The $10B music industry problem and how web3 addresses it

Transcript

gmgm welcome to web3 Academy your one trusted source to capitalize on the next big phase of the internet don't get caught in the hype cycle I'm Jaybird and I believe that music is changing our world and that's why I'm carving a path for doers to confidently build and invest in web 3. why because web3 is going to change the music world is going to specifically change music for artists I think we all know that there is a massive problem with our ability to compensate musicians and artists in the current model of the way that we access

their art it is particularly pronounced in music where as a result of streaming services there is a very very difficult time for artists to make a living wage a living income off of their music in today's episode I have Nigel the co-founder of Vault with us to break down the 10 billion dollar music industry problem and how web3 is going to solve it now Nigel is a a real real expert in creating businesses and I'll tell you why because he previously was a co-founder and CEO of FanDuel which is

the largest sports betting platform in the US with over three billion dollars in Revenue last year and 50 percent of the U.S market and sports betting so Nigel's been around the block he's seen success he's built up a billion dollar company and now he has decided to dedicate his time to web3 why well because he believes in music and he believes that web3 offers a better way for a couple things one for musicians to monetize and make money because currently in streaming and Nigel gives us some breakdown that if you get a million streams on a song on Spotify you

make thirty five hundred dollars and just to put that into perspective a million streams is very difficult to achieve that level not many artists are achieving that and only thirty five hundred dollars can't live off thirty five hundred dollars so that's a problem the other problem is that fans don't have a direct way to support artists if you're a fan of a musician that you love you want to support them you want to have a way to support them currently the only way you can support them you can go to their live shows you can buy their merch or you can buy their vinyl records we've gone backwards and we're selling vinyl records again because musicians know that's one of them right now

one of the only ways they can monetize and if you look at Taylor Swift who is really one of the most Innovative musicians in the world she is very successful with vinyl records and Idol is going to tell us about that in today's episode folks this is one of my favorite episodes that we recorded in a while highly recommend this one you're really going to enjoy learning from Nigel on his path as an entrepreneur and building a billion dollar company and then his path in entering web 3 and trying to solve the problems that the music industry faces and how he is doing that with Vault so let's jump in before we do we'll just take a minute to hear from our sponsors the future of social media is here and that future lives in

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but it's certainly the highlight of your career I'm sure let's start at FanDuel I know FanDuel is not a web 3 company it's a sports gambling company one of the largest in the US 50 of the U.S market share three billion in Revenue last year but tell us a little bit about your background how you came into founding FanDuel some highlights from that experience in that Journey yeah so FanDuel very unlikely story started by five co-fundors we were all based in Edinburgh none of us were American never mind none of us followed American Sports I previously had been in the the sports betting industry in the UK and in 2007 we actually went to launch a prediction Market a prediction Mark called Hub dub

this is like pre-financial Crisis and it was sort of play money it was a lot of fun we did a lot of election markets but it didn't have a very strong business model and in 2009 we sort of said hey we've got a really good team here we're good at building games prediction games what can we do and we saw that Sports was our most active category even though we hadn't really paid attention to it and we saw that fantasy sports was a pretty big market and we said well why don't we build a better version of fantasy sports that was the start and Fidel itself was a 15 demand that we bought you know of GoDaddy in 2009 so it's pretty impressive for what's not like a 22 billion dollar company you

weren't even the fantasy sports no I never played fantastic really yeah that's so interesting usually founders of them they're actively involved in yeah and then they see a problem they experience it themselves that's definitely a sort of a Trope of Entrepreneurship I actually think you know there was a lot of people come innovating within fantasy sports and it was interesting they all came out in a different direction which is they always had this even more complicated game than you know traditionally people played in Yahoo and ESPN they're like I've got an even better game because it's like so many points per touchdown unless this happens and then this happens and then I'm like and here's me I've never played before

in my life it's already too complicated for me to understand so we ended up designing a game that was so simple that even I could understand that given that I hadn't been brought up in it and that actually turned out to be like a wedding formula because we actually made a very simple game you know we made something that could be really Mass Market prior to FanDuel fantasy sports only grew virally because you needed to have a friend to explain that to you how it worked whereas with FanDuel people could just download a map and go all right I just picked like nine players and I just put five dollars by it and hit go and then I can watch them play that's not so hard we kind of turned our handicap there into like a huge advantage is we

