Morgan Chittum

<div id="highlights-block_61d7a341c0a74" class="highlights">
 <ul>
 <li>Royal announced rapper Nas plans to sell his two most recent singles on its platform</li>
 <li>The crypto music startup previously secured $55 million in Series A funding in November 2021</li>
 </ul>
 
</div>



Justin Blau, better known by his stage name “3LAU,” remembers first hearing the words non-fungible token roughly five years ago when cryptocurrencies like Ethereum initially piqued his interest.&nbsp;



Although Blau has made headlines as a renowned EDM artist, whose songs have raked in over one billion lifetime streams, he has been a heavy investor (of both his time and capital) in NFTs and music ownership monetization. 



Blau is a Washington University St. Louis business school dropout, who had stints working at UBS and Credit Suisse.



<div class="wp-block-image"><figure class="alignleft size-medium"><img loading="lazy" decoding="async" width="222" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg" alt="" class="wp-image-13628" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=222 222w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=190 190w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=193 193w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=162 162w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=59 59w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Royal-founders-222x300.jpg?w=467 467w" sizes="auto, (max-width: 222px) 100vw, 222px" /><figcaption>Justin Blau, co-founder, Royal. Source: Royal</figcaption></figure></div>



He co-founded <a href="https://royal.io/" target="_blank" rel="noreferrer noopener">Royal</a>, a music platform that aims to allow fans to buy NFTs so they can share in royalties earned by their favorite artists. The crypto startup <a href="https://cms.blockworks.co/nft-music-platform-royal-secures-55m-in-series-a-funding-from-a16z/" target="_blank" rel="noreferrer noopener">secured $55 million i</a>n Series A funding led by venture capital firm Andreessen Horowitz (a16z) in Nov. 2021.



This week Royal announced that rapper Nas plans to sell his two most recent singles via Blau’s platform. Fans can purchase tokens of the tracks, dubbed “limited digital assets,” which claim partial ownership and streaming royalty rights of the Grammy award-winning artist’s songs.&nbsp;



I spoke with Blau about the future of music NFTs, how increased fan engagement may offer valuation premiums relative to traditional finance and working with Nas.&nbsp;



Chittum: Can you give us, from a very high level, your elevator pitch on Royal? What is it and what should people know about it?&nbsp;



Blau: The idea behind Royal is to give everyone the ability to own their favorite music, and share in their favorite artist’s success.



The quickest way to explain it is that music royalties are an asset class that the public has never had access to. When you think about investing in music and owning music in conjunction with your favorite artists, the incentives between fans and artists become extremely aligned in how that music performs, how it’s distributed and how it’s shared by word of mouth.&nbsp;



Chittum: What is the benefit of an artist selling ownership through a platform like yours versus a traditional fund? In particular, I’m thinking of Calvin Harris’ catalog and how private equity firm Vine Alternative Investments acquired his music for around <a href="https://variety.com/2020/music/news/calvin-harris-sells-publishing-vine-investments-1234813438/" target="_blank" rel="noreferrer noopener">$100 million</a>. What&#8217;s the value proposition for a larger artist like him?



Blau: The only people that have had access to even pricing these assets are labels, private equity firms and publishing houses, right? So like you said, a lot of these bigger players are looking to acquire an individual celebrity artist’s catalogs the same way they did with Taylor Swift’s.



The question is, how much more would her real fans be willing to pay for the same type of ownership. What we&#8217;ve proven so far with Royal, at least with some of my assets, is that that multiplier is absolutely ginormous. There&#8217;s emotional value to a fan in owning music that&#8217;s not being captured by the market today.



