NFTs combined with IP rights can guarantee a new future for creators in Africa and globally

Intellectual Property (IP) rights are a body of rights made by law to protect creative works. They secure creative rights in different forms like books, music, art, inventions, speeches, software, designs and so on.

They ensure, in theory, that creators and artists are fairly compensated for their work. But is that so in reality?

Types of intellectual property rights

Depending on the type of creation/invention, there are generally three main categories of intellectual property available- copyright, trademarks and patents. Of the three, we are mostly interested in copyright and trademarks for this article.

Copyright protects the rights of artists to their creative works, and gives them the exclusive right to use their creations however they like. Creative works protected under copyright include works of literature, music, recorded sound, film and photographs.

Under Nigerian law for example, artists are protected from infringement of their works by third parties, and Nigeria is also a signatory to treaties like the Universal Copyright Convention 1952 and the Berne Conventions for the protection of rights in literary, musical and artistic works.

All this means that as a creative in Africa and around the world, you are empowered to enforce copyright laws on your work immediately they are created.

Who can own copyright in the music industry

• Songwriters or composers typically write music that they either record on their own or in collaboration with performers/artists.
• Musicians create copyrights by performing on records. They also generate royalties from reproducing songs and compositions.
• Record labels invest in artists and producers, market their music, and manage the various rights in the recorded music. They make money by owning the rights to the recorded music of an artist or producer for a period.

Trademark in the music industry

Trademarks are used by creatives in the music business to protect their image rights and personal brand from imitation and impersonation. Unlike copyright, the universal approach is that they have to be registered to be protected. Common trademark types include a logo, word, slogan, audio recording, particular images or a shape closely identified with your brand as an artist.

If your music brand has a logo, a word, or anything closely affiliated with it, registering it as a trademark is advisable.

Both for labels and artists, registering trademarks can protect you and your business from copycats and infringement. Registering trademarks also allows you to monetise your brand by licensing or selling it to third parties.

Now that we’ve gone over the basics of intellectual property in the music business, let us talk about Non-Fungible Tokens (NFTs).

What are NFTs and do they grant IP rights?

An NFT is a cryptographic representation of a unique digital asset. It is used to represent assets (such as a specific copy or version of a song) which can be stored on a blockchain or "off-chain", like on a website.

Each NFT is powered by a smart contract (contract on the blockchain) that makes it unique, and the blockchain then keeps an unchangeable record of ownership of the NFT.

Related Article: 10 exciting trends in the world of Non-Fungible Tokens (NFTs)

As expected, NFTs provide an interesting new twist to intellectual property, as tokenization allows music to be transformed into a digital asset and put up for sale or licensed in a marketplace.

It should first be noted that acquiring ownership of an NFT does not necessarily grant the new owner of the NFT IP rights to the asset. The rights obtained by the owner of the NFT depend on the terms of the contract recording the transfer of the NFT by the creator of the musical work.

So, an artist that wishes to protect their IP rights in their music can do so in the terms of the underlying contract. Conversely, an artist can grant IP rights by contract. For example, Nas’ recent single “Ultra Black” also granted owners a share of royalties.

How NFTs and IP rights can ensure a more equitable income for creators

Changes in distribution and the introduction of streaming services have changed the business model of the music industry. Yet, streaming does little to help artists get fair compensation— only the top 0.8% of artists on Spotify earn $800,000 and above. The vast majority of artists still have a hard time retaining control over their work and monetizing it.

Music NFTs can be thought of as rare digital collectibles for the most devoted fans to show their loyalty. The latter is of course the long-term vision for Music NFT’s but requires more legal engineering and overcoming of barriers laid by the legacy music industry.

The artist gets to decide what song, or songs, they want to offer their fans as NFTs and what kind of “utility” the NFT will receive. This could be various commercial licenses to the musical works, but could also be music videos, merchandise, concert tickets, and so on.

NFTs allow music works to be collected as digital collectibles allowing early fans to show support and thereby finance the production costs of an artist's album/song.
Artists can build a dedicated following on streaming sites (and even new NFT dedicated sites) based on their work, monetizing it by selling NFTs of songs, or related content to their fans.

Middlemen and large industry players are cut out and most proceeds go straight to the artists, ensuring fair and equitable revenue distribution.

Newer artists have great opportunities because there are no barriers to entry to the music NFT scene. You can tailor your content to fit particular audiences and upload/market your work to your fans directly without the need for industry middlemen.