designed something that in the end was actually really simple like a cool mass marker it makes me think of one of my favorite quotes Steve Jobs Simplicity is the ultimate sophistication right yes yeah that's definitely true and that was a core factor in the success of like what FanDuel came today which was it became a very simple product that people could pick up and play the other thing that makes me think of is right now in the web 3 space we see we see this complexity all the time like yeah like earlier today we recorded our weekly news roll up it's Thursday if you guys are listening to this you're hearing this about six days after we're recording this episode and we talked

about um op pen it's Jack moocher's project I don't know if you know it I'm in web3 and I can understand that yeah like it is very difficult and then and then I'm diving into yoga labs and look at that like dookie Dash and then heavy metal in their games these are very complex challenge changing things to understand what do you think about that being the current state of the web free space it's a huge issue as if web3 is a magnet for complexity and and some of that complexity I think is a fustication from the fact that it's you know shall I said a Ponzi scheme right if we just sort of set up front what it was and I think nobody would get involved and so you know we saw like the purest form of it which in 2021 which is

like Olympus die which was just so complicated and at the end it really was just a Ponzi scheme people were probably criticize that description of it but essentially was like the only way it would go up is that people kept buying in but it was so complicated I remember watching like YouTube videos and and obviously all the only YouTube videos were people who were like really thought it was the reinvention of money and then sort of the end of it I still don't really get it like and I think in web 3 I usually like I always My First Reactions like why don't I get it am I stupid and I'd say 90 percent of the time it's because they don't make sense right 10 of the time you're like wow that's I get it now I understand that like I remember the first time I

understood how an amm works like on a unit Swap and it could be a liquidity provider and I was like I for a long time I just don't understand that once I understood I was like wow that's genius but that's like the water instance there's other what answers but there's so many times when like I looked into a project and I'm like at its core there's really not much there it's like you know if they took away the complexity and that definitely harms it if you really want a free vision of getting to millions of consumers that complexity is not going to get us from where we are here to where we want to get to yeah it's such a great point I always wonder part of it is when we have new tech and we have new foundational layers of tech which quite honestly most people are

never going to use the term nft they're not even going to know that they're buying an NFC you were telling me about that right before we hit the chord and I hear that all the time we need people to experiment and so we do need this like very you know nerdy confusing let's go experiment and try things right but then at the same time we also need the mass Market it sort of makes me think of like yoga Labs versus V friends and garyvee if you look at like V friends and what garyvee is doing and I'm actually writing a deep dive right now on Burn Island which is his like it's basically sweepstakes right it's very simple you can burn a token and you might win something no complexity right Gary B he understands the mass Market that mindset

right but then you look at like yoga labs and they clearly have the mindset of let's be more a little bit more d-gen let's be a little more exclusive let's not be for everybody a reason I bring this up and feel free to add any thoughts now but I'm curious if you have from your experience of building manduel and taking that from 0-50 domain to a billion dollar company what were the big lessons or the things that you took away that you would share with Founders regardless of whether it's web 3 or whatever business but like to like use a different analogy and I'll touch and found in a moment I think if we talked about this before if we think about web 3 and compare it with like the automobile Revolution which I think is

really an interesting one so late 1900s early 20th century we had these people who tinkered around with this internal combustion engine and then they put it on I guess cart and they showed that they could get it to move slowly and dangerously and sometimes it blew up it was really a hobbyist industry and it was a an elite that did it because it was very expensive it was very unreliable whether he's like that today it is full of hobbyists and I think that's great and we need that and you have to be a hobbyist you have to understand then you had to be a mechanic or you had to employ a mechanic to operate one of these newfangled machines but that's kind of where we're at we're with web3 which is people rather mechanics are the employer mechanic I ever automobiles only ever became a mass

Market phenomena whenever non-mechanics could happily get into one and get the benefit which used to go from A to B quickly and relatively safely and smoothly and fast that is what it turned it from being like a tinkerers like a hobbyist activity into something that actually became a mass-market phenomena and I think that's true what we see with web3 is we still a lot of the infrastructure for example wallets does it look almost identical to click a transaction that is sign that I'm here the transaction where it is drain my wallet this is my entire bank account why do they look almost the same why is it indistinguishable to a normal person a developers will say well if you invest

to get the code that's what they always say I know you have to get a code right which even as we've seen even sophisticated people in web 3 do not do we are at this very very primitive stage we need to get to if we genuinely want millions of people to use this technology we need to be able to provide the benefits without expecting them to be a car mechanic and that's what we're expecting today where said oh you have to learn about seed phrases and self-custody and you have to you know inspect the code that's not happening this is never going to happen and it's never happened really with any interesting technology it's gone mainstream what's happened is technologists have managed to deliver the benefit without expecting the user