Maybe a private equity firm has more liquidity to make those types of offers, but we are more focused on artists that have been disenfranchised by existing systems, who have signed bad record deals. Labels have served a lot of purpose and have a lot of value for many artists. But in most cases, artists end up giving away 80% of their equity very early on in their careers.&nbsp;



Chittum: If in the future you&#8217;d like to focus on smaller artists on Royal’s platform as well, why are you starting with a big name like Nas?&nbsp;



Blau: It makes sense for many reasons. Nas is an icon in the hip-hop world. A lot of surveys that we conducted came back with 36% of respondents saying they are interested in investing in hip-hop compared to any other music genre, which is quite significant.&nbsp;



Beyond that, Nas has a long history in crypto. He&#8217;s an early investor in Coinbase. He has a legacy of being a true innovator and entrepreneur. It made sense to make a big stand early on and show the world that both legendary artists and up-and-coming artists are going to be active participants in the Royal ecosystem.



Chittum: What do you think the biggest barrier to mainstream adoption is for music NFTs?



Blau: I think a barrier to entry is account setup. As human beings, we are used to logging into everything with our email or our phone number. In crypto, you have to go through a way longer process to do that.&nbsp;



With Royal, if you are crypto savvy, you can connect with your wallet and go about the purchase of the asset. If you don&#8217;t know anything about crypto, all you need is an email address to log in and we take care of the rest for you. We kind of guide you on the journey to becoming more <a href="https://en.wikipedia.org/wiki/Web3" target="_blank" rel="noreferrer noopener">Web3</a> native through the Royal experience, which is something that we feel is really important.&nbsp;



Chittum: Take me back to the first time you heard the words “non-fungible token.” What were you thinking?



Blau: I haven&#8217;t gotten that question before actually. It would have been 2017. I had just been reading a lot of blog posts about Ethereum and getting really excited about it. It was more of a gradual thing for me where I began to learn that the technology existed, had familiarity with fungibility from my days in finance, and just got excited about the idea of authenticating ownership on a blockchain, which is ultimately what an NFT is.&nbsp;



I started thinking about non-fungible tokens in lots of different contexts related to ticketing and proof of attendance in 2018. I thought about how [someone] could earn a limited digital asset from attending a concert. We threw the festival in October 2018, where we actually did some of the earliest live NFT experiments ever. Fast-forward and I began to see NFTs manifesting as art.&nbsp;



Fast-forward to when <a href="https://www.beeple-crap.com/" target="_blank" rel="noreferrer noopener">Beeple</a> did his first NFT sale for $2 million. At that time, I was like “holy crap,” there&#8217;s digital artists selling NFTs for millions of dollars, not just thousands of dollars. When you see numbers of that size, you pique the curiosity of everyone and then you create this giant feedback loop of people who are interested in the technology and learning what it&#8217;s about.&nbsp;



Chittum: Finally, if you could make or mint a music NFT with any artist dead or alive, who would your top choices be?



Blau: Based on my personal taste, I&#8217;m a huge Radiohead fan so helping them with something like that would be awesome. I&#8217;m a huge fan of Sigur Rós too. Those are my two favorite artists of all time.&nbsp;



This interview has been edited for length and clarity.



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Exclusive: DJ Justin ‘3LAU’ Blau on NFTs and Music Royalties as an Asset Class

<div id="highlights-block_61b88b9da0361" class="highlights">
 <ul>
 <li>The music industry generates roughly $42 billion in revenue and less than 12% of that goes to artists</li>
 <li>Daniel Allan, an artist who previously made hundreds of dollars per month from Spotify, is now making thousands after minting NFTs of his music</li>
 </ul>
 
</div>



World-renowned music producer Justin Blau sold his <a href="https://nft.3lau.com/#/auction" target="_blank" rel="noreferrer noopener">first tokenized album</a>, Ultraviolet, as a collection of NFTs for $11.7 million in February. A month later, Kings of Leon made north of $2 million through <a href="https://www.billboard.com/pro/kings-of-leon-nft-sale-2-million-sales-crew-nation/" target="_blank" rel="noreferrer noopener">NFT sales</a> of their album, When You See Yourself.&nbsp;



