Steve Aoki is riding to New York City in a Sprinter-van tour bus when the Zoom call comes in. The iconic DJ fumbles with his iPhone, brushes back his sweeping black hair, and greets his younger friend and collaborator Justin Blau, a.k.a. 3LAU. The pair are eager to talk about a technology they say will transform the business model of music and redefine the relationship between artists and their fans. “The only opportunity for fans used to be merch,” says Blau, becoming animated as he makes his case. The next opportunity, he says, is what he and Aoki are sure is the hot new thing for music: NFTs, or non-fungible tokens.
The term describes unique items inscribed on a blockchain—most commonly pieces of art, but also other digital artifacts like songs—that can include rights of ownership to those items. In 2021, NFTs became part of the cultural zeitgeist as celebrities plunked down millions to collect digital primates known as Bored Apes, and the artist Beeple sold an NFT piece at auction for an eye-popping $69 million.
Today most NFTs are worth a fraction of what they fetched during the earlier mania, and trading volume is down more than 80% from its peak in early 2022. NFTs now often serve as a punch line—a folly that illustrates the worst excesses of crypto, rather than a serious investment. But Aoki and Blau, like a growing number of artists, are convinced that NFTs are a transformational technology, and that the speculative frenzy in 2021 was a precursor to something much bigger.
Photograph by Saeed Rahbaran
For Aoki, a Grammy-nominated DJ who is also an author and producer, NFTs offer an expansive new way to connect with fans. By distributing NFTs tied to his work, he can identify the people who are most passionate about the music, and communicate and even collaborate with them through the digital realm known as Web3.
“I never really felt a community like the community I felt in the Web3 space. I never really felt this energy in the real,” Aoki says. “[NFTs] allow for things I never thought I’d ever do, like make a song with a fan.”
Aoki’s latest project involves making music and art with Blau under the banner of PUNX, which the pair describe as an “audiovisual IRL meets metaverse supergroup.” The details were under wraps at press time, but the project is based around the duo’s CryptoPunk NFTs. Those NFTs, like Bored Apes, are part of a limited collection that is owned by a studio called Yuga Labs but that gives collectors broad latitude to develop intellectual property associated with the brand—by, say, customizing the images’ designs.
Blau, meanwhile, is using NFTs to create novel copyright arrangements between musicians and fans. His company, Royal, is a platform where artists can create and sell NFTs that represent partial ownership of a song or album, letting the purchaser collect a portion of the streaming royalties. The Royal NFTs typically offer additional perks like early access to new songs or opportunities to meet or chat online with the musician. The artists, meanwhile, get a new way to directly monetize their current work and raise funds for future projects.
Royal, which has raised $71 million from investors, offers what Blau sees as a fan club for the blockchain era—one that lets musicians interact with the people who love their music best, while tapping into a revenue opportunity that doesn’t rely on the middlemen who have shortchanged artists in the past. So far, Royal remains a niche offering: The company says it has 11,000 users who have paid a total of $2.1 million to invest in 39 “drops” on the platform by artists including rapper Nas and Diplo, another top DJ. (Secondary sales have generated another $5.4 million.) Users have earned a total of around $140,000 in royalties. While the numbers are modest, Blau says they amount to an opening act as NFT technology gains a broader footing. “It’s just the first inning of NFTs ever. The second inning is going to be wild. Stuff is going to work a lot better,” he says.
He may be onto something. Even as NFTs remain a source of ridicule in mainstream culture, other creative types—from actor Seth Green to comic book legend Todd McFarlane—are embracing them as a way to bond with fans. And while the overall market is far from its 2021 highs, NFTs still generated over $700 million in monthly sales in February. The so-called floor price for items in the preeminent Bored Apes collection, meanwhile, was above $100,000 in March. It’s hard to shake the impression NFTs are here to stay. Aoki certainly thinks so—and is hoping a mainstream breakthrough is around the corner: “Imagine if Kendrick Lamar makes a song and releases it with the Web3 community? Or Paul McCartney sold one to a Beatles fan?” NFTs, he says, “allow for imagination and intuition to do things on the fly.”
This article appears in the April/May 2023 issue of Fortune with the headline, “Fans and funds: Why NFTs sound sweet to these musicians.”