to really get into the balance of the system if it's earlier today I was explaining erc6551 to somebody and even just saying that like you don't want a mainstream user to have to understand yeah we're going to talk about music in your new project soon but we're having so much fun just shooting the early here so we'll keep going for a bit but in the music side I think everyone understands MP3 to a certain degree that at least you know heard it but the analogy I always make is I don't go around telling everybody I bought a bunch of MP3s I'm signed up for a streaming service that gives me access to mp3s so say yeah you're not going to go around telling him people you bought a bunch of nfts or you've got a bunch of ERC 721s nobody

needs to know that right if I I'll even go further than that MP3 is an amazing technology there's actually a whole book you can read about how they managed to compress a massive sound file into this you know tiny thing that's what kind of give rise this revolution no one even knows about it because all they knew was that music which you know was physical and was cumbersome now it could be shrunk down and did just like a little audio file that they could basically download from a website that was revolutionary it wasn't the technology it was what it let that user do that battered um that's so interesting FanDuel any lessons you want to share from there I think a number of things that we find

with FanDuel like certainly one which is the need for Simplicity we prided ourselves in building a a lightweight product that users loved right and we focused a lot on that first time user experience like how does the user go from seeing an ad to heading a landing page to playing for the first time we really valued the user experience above and beyond whether or not they won in fact we had really nearly for instance the start we actually had a deposit bonus which basically said if you lose your first game and don't enjoy it email us will give you your money back because we just felt that look if you play it he didn't like it we don't really want to hold on to you as a customer because

that's not what I bought it should be like a really fun experience and I think that sort of held us to a high standard like if we delivered a crappy experience everybody would ask for their money back the good news is the product experience was great and so generally very few people did so I think Simplicity is really important I think just quality of experience is is really really important I'd say another one and I think this is really important in web3 is there's a very interesting relationship with Mari and that money even a product like Vandal which is a gaming product where you think oh well people play it to win money that's actually not why they play it it's actually not at all why they play it the reason they play it is FanDuel skews young and male competitive unsurprisingly like crypto

the reason they play it is really around status and success and feeling a sense of control they want to be seen as there by their peers as successful they also like a big part of it is and that's for sort of high value players another big part of it is just pure entertainment this is when I see this like play to earn I'm like this is like the dumbest thing I've ever heard play by its very nature is about entertainment and if you're having to pay me to play it the game sucks like I don't care again sucks and so from the phrase star of this sort of play and the only reason you're paying them is is because of that FanDuel never paid people to play they play it because they loved it and it was

a fun game and we delivered something that nothing else could deliver and so I think that anyone developing in web 3 I think there's a real danger just runs out another point which is tokens themselves are very dangerous and that they can give you a sense of product Market fit when you don't because you're just paying people to use a product and that is very dangerous do you think it's great because you see all distraction but there will come a point where you no longer can pay them and if your product is not great your attraction is going to go to zero that's highly problematic I love that line I want to quote that we're definitely going to make that an outtake in this episode that was a great line okay how does a guy go from founding a billion dollar sports betting

company to transitioning into web3 what was the moment who is the person how did that go yeah well so I've left the sports betting industry twice I was actually involved in Betfair and flutter in 2000 got out of that got back into the game a fan deal got out of it again I played around with crypto in 2017 I read Bitcoin white paper I read ethereum white paper and it was like wow this is Bitcoin didn't really interest me I didn't really have much money then so I was like oh great another way to store the money I don't have I wasn't that excited about it being a speculative asset because in a way spec of assets don't really interest me intrinsically it kind of interest me I always prefer

more money to last money but I just didn't find them intellectually interesting ethereum though I find fascinating it's like the idea that I could build this or we could build on top of this decentralized world computer and I sort of visualized all of the possible consumer applications that I built on it and I remember getting it in 2017 and then starting to realize that the core infrastructure there was so basic that you know the biggest consumer application in 2017 was cryptokitties which was almost impossible to buy right so I was like wow this is never like I at that point I was like this is years away from being a consumer product and the only thing that got me back was in