Along with a booming and speculative non-fungible token market for visual art, fashion and even <a href="https://cms.blockworks.co/why-investors-are-paying-millions-for-virtual-land-in-the-metaverse/" target="_blank" rel="noreferrer noopener">virtual real estate</a> this year, the demand for tokenized music is notching never-before-seen highs as well.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“There&#8217;s never been a way for [musicians] to mint their own work or provide value directly to the fans while simultaneously being able to pull value directly from their fans [until NFTs],” Austin Virts, head of crypto marketing at Audius, told Blockworks.</blockquote>



Historically, the music industry generates roughly $42 billion in annual revenue and less than 12% goes to artists, according to <a href="https://thedefiant.io/building-the-investable-layer-of-music-by-3lau/" target="_blank" rel="noreferrer noopener">a report</a> from Audius. Additional <a href="https://www.rollingstone.com/pro/news/top-1-percent-streaming-1055005/" target="_blank" rel="noreferrer noopener">data shows</a> that around 90% of streams on platforms such as Spotify and Apple Music are from the top 1% of artists. Therefore, most artists get paid fractions of pennies per stream.



Seeking to disrupt this system that has often failed artists, <a href="https://audius.co/" target="_blank" rel="noreferrer noopener">Audius</a> launched a peer-to-peer NFT music streaming service that allows users to upload their own music and monetize through tokens instead of royalties.



Audius allows creators and consumers to both upload and listen to content for free and without a third party. “We provide a UI and a UX, and then everything else on the back end is fully decentralized,” Virts said.&nbsp;



“There hasn’t really been anywhere [until] now for individuals who are not signed to a major record label to develop and grow an audience. Audius [is] utilizing blockchain technology to provide the platform for the 90% of artists who are being pushed around and not catered to by massive record labels.”



Currently, monetization for artists on Audius primarily comes from “trending tracks” on the platform via their token AUDIO. However, Virts said that a major focus moving forward for the platform is finding ways to increase monetization strategies.



“We&#8217;re not here to [just] make these artists millions of dollars,” he said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“If you&#8217;ve never monetized your music before, and you upload to Audius and make $5,000 to $10,000 in one month, that can be life changing for a lot of people.”</blockquote>



Other startups such as OneOf are challenging the way musicians have historically interacted with their fans as well, co-founder and COO Josh James told Blockworks. The Quincy Jones-backed marketplace allows users to buy NFTs from certain musicians that gives them access to a “vault” where the artist can communicate with the NFT holders. OneOf has sold NFTs for big names such as rapper Pitbull, Doja Cat and Alesso.



“Artists are excited about a new way to connect with their fans, [one that] doesn&#8217;t involve a buffer or a middleman,” James said.



Additionally, the Grammy Awards <a href="https://www.grammy.com/recording-academy/news/music-nft-platform-oneof-announce-exclusive-grammys-awards-nfts-2022-64th-quincy-jones" target="_blank" rel="noreferrer noopener">announced</a> in November that next year’s show would be commemorated via a collection of NFTs in a partnership with OneOf, signalling further adoption of the digital assets in the multi-billion dollar industry.



Although it is unclear whether music NFTs will ever achieve mainstream status, it’s hard to deny that digital collectibles have changed the lives of many whom the traditional music industry has failed.&nbsp;



Independent artist Daniel Allan, who previously only made hundreds of dollars per month from Spotify despite racking up millions of streams, is now making thousands from minting NFTs of his electronic pop songs, <a href="https://time.com/6124814/music-industry-nft/">TIME</a> previously reported.



“I felt that a lot of my career was making a certain type of music that I had to make — and at times I didn’t really connect with,” Allan said to <a href="https://time.com/6124814/music-industry-nft/" target="_blank" rel="noreferrer noopener">TIME</a>. “From an artistic standpoint, I just feel like NFTs and Web3 in general can create a much brighter space for art.”



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