustainable in hindsight. Instead, rather than trying to sell NFTs at extortionate prices, artists are experimenting with a starkly different tactic to engage their fan bases: giving them away for free.
At the grassroots level, independent artists are giving out free NFTs to capture their earliest fans and kickstart a community. At the superstar level, artists like The Chainsmokers are using free NFTs to reward their fanbases. Far beyond speculation, platforms in the space have pivoted to focus on non-financial use cases such as integrating free NFTs into Spotify pre-save campaigns, incentivizing email capture, Web3 fan clubs, token-gated exclusive content, community building, rewards and commemorative tokens.
Chainsmokers Alex Pall and Drew Taggart were among the first to tap into the new trend. The duo watched the NFT explosion play out while recording their fourth album, So Far So Good, but instead of following the million-dollar playbook, they gave away 5,000 NFTs tied to their album for free. The NFTs also grant fans a 0.0002% share of streaming royalties in the album. The duo doesn’t even take a cut of the NFT’s secondary sales, which go straight to the album’s songwriters.
“Alex and Drew literally made no money from these NFTs,” says Adam Alpert, the duo’s manager. “In fact they lose money because they’re giving a royalty away.”
So why didn’t the Chainsmokers follow the NFT hype and cash in? “That didn’t really appeal to us,” says Alpert. “We didn’t believe it was the right use of the tech at this time.” Rather than financial speculation, the Chainsmokers saw NFTs as a way to deepen their relationship with fans. “Having a happy superfan as a result of this is worth more money than selling an NFT.”
The Chainsmokers have built their entire NFT campaign around free giveaways and exclusive fan experiences. NFT holders get access to a “gated” Discord server where Pall and Taggart interact with fans directly, answer questions and play music. Instead of paid meet and greets, the duo invites token holders to meet backstage at shows. “It really felt like [the fans] were a part of something that no one else was,” says Alpert. “That’s the power of NFTs.”
What started out as free NFTs now change hands for an average of $55 each. The tokens have naturally increased in value as the duo has added new perks for their fans, such as a recent free “airdrop” of the lo-fi version of the album. Perhaps Web3’s killer use case, then, is not the hyper-financialization of music, but a “sincere, modern version of the fan club,” as Alpert puts it.
NFT platforms are also pivoting to explore these free use cases. Decent.xyz started out as a Web3 music platform to sell NFTs backed by streaming royalties but now offers a range of non-financial Web3 tools for artists. “Our team has always been in pursuit of less speculative use cases,” says Charlie Durbin, founder of Decent.xyz. “They force people to consider what NFTs are good for beyond patronage and trading.”
Durbin sees free NFTs as a new layer in the artist’s funnel allowing them to convert fans on social media into stickier “collectors.” Emails and phone numbers are difficult to collect, he says, but “free NFTs promise to tilt those odds.”
Another platform called Showtime.xyz allows artists to give fans a free NFT in exchange for pre-saving their track on Spotify. Meanwhile, POAP is an app through which artists can give fans a free NFT as a reward for showing up to digital and IRL events.
Last year, independent pop artist Annika Rose gave out almost 500 POAPs to her fans every time she interacted with them, acting as proof that they supported her at the start of her career. “She needed to grow [her community] one member at a time,” says Hannah Hyman, Web3 project manager at NVAK Collective, the Web3 record label that represents Rose. “By offering a free POAP to people Annika engaged with, she could timestamp when she connected with them, introduce them to her artistry, and begin to develop a relationship with them without having to sell anything.”
When Rose later released a paid NFT, she put all POAP holders on a “presale” list at a discounted price. It sold out immediately, ensuring the NFT went straight to her earliest fans and supporters rather than speculative traders.
Avoiding speculators was also key for The Chainsmokers. “We tried to minimize it the best that we can,” says Alpert. Eighty percent of the tokens were available only to the Chainsmokers VIP list for the first two hours, ensuring that existing fans had priority access.
Of course, none of this means speculation and financialization of NFTs will disappear. “I’m not naysaying it as a revenue stream,” Alpert clarifies. “I think it can be really helpful for developing artists, especially those with a small but loyal fanbase. But I think for big artists, a much more powerful and pragmatic use is creating a community.”
The future of Web3 is likely somewhere in the middle: A healthy combination of non-speculative NFTs to build community combined with financial NFTs to unlock new revenue streams. In hindsight, many are realizing that turning the music industry into a casino was perhaps a misjudgment, but sustainable use cases for blockchain and NFTs could still add value to an artist’s relationship with their fans.