A guide to the benefits and risks

The incentives to be a music fan have diminished over the years. Ticket prices continue to skyrocket thanks to monopolized ticket marketplaces, and streaming prices are also rising. As a result, attendees find it less rewarding to champion their favorite acts, and artists have an increasingly difficult time gathering connections with their core audience.

All in all, the music economy feels incredibly narrow-minded.

This is exactly why creators and consumers are turning to the blockchain. It’s a way to get around some of the music industry’s worst features. Now, some of the NFT-compatible features that have come up in recent years are trickling out into the mainstream.

From NFT ticketing to decentralized community building, a wide variety of token-gated efforts have made their way to the masses. Now token-gated streaming has reached a mainstream audience thanks to Spotify’s recent product updates.

What should fans and the traditional music industry expect from the rise of token-gated streaming? What are the benefits and risks? We turned to industry experts and holders of the Now Pass – the access pass to the Now Network, the foundation for all of our initiatives to build the future of tokenized media and pioneer a community-based media model – for input.

But first, what is token gating?

Token gating is essentially any instance where a blockchain token – often an NFT, but it can also be another kind of crypto token – is used as an access pass. Token gating has become popular in Web3 as it is a way to quickly and easily restrict access to content, events, collections, Discord servers and more to those who have a specific token.

While token gating is more often than not used for allow list purposes, it has recently become a tool for creators in the Web3 music space to create a layer of exclusivity around their content. Spottie WiFi token-gated for example some of his music NFT dropsand Daniel Allan and Reo Cragun launched token gated sample packs. Right now, when it comes to streaming, there are many token-gated success stories.

And now the old streaming industry has caught on.

Spotify and token-gated streaming

In February 2023, Spotify began testing “token-enabled playlists”, which allow holders of specific NFTs to use their wallets to access curated music. For the first part of the rollout, Android users in selected countries were able to access the feature if they had NFTs from Fluf, Moonbirds, Kingship, or Overlord.

Speaking to nft now about the rise of token gated streaming, Thomas FissHead of Music NFTs at environmentally conscious NFT music platform OneOf, said he sees Spotify’s interest in token gating as a net positive for Web3.

“When big players like Spotify start exploring cryptocurrency-based models, it will be good for all of us in the space and mass adoption in general,” said Fiss. “Basically, we’re talking about streaming attribution (engagement), and artists and labels getting extra transparency about their fans’ listening habits, and rewarding them for it.”

From a general NFT enthusiast’s perspective, more prominent brands claiming the blockchain certainly seems like a win for the NFT community. But as promising as these types of activations may sound, token gating has a long way to go before established players like Spotify place their bets.

“At Spotify, we routinely conduct a number of tests to improve our user experience. Some of those ultimately pave the way for our wider user experience, and others only serve as important lessons,” a Spotify spokesperson said in a statement about the platform’s token-gating features. “We have no further news on future plans at this time,” they added.

But while Spotify may need more time before committing to Web3, others have already seen the promise of token gating and are adapting their platform and products accordingly.

Less than a month after Spotify’s announcement, Audius went live with NFT gating features that allow artists to make songs, mixes, stems and more accessible to fans who have a specific NFT.

In an interview with nft nu, Audius CEO and co-founder Roneil Rumburg said he understands the real value of token-gating streaming for artists and fans. “The ability to identify your most engaged fans and then kind of hyper-serve them — give them an experience they wouldn’t otherwise have access to with other artists — is a great way to drive more purchase activity and engagement from those fans, ” he said.

“There is a lot of precedent there. But what we’re really excited about is the opportunity artists have to engage those fans, give them unique experiences that keep them coming back, and then reinforce that fandom through benefits,” he added.

And the value is?

Rumburg’s statements get to the heart of what is perhaps the most important benefit of token gating. While it can help increase financial rewards for platforms and artists, Rumburg notes that the real benefit is users getting new experiences — and artists new use cases — that they can’t get anywhere else.

“There is a perspective of it growing the cake vs. the better allocation of the pie that already exists. Where I think the [traditional music] the industry gets concerned when they see things that cannibalize what they have — just shake up the percentages of the existing pie,” Rumburg said.

“I think Web3 technologies in general are growing the pie. The usage happening on Audius doesn’t compete with, or even relate to, the activity happening on the major DSPs […] Isn’t the casual listener also someone who needs to be served? It’s just not who we are,” he clarified.

Similarly, Fiss noted that the main benefits of token-gated music lie in its ability to provide new forms of engagement and connection.

“Labels, managers and artists can gain deeper insights into passive versus active fans and deploy retargeting tactics to activate these audiences accordingly. Artists can reward fans who move the needle while continuing to nurture passive fans,” he said. “The bottom line here is that music marketers need to remove the stigma surrounding ‘Web3’ as a walled garden and refocus attention on the insights and opportunities the technology offers to complement outdated data and marketing tactics,” added Fiss.

The risks of token-gated streaming

It doesn’t look like it though everyone is sold via token-gated streaming. Even those within the Web3 music space are skeptical about its features. As noted by Sean BonnerNow passholder and member of 8taritoken gating, in its current form, sometimes seems almost a step backwards.

“The promise of Web3 is not to stop people from enjoying your work, but rather to make it enjoyable for everyone and to make ownership a rare thing,” Bonner wrote in the nft now Discord. “With music, ownership can be limited and have special benefits, while everyone can listen. Forcing people to buy something before they hear it feels like a great way to lose fans. Better to make people fall in love with your art and then buy in for more,” he added.

Forcing people to buy something before they hear it feels like a great way to lose fans.

Sean Bonner

This sentiment was echoed by Now Pass holder and sound/multimedia artist Michal Milczarekwho highlighted the positive side of music NFTs as improving the fan-artist relationship, but also the potential downsides of token gating as part of the Web3 music ecosystem.

“Modern listeners live in the world of Spotify. Music should be available easily and for free. For many people who support artists on Bandcamp, [tokenized music] is too ‘complicated’ or ‘expensive’,” Milczarek wrote in the nft now Discord. “In this context, using NFT platforms is even more difficult given education issues and the overall public image of blockchain and Web3,” he continued.

What does the future bring?

While there’s still some debate over whether there’s more risk or reward when it comes to token-gated streaming, that’s the whole point of Web3.

Ultimately, token gating allows artists to dictate how their intellectual property is distributed and who can interact with or collect it. Creators are free to use or ignore the tools, which is a win for sovereignty in general.

That said, these tools may ultimately not be a good fit for many of the world’s largest platforms because their current models aren’t based on building niche audiences and communities. Instead, platforms like Spotify rely on as many engaged users as possible. So it remains to be seen if the early music industry will be willing to change. But if the tools meet the needs of artists and consumers, they may not need legacy brands to help them gain widespread adoption after all.

Editor’s Note: Want to share your thoughts and insights with nft now readers? We are working towards a more community-based media model. Visit the Now Pass website for more information.