Music NFTs allow artists to hold on to ownership of their work, even if they market them as NFTs due to the record of ownership built into the NFT’s metadata.

Who is building IP powered NFT marketplaces for artists and creators?

We are still in the early days, and there is still a lot of building going on. As stated earlier, the long-term vision for Music NFTs is to create platforms for creators of music to freely build an audience, and sell all their music related works directly to them.

However, this still requires more legal engineering and overcoming of barriers laid by the legacy music industry. The old guard is certainly not going anywhere anytime soon.

Euterpe is the only frontrunner in this regard. Other platforms like sound.xyz and Royal.io focus mainly on music as collectibles and music streaming and revenue splitting respectively.

Euterpe is an interesting platform building various IP powered tools for creators, especially music artists. It is the inventor of “IP-powered NFT as a Service with SocialFi” aiming to build a healthy ecosystem for creativity to thrive, creators to be duly and equitably compensated and for fans to be an integral part of their favorite artist's success.

The team seeks to build blockchain technologies for intellectual property rights, and give NFT collectors the chance to financially benefit from investing in, discovering and promoting original works of artists. The stellar team is composed of mainly Stanford alumni, with senior ex-Google, Meta’s Diem, ByteDance, TME, Sony Music, CAA and Uber credentials on the team.

What is most attractive about Euterpe, is its emphasis on two very important parts of creative distribution in the blockchain- an IP powered NFT marketplace, and SocialFi. Its core product runs on some key value propositions

Content creators have access to innovative NFT fundraising process, effective SocialFi promotion engines, and copyright smart contracts that increase revenues dramatically; Fans become investors who share in the commercial success by acquiring a portion of copyright ownership in a creative work and therefore receiving a percentage of revenue flows; Fans turn into active community participants, rewarded financially for their contributions in promoting new artists and new works through Euterpe’s native token.

In terms of funding, Euterpe has investment backing from Fenbushi Capital,  the first and most active blockchain-focused venture capital firm in Asia, and Huobi Ventures, the VC arm of the global crypto giant Huobi The startup says that the new funding will be used to develop a game-changing NFT marketplace featuring high-quality, scam-free content for users, alongside robust IP protection for creators.

In terms of IP, Euterpe has on boarded over 30 record labels. Around 30 songs by more than 20 artists will be released as the first batch of NFTs for Euterpe’s beta launch.

In terms of traction, Euterpe has passed Fairyproof’s smart contract audit. The audit comprehensively evaluated the platform’s code function, data security, permissions, financial safety, contract migration and upgrades, giving it excellent passes on all counts.

It is also worth of note that the background interfaces for music classification and playlists has been improved, along with the implementation of the API call of the marketplace list, the auction function and the secondary market sub-page function.

The project promises that the refactored market listing API will reduce latency, and the upgrade of these functions will enormously improve the users experience.

IP and NFTs can only go hand in hand if there is SocialFi- incentivizing fans and collectors with continued interaction and followership, thereby bringing rewards for both creators and fans. This way both sides benefit from the commercial side of IP (even if IP is not expressly passed down to fans by creators). Artists also receive various forms of financial rewards in proportion to the values of their intellectual creations, and investors (fans) share in the commercial success by receiving a percentage of revenue flows.

You can read Euterpe’s whitepaper here.  It is the first blockchain whitepaper in the world published in an SSCI law journal.

Takeaways on NFTs and IP

Non-fungible tokens offer IP owners new possibilities to monetize their portfolios. We are still in the early days, and there is still a lot of building to be done. Yet, music NFTs provide some real value and disruption to a traditionally repressive and underserved industry.

Africa’s entertainment scene has blossomed these past few years, propelled by global acceptance of our music and artistic works, hinged on the rise of legacy streaming platforms. The industry employs over 10 million Africans, and music revenues are projected to reach $297million in 2022.

The problem is the legacy streaming platform are notorious for unfair compensation to creators, a clear algorithmic bias in favor of established artists as opposed to promoting newer ones, and a siloed environment making it harder for newer artists without solid backing to enter the market.

IP powered marketplaces are the next generation of copyright, and platforms like Euterpe are building future gems. In the end, what is for certain is that all this will surely empower a particular section- creators and creatives who will finally have full ownership rights to their intellectual property.

Featured image source: Ditto Music