How long before the likes of Spotify get impacted by NFTs

I was consuming my daily intake of news this morning when I came across an interesting article. Saxo predicts that next year, NFTs will be big enough to start disrupting the music distribution industry and impact platforms such as Spotify.

According to one of Saxo Bank’s “Outrageous Predictions 2022: Revolution,” music creators will benefit from NFT-based streaming platforms, as they allow distributing music directly to listeners without centralized intermediaries charging a fee.

The analyst noted that NFT-based music streaming projects are likely to kick off in 2022, including initiatives such as Audius, a blockchain music platform backed by Katy Perry, The Chainsmokers, and Jason Derulo. The Audius platform is designed to remove intermediaries from the music industry and allow fans and creators to interact with each other directly.

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Such articles are good food for thought. Everyone involved in the crypto universe understands that DeFi and NFTs are two major developments that are going on in this space. While Saxo's report is titled "Outrageous Predictions" (rightly so in my opinion), it still takes a lot of confidence to suggest that NFTs will see so much adoption that they will disrupt a giant such as Spotify in 12 months.

No one is denying the potential of NFTs. It is for this reason that many celebs are also getting attracted to it and are launching NFTs. However, music distribution companies exist for a reason. Every company is successful for a reason. For $5 a month or less, consumers get access to unlimited ad-free music that they can download or listen to at any time. What do record labels get? They get access to million-plus consumers.

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The above is a schematic representation of how the music industry works. In the current scenario, one can replace blockchain networks and platforms with Spotify/Apply Music and the likes. Every node in the above chart has an area of expertise. Artists make music. Producers finance them. Record labels are in charge of marketing. Platforms are responsible for finding end consumers. This leads to an efficient system. Of course, how money flows between the nodes can be a point of contention. This is why NFTs become relevant in the above scenario.

If artists wanted to get more money and decided to sell each song separately, then firstly, it would be a nightmare for them. Secondly, without NFTs, they cannot ensure that piracy does not happen (Even with NFTs, songs can be sold illegally). In the current scenario, when crypto adoption is more or less around 10% across the globe, expecting that artists will move to NFT platforms quickly or that users will pay more money by paying for each song is incorrect. Even for NFT platforms to develop and disrupt anything, crypto adoption has to reach a meaningful 25% to 50% (High adoption because a large proportion of adopters are simply investing financially)for someone to disrupt any incumbent. This is because users need to be able to buy/hold bitcoin/ether/stablecoin to buy an NFT.

NFT tech and platforms are still evolving. Can Spotify be disrupted by a less profitable company i.e. a company that pays more to the artist? I don't know the answer. However, it is not necessary that NFTs will disrupt Spotify and that too by 2022 is just not possible.

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