2020 it was actually Top Shot on Nifty Gateway and I'd actually at the meantime I'd set up a sports trading card business and when I saw Top Shot I was like wow this is cool I get this it was consumer friendly you could buy with a credit card I'm like you know and not acted as an onboarding and so I started collecting on there and I still have that collection Nifty Gateway one today and I did make the mistake of checking what the recent trades were and it looks like they're the same price because nobody's selling them so obviously yeah right but you know I found that as a route back in again and I thought nfts were brilliant like giving ownership of a digital asset I think is a really magical property and I think that's why

we saw a huge explosion in 21 where people sort of said we have this magical property that can't be done anywhere where could we apply it and we saw a lot of places where it made a lot of sets and I would say one a one place which was in the Fine Art Market some places were maybe made sense which is like the idea of recreating clubs and virtual clubs communities no I mostly made sense and then some areas where like makes absolutely no sense at all like nft mortgages are you know sort of like mirroring with physical assets where you actually had to rely on law to back it up to you get to the point where why am I using a blockchain anyhow those are the places where it just didn't make any sense and we saw a lot of that in its

Essence ownership of a digital asset is a magical property yeah I completely agree and you've got to use it to get that feeling there is something so powerful remember my first nft I mod it was 20 it was for my wife for her birthday and it was a llama like I think it's probably worth less than zero now because yeah no liquidity in this case yeah yeah to anybody yeah but there was something really powerful about this concept of I own this you just don't know until you try it and you get it so okay so for you then did you see web3 and say I want to start a web 3 company and then go figure out the consumer application that was in how did that

happen so what happened was in 2020 I started playing around with crypto and I started to sort of say well this is actually a really cool technology I was sort of early 21 that we started as a company to say well so we already started a company which was a chat product somewhat like Discord and we discovered is that social is actually one of the hardest verticals to build any product in there's like a very very small number of winners so we had built this chat product and then one of the things we built into it was this idea of buying something which was an nft that unlocked content and that became the sort of starting point of like oh this unlockable content is really interesting like and we started

to think about what that meant and we started to think well in the offline world if you remember back early nfts even today you'll have the sort of the right click Brigade you're like I can right click save and you know we sort of laughed at them but they had a little bit of truth right like it was true like everything apart from the price appreciation which none of us have seen the theoretical price appreciation that personally right clicked it has the same writes as everyone else like they get to experience it enjoy it and so we sort of thought you know that's not true in the offline world like I don't go into a record shop and I can't play all that music whether I buy it or not and we sort of said well maybe the digital world is going to be like the offline

World maybe it should be like the offline World in that if an artist says you know what I'm going to create 100 copies of this song and only and instead of said and everyone can listen to it but only 100 people get the price appreciation what we would say is only 100 people could listen to it or only the 100 people who own it at that point in time and I guess you could look at it and say well it's a little like the Wu-Tang Clan whenever they created their last album and said only one person can have this and it sold for what I don't see that really oh yeah see that yeah yeah yeah so it's a Wu-Tang their last their last album so they created one version of it only one person owns it there's it can't be shared more broadly until a certain date which is incredible

so in a way what we've done is we've created a way for artists to create limited editions that they say to their fans there's only 50 or only 100 of views or can actually listen to this and so what we've actually done is create something music that is never really existed before has not really existed much before which is scarcity and that becomes really really powerful but music has been devalued for the last 20 years whereas people are music's free like maybe it's just everywhere I can get it for free now what we can do is we can say no musicians can create they can create singles and albums that have music no it doesn't mean it can't be

stolen doesn't mean that if somebody can't record the audio file and put it on Soundcloud but it does mean that only 50 or 100 people who own it can get the original experience of how the artist wanted it to be heard in the format they wanted to hear so that was kind of our idea around 2021 as we started exploring this and we actually were working with artists at the time a lot of these artists were like hey I want to do an nft projects and then they dug into it and they're like huh I have to hire a graphic artist and it's like I just put my music on it this doesn't feel that special and we were like yeah I think you're right what did we create a format that is it's Unique to only the owners of it I actually get to experience it

the way you want to it to be yeah I think that like you kind of have to reframe music in your mind because unfortunately the Advent of the MP3 and streaming services have really changed fans relationship through musicians in the restaurant in the past few decades you go back to CDs really before this I was chatting to one of my team members and we were prepping for the show and we were talking about how we really did enjoy buying CDs because there was something about supporting the artist and so I think what you're talking about with music is it's very easy for a lot of people to to listen to this and say

well but so what like I don't need scarcity I only want to hear that song once or a few times right but you need to think about like your favorite artist right you want to support them yeah right yeah and that's the part we lost this is what I I feel like I'm stealing your line here I'm calling this the 10 billion problem in the music right yeah the 10 billion dollar problem you can correct me if I'm wrong but the way I understand this is that in the last 20 years recorded music sales have dropped 45 and they're spending 10 billion dollars in lost Revenue because of streaming and the change in the business model so we used to more money used to go to the artist because we would buy their records right of CDs and so now we

