Will Record Labels Survive Web3?

This is part one of an explorative essay on the evolution of record labels and the role they will play in web3. It was written with the expectation that the reader has a basic understanding of web3 and music industry terminology.

The second part of this essay will focus on the challenges labels face in adopting NFTs as a new format. It will be published in two weeks. Subscribe to our newsletter to make sure you don't miss it.

Developments in technology have long challenged the recorded music industry. From wax rolls to tape, then vinyl, CD, digital download and streaming, each new format disrupted earlier systems and created opportunities for those who embraced them. They also wiped out those that could not adjust their business models.

We are at the start of another revolution in music consumption. Blockchain technology and the so-called web3 movement has arrived and is here to stay. As much as some still refuse to believe it, the biggest tech and media companies in the world are already adopting it. Those leading the charge for blockchain adoption in music are moving terrifyingly fast. So fast, that they don’t always consider the perspective of record labels who have been around for decades and who control the bulk of recorded music available today. In fact, some are seemingly out to eradicate record labels completely. As someone who’s made a living from managing labels for the last decade, I’ll admit that I was the first to feel concerned by all this.

Direct artist-to-fan tools along with platform agnosticism allows artists in web3 to not only bypass labels and distributors, but also digital service providers like Spotify and Apple Music, thus eliminating ALL middlemen from the equation and capturing 100% of their revenue. Quite a threat to the status quo, if you ask me.

I’m all for artist empowerment and maximizing value in recorded music. But I believe record labels—especially indies—will still have an important role to play as the music industry adopts NFTs.

Below are the four roles record labels currently serve that will continue to remain essential in web3.

1. Community

As much as we’ve seen extreme fandom towards artists, we’ve also seen extreme fandom towards certain indie labels. People buy label merch, attend label showcases, listen to all the music they release, etc. Labels that manage this well often end up creating subcultures of their own.

If you’re a fan of dance music in North America, surely you’ve seen the Dirtybird effect in the last few years. Thousands of ravers from across the continent driving out to every show, following every artist on social media, wearing the merch and listening to the songs while getting label logo tattoos… I went to their Campout festival once, and people were listening to Dirtybird records in the parking lot as if an entire weekend of Dirtybird music was not enough!

So far, I haven’t see an opportunity to tap into an existing community of like-minded fans like this in web3. The closest thing might be to join a certain DAO, but I have yet to see one that revolves around a certain genre of music and has real influence on its members. Well-curated labels give context to music. They help shape a culture around a certain sound, often by promoting a specific lifestyle alongside it. In this manner, indie labels play an essential role in the ecosystem of music that I don’t see becoming irrelevant in web3.

2. A&R

Music lovers often discover new artists by following record labels whose output they trust. But if labels are out, can you trust platforms, users and DJs to handle curation for you?

Given the accessibility of music-making and the relative ease of self-distribution, the quantity of recorded music being released is astronomical. Close to 60,000 tracks are uploaded to Spotify per day - that’s nearly one new song every two seconds! That’s a lot more than any human can handle.

The music landscape has never been so competitive, and the current solution to handle this volume is AI-driven algorithmic curation. It’s impressive, but nothing beats the stamp of approval you get from releasing music on an esteemed record label. It goes beyond playlisting or radio/club play because you know the label has invested time, money and effort into making the release happen—and they would not have done that if they didn’t believe in the song and the artist.

Curation will evolve in web3, and it’s already got its own discovery tools like FutureTape and SpinAmp. Beyond that, opportunities for human/user curation are growing. Nina has launched “hubs”—a space where users can curate a selection of music NFTs, and earn a commission when sales happen through their hub. Meanwhile Catalog has just launched a rotating curator program.
Curation is becoming directly monetized because it remains absolutely necessary in web3. Someone is going to have to do it, be it labels, users, platforms, or a mix of all three. I’m excited to see how A&R and curation evolves in this space, but in the meantime, it is a crucial function record labels still fulfill.

3. Finance

Web3 offers new ways for artists to raise money for their projects. What we often see is an artist will sell a collection of NFTs promising future benefits. For example: “buy my NFT now, and you’ll get an exclusive behind-the-scenes look at how the album was produced, plus a signed copy of the vinyl, or guestlist to a show, your name in the credits, etc.” In this manner, they crowdfund their projects upfront somewhat like you would in a Kickstarter campaign.

We’ve seen unsigned artists raise a lot of money this way. But realistically, this only works if you are able to tap into a community of people willing to support you upfront... Which is attainable if you already have a dedicated fanbase, but it likely won’t happen if you're a brand new artist.

Some new artists (such as Daniel Allan) have pulled it off by designing intricate marketing campaigns and being online 24/7. But I don’t believe this is feasible for everyone. It requires a level of commitment and marketing intelligence that is hard to come by, and it distracts artists from what they should really be doing, which is making music.

For both new and established music projects, record labels with money to spend and the in-house expertise required to execute a proper release campaign remains a solid alternative to crowd or self-funding. But only if you can strike a fair deal. Take only what you need, and never give up your rights in perpetuity. Alternatives to label investments are grants, loans and private investors - but these are only available for a fortunate few.

4. Label Services

Artists today often bear much more responsibility than they used to, with recording and performing being only a small part of what they do. They need to constantly feed content to fans on social media and are increasingly involved in every decision in their careers. So artists build teams around them to help them deliver on everything expected of them. They bring in business managers, social media managers, agents and labels.

As much as web3 touts the benefits of direct artist-to-fan relationships and distribution, the reality is you can’t expect every artist to be minting, marketing, and distributing their music themselves. That is a huge responsibility requiring the kind of expertise which typically falls on a record label’s shoulders.

In recent years we’ve seen a massive rise of artist-led labels. It’s a standard part of the artist playbook at this stage. In fact, nearly every leading independent dance artist has started their own label to release their music and that of their peers. These artists (and their managers) often quickly realize that they can’t handle all the responsibilities of a label by themselves, so they'll hire someone internally or sign a label services deal, handing all of the back-office operations to a leading label or distributor.

Producing, marketing and distributing music is relatively accessible these days, but it requires expertise that can only really be gained through experience. Doing so in web3 is brand new and arguably more complex than pressing vinyl or traditional digital distribution because it's so new. Someone will have to fill in that gap for artists so they can focus on what they do best: making art.

Community, A&R, finance and label services are four key roles of record labels that are unlikely to become obsolete in the web3 ecosystem for music, so I don’t see labels disappearing anytime soon. However, I do see them having to make significant changes in order to adapt to this new medium. The term “record label” alone is already out of tune… One of the more interesting concepts I’ve seen so far in web3 is that of the “Metalabel”, or DAOs who support creative endeavors such as Seed Club. The mold will change shape, but the stuff that goes in the mold will remain very similar.

In the second part of this article, I will map out some of the challenges labels face in web3 as well as explore some solutions to them.

If you enjoyed this article and would like to receive more information about music and web3, you can sign up to our newsletter below.