As 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 attendees scanned QR codes to earn collectible assets. 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 pulled in $11.6 million in just 24 hours.
“All the people who had spent money on that stuff believed in the narrative that I was pushing for many years,” Blau says. “I felt an innate responsibility to see the technology evolve into what I wanted it to be.”
So last year, alongside entrepreneur JD Ross, Blau cofounded 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,” says Blau, Royal’s CEO. “There’s all this baggage that’s carried by this phrase. And in building Royal, the goal was always to give people access to an asset class: music.”
Through Royal, artists sell fractionalized 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 forth. Royal is currently still in beta, but already counts major artists, including Nas, Big Boi, Diplo, and The Chainsmokers, among its roster.
Many people in crypto touted the music industry as the next wave after art to push NFTs deeper into the mainstream. Along with Royal, there have been NFT-native startups such as Catalog and Opulous. RoyaltyExchange, one of the leading platforms for investing in song royalties, incorporated NFTs last year. Even more traditional music companies such as the major labels Universal Music Group and Sony Music, as well as streaming giant Spotify, are dabbling with Web3.
But to Blau, Royal isn’t in competition with much else in the market. Given his own background as an artist, being an early crypto champion, and Royal’s fan-centric approach, Blau feels that Royal is uniquely positioned to lead the charge in allowing everyday fans to invest in the people and art they love.
“People don’t really know what stocks do, on average. But they do understand what they like and what their friends like,” Blau says. “Cultural investing is, in and of itself, really interesting. Music being a wedge to make that happen is particularly interesting. It’s our job at Royal to make it easy for everybody to understand that.”
Blau, 31, was a full-scholarship finance major at Washington University in St. Louis with every intention of going into investment banking. But during a 2011 vacation in Sweden, 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 the investment management giant BlackRock offered him an internship with a fast track to Wall Street. Blau chose to dive headfirst into music—but his finance background wouldn’t necessarily go to waste.
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. During the advent of NFTs going mainstream in 2020, he saw the opportunity of attaching music IP rights to NFTs. Initially, he thought about sitting on the board of a company in this space. But Blau’s friend, Fred Ehrsam, cofounder of the major crypto exchange Coinbase and the investment firm Paradigm, challenged him.
“He said, ‘If somebody else builds this idea and it wasn’t you, would you regret it in 10 years if it worked?'” Blau recalls. “And that’s what convinced me.”
” . . . it’s important that artists step up and approach the space differently”
Royal launched last May and raised $55 million in a Series A funding led by a16z, with additional investment from Creative Artists Agency, Coinbase Ventures, and artists including Kygo, Logic, Nas, and The Chainsmokers (Drew Taggart and Alex Pall).
“It was about backing two amazing people [Blau and cofounder JD Ross] who really understand the complexities of the space,” Pall says, “and have the experience, operationally, to build something that is capable of taking on a business that has often felt antiquated.”
In conjunction with the release of their latest album, So Far So Good, The Chainsmokers gave 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 from that will be distributed among the album’s 14 songwriters, excluding The Chainsmokers themselves.
“I think Web3 has suffered a lot of bad publicity around some of these quick, cash-grab token drops and shit coins,” Pall says. “It’s important that artists step up and approach the space differently.”
As Taggart mentions, the aim of The Chainsmokers’s drop on Royal was to go deeper, not wider, with their fan base.
“We put out a lot of music and we’ve been very fortunate to have global success. But when something like that happens, you can lose connection with your fan base,” he says. “We really wanted to find a way to reconnect with them. And I feel, sonically, we did that on this album.”
Royal gave them an additional opportunity to connect. “We found a way to double down on what our thesis was, musically, with this technology, which is how do we make something for our fans that they have ownership of?” Taggart says. “We can also see how they interact and build more things that we can give to these token holders. It just felt really like symbiotic.”
” . . . do not buy this if you can’t lose $150″
The Chainsmokers didn’t use their drop as a money-making opportunity, but singer-songwriter Vérité has leveraged the revenue potential of Royal, which has been especially crucial as a smaller artist.
Vérité has long been a proponent of Web3 technology, if for no other reason than it offered a different avenue toward growing her audience.
“I was just seeing the trend shift to, if you wanna make it [in the music industry], you gotta go viral on TikTok,” she says. “I don’t dance on TikTok. I don’t have the personality to do that shit.”
Vérité actually tried her hand at her own NFT drop last April, which she now describes as “a really clunky experiment.”
Vérité auctioned off a percentage of her streaming royalties for her song “By Now” set at a valuation of $1 million. She sold 2.3% for around $23,000, but she realized the price point of those NFTs, which ranged from $1,800 to $20,000, were too high for most of her fans. Around the same time, Blau was getting Royal off the ground, and the marketplace’s approach to fractionalized ownership was exactly what Vérité was looking for.
She was able to slice up her royalties to more affordable tokens starting at $145. And her drop of “By Now” on Royal raised approximately $90,000.
“The power of all of this is artists get to set their own valuation,” says Vérité, who was the second artist on Royal after Nas. “And fans and collectors get to participate at whatever level they want.”
That said, Vérité is clear with her audience that participating in her drops is more about being a patron and and less of an investment opportunity. Her latest drop 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%. Because Vérité is independent and owns her masters, she does indeed get a larger portion of streaming revenue. So, in theory, if her song becomes a mainstream hit, those who bought a token may receive a decent chunk of change.
But as Vérité herself admits, that’s not likely. “I had a town hall on Discord for my drop and I was just like, ‘Do not 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 beyond streaming her music and going to her shows. Even if it may be a niche group for any artist, she sees immense value in having the option to connect with her audience on a deeper level.
“Let’s be real, it’s a luxury to pay extra for art,” Vérité says. “Most people are focused on paying their bills, which is why it’s really important that the baseline is free. Access is free to me, to 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—particularly smaller, independent artists—have new lines of revenue. 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 especially egregious in the music industry,” she says. “I’ve always advocated for artists to bootstrap their own initial capital, so that when they’re talking to labels, publishers, et cetera, they’re having those negotiations from a position of power and leverage.”
Investing in the future
No one can argue that independent artists having another resource to fund their art and make a sustainable living is a bad thing. But, do a few examples of success suggest that Royal, or something like it, will be a viable avenue for artists in the long run?
Alaister Moughan, a music catalogue consultant, can see the potential of NFTs in the music industry, particularly as they relate to engaging fan bases with exclusive perks. But, he takes pause with the idea of NFT-based investments in music. “Sometimes you wonder, does having market value of something like an artist or a piece of work, is that something people are yearning for?” Moughan says. “Or, is it an interesting idea in theory that you kind of go with, but you realize that no one’s actually asking for it?”
Blau echoes Vérité’s sentiment in being upfront with fans about the feasibility of earning substantial income from fractionalized ownership. That said, in the near future he wants to display historical streaming data for fans so they have a better idea of what a possible payout could look like.
“We don’t pretend to know how something is going to perform in the future. But, we can keep the past as transparent,” Blau says. “It’s something that a lot of people in cryptoland don’t do a very good job of. Representing what people are actually buying is super important.”
At the moment, Royal’s marketplace is a curated selection of artists, but Blau wants to open it up to any artist, of any genre.
“If we’re championing this technology as the future for music culture, we have to lean into that,” he says. “To be very blunt, we can’t just issue a bunch of male white DJ tokens every week. That’s not representative of culture.”