The Beat

Welcome to The Beat, Decential’s weekly breakdown of the music-web3 byway.

Like most things in web3, the music space moves at breakneck speeds, issuing regular bouts of hope, cringe and FOMO. That combination of qualities blur the essence of the movement – the enduring solutions to legacy industry problems and the people building them. Let’s focus on the essence; the rest, as Alex Ross wrote, is noise.

Vibrating strings

Some time ago, a friend gave me a copy of Brian Greene’s book, The Hidden Reality – subtitled “Parallel Universes and the Deep Laws of the Cosmos.” I’ve been thumbing through it in the morning, trying to wake up my sluggish brain. In each chapter, the physicist breaks down in (kinda) layperson terms one of the many possible foundations of our reality. The bit that’s earwormed me is string theory, a buzzing proposition that attempts to unify the fundamental forces of nature (including gravity). It’s a candidate for the so-called “theory of everything.”

There’s a lot to unpack, and plenty of math that goes way over my head, but the most appealing bit is the suggestion that the substrate of our universe(s) is vibrating strings. “Much as different vibrational patterns of strings on a guitar produce different musical notes,” Greene writes, “different vibrational patterns of the filaments in string theory produce different particle properties.”

In such a reality, we have – and we are – countless little instruments whose composition yields untold forms of matter and mettle. It’s akin to Tolkien’s fictional proposition that music is the fundamental particulate of the universe — that from which all else formed. And perhaps there’s some predictive merit to that — is it such a stretch to imagine that an aspiring physicist riffed on a hunch and some buried remembrance of The Silmarillion?

Perhaps this vision helps explain why music seems to have the singular ability to cut through our outer shells and enrapture us in an instant – and why it can focus our collective attention on a single resonant point: the bard, the diva, the string quartet and punk laureate. They’re literally thrumming our own tiny little strings.

It’s part of why we venerate our musicians – it’s a superpower, to resonate so fiercely. But surrounding them is an industry that continues to pull the strings, so to speak, and punish them for trying to pull them back. And it’s not working.

Hipgnotized

Regular readers of the Beat will have read my concerns of music’s overfinancialization — especially in web3. But it’s happening off-chain, too.

You may have seen the recent trend of purchasing song catalogs from music’s biggest names. Bob Dylan sold his for an astounding $400 million. Earlier this week, Katy Perry sold hers for $225 million.

One of the key players in this game is Hipgnosis, a UK investment firm that’s invested in the catalogs of Justin Bieber, Neil Young, Leonard Cohen and dozens of other luminaries. Now, though, it’s having to sell nearly half a billion dollars of its song portfolio to buoy its tanking share price, which has dropped about 40% since the beginning of 2021.

To make matters worse, the songs are selling at 17.5% below their fair market value. And is that ever going to change? Eventually, copyright runs out and music enters the public domain, which makes songs a “depleting asset,” Ted Gioia notes, before adding, “Music people are almost indistinguishable now from lawyers and portfolio managers.”

Lawyers, stoners, and the SEC

Speaking of, the royalties marketplace JKBX just launched. The company reportedly has $1.7 billion in music rights, which means artists and songwriters have sold slices to JKBX, who’s then registered them with the SEC to make the songs available for retail investment. Ever wanted to own royalty shares of a U2 song? Now could be your chance.

For the time being, though, would-be investors can only reserve songs. But if JKBX is successful in securing regulated approval from the SEC to sell royalty streams as a ‘Regulation A offering’ — an exemption from registration for public offerings — they’ll be able to buy them too.

JKBX works by “packaging the investments in SEC-registered entities and creating a platform welcoming of investors confused by blockchain and NFT jargon,” said JKBX Chief Executive Officer Scott Cohen, who’s also the founder of The Orchard — one of the earliest digital distributors — and the former Chief Innovation Officer at Warner Music Group.

The approach is reminiscent of web3 platforms like Royal and anotherblock — whose Bieber Bunco I covered last week — that sell fractionalized shares of song royalties as non-fungible tokens (NFTs), but Cohen is offering the approval of regulatory bodies – like the SEC – as a reason to use the platform.

“I love blockchain. I love NFTs. I love crypto, wallets, coins, tokens,” he said back in April at Music Ally’s NEXT event. “The SEC doesn’t.” JKBX’s platform isn’t explicitly powered by the blockchain, but when broached with the potential of leveraging the technology in the future, the industry vet was circumspect. “Maybe you could get a virtual version of a certificate – back when people bought stocks, you used to get a certificate,” he said. “But is it a token? Is it an NFT? We’re not telling you – it’s irrelevant to the customer.”

Leading with the tech — e.g. marketing products with terms like “NFT” — has been one of web3’s most contentious strategies. And though the tech likely is irrelevant to most customers, is it irrelevant to the artist?

That question was explored in another recent case:

That's the dissent from two of the SEC commissioners – amongst five total – in a case against Stoner Cats, a collection of 10,320 NFTs that inspired an animated series featuring Mila Kunis, Jane Fonda and Ashton Kutcher. The three assenting commissioners won out, though, ultimately fining Stoner Cats $1 million.

The two dissenting SEC commissioners compared the use of NFTs to familiar devices like crowdfunds and Star Wars collectibles. For both, the reasons people purchase are at least as cultural as they are financial, and without that cultural resonance, it’s tough to see the fiscal-first approach taking hold.

Will JKBX prove a point that Hipgnosis hasn’t been able to — that music should exist as an asset measured in the expectation of future returns? Do people want to interact with music like that?

Despite myriad builders’ efforts, NFTs haven’t really proven that people are seeking this interaction either — but at least they’re composable tools that artists can use to connect directly with people. And artists should have that power.

Artists create cultural resonance, which forges identity that engenders community and yields opportunities for commerce. But then the commercial layer is abstracted so far from the original creators that we’ve turned music into a stock market.

I'm currently participating in Metalabel’s “Lonely Writers Club” — a meetup whose intention is to make the act of writing a little less lonely (as I sit alone and write this with nary a soul in sight) — and in a music-focused breakout room, we spent some time imagining what our world would be like if we could quantify culture. What if “return on investment” was calculated in cultural returns? Or if success metrics were defined not by technocrats, but by the artists themselves?

People buy music because it vibrates their strings. How can we start measuring that?

Coda

Jim Croce died 50 years ago this past Wednesday — at just 30 years of age. One of his hit songs, “I Got a Name,” was released the day after he died (50 years ago today). The single prefaced a posthumous album of the same name, which includes "I'll Have to Say I Love You in a Song,” which happens to be my parents' "song."

They heard it on their first road trip together, and the memory and the music persists, continuing to bring them together. And through their connection, at least peripherally thanks to Jim Croce, I was soon plucked from the veritable ether and placed into this vibrating realm. I've been trying to stay in tune ever since.

Now go outside and listen to music – it’s a beautiful day.

My name is MacEagon Voyce. For more music and less noise, consider subscribing to The Beat. Thanks for being here.