don't do that and that's a massive opportunity because the super fans still want to support you know and that and the interesting thing with that analysis is the sort of raw numbers music industry 20 years ago through 2001 at the peak of the city air it was about a 24 billion dollar industry this is recorded music in North America similar size to the video game industry yeah I love this today music is 40 I think it's like 15 billion video game industry is five times bigger it's actually over 100 billion dollars so even to say it's a 10 billion dollar issue or Gap is a massive understatement it's like music is even more prevalent today the amount of Music

being consumed is way off the amount of music is being used sell products or to sell iPhones or to move other products to sell albums and products it is everywhere but the value of it has just gone down and down and down and down to each individual stream being a fraction of a fraction of a Cent and the impact of that actually hits on the artists you produce that music because their position today compared to where they were 20 years ago is dramatically worse off which is where you hear those stats from Spotify about how Spotify has like 8 million artists and the average person is only making like a couple thousand

dollars a year and there's just horrible stats on yeah so what it's you know like it's good that lots of people can become artists and the major artists like Taylor Swift's doing okay you know Drake okay ETS doing okay the difference between today and 20 years ago is it's been so much more challenging to be a mid-tier artist like the long tail never made any much money from art or they could maybe earn a career like they didn't register nationally but today it's dramatically harder to be in that mid-tier 20 years ago you could have had a good career in that mid-tier but today you can't so just give you the stats on Spotify Spotify is not an offender here Spotify actually in a way save the industry but

for a million streams which is quite challenging for an artist to get you make about three and a half thousand dollars I'll just give you an idea as a band that we work with got on new music Friday that's a big result and after a month that song they got a new music Friday had 20 000 streams so you go okay so that's what 150 of of that so they made less than a hundred dollars as one of the musicians I worked with he said yeah it's less than the cost that it to us to get the Uber with all the equipment to the event so do musicians just make their money off of concerts and merch now that is because a lot of musicians will lose

money on their tours so in a lot of ways musicians are quite like startups which is in their early years they're loss making they have to have another line of work because they're not making money from music and anybody they do make they have to reinvest back into it with the hope that one day they make it big and they make their money later on in their career like even the chain smokers I think would said their last tour they actually lost money on which is just exception because they're one of the biggest bands in the world it is quite exceptional do you extended the music industry you do hear a lot of people talking about merch which I actually think is it's not funny but it's kind of like in the tech industry if somebody had a significant Revenue line from their t-shirts I'd be like oh

I don't think that business model is working right like and and this is the industry we're in like there's something wrong here yeah that we actually are making money from t-shirts we're not making money from recorded music we're losing money from live we can't be making up on the t-shirts and I guess for us like we are saying something that is goes against the gray in the music industry which is before everyone's like put it on the dsps put it on Spotify we're actually saying don't put everything on Spotify all your top fans will appreciate some of your music right there's some of your music that is not going to you know get you a billion streams even if you're Miley Cyrus or Miley Cyrus released flowers in January absolutely gangbuster song It's not over a billion streams and when she dropped

the album she had a demo it's called the demo version of it that song has got 10 million streams so that made her about thirty five thousand dollars so just think about that that is a song that only probably really appeals to her top fans if she instead had kept that rare and said you know what the only people are going to hear this is my top fans I'm going to put it in a special album it's going to be priced at 25 and this song is only going to appear in that album it is 30 dollars she would put you so ten thousand easily right so that's what her point is that there is music that is you're only selling to your top fans but they will pay dramatically more than what they

would pay on a DSP which is effectively nothing very very interesting let's use this as a jumping off point in the vault so we're talking around without specifically talking about it yes so tell us about bold give us the sort of the the high level elevator pitch Yeah so basically vault is a new digital format that uses crypto that allows us an artist to create a limited edition version of a single AP or album it supports multimedia so it also supports voice memos video pictures and it basically creates that limited edition which you can then sell directly to their fans and within that limited edition give me a little bit of idea of without getting too technical yeah explain the tech stack too sure yeah so

a couple of things that we designed from the very start we said to ourselves reset number one this is a mobile experience this is not going to be a web experience certainly last time I listened to music on the web was Myspace you know so music is dumb you know dominantly listened to on the phone so we said we have to build this natively for mobile it has to be a mobile experience number two we have to build this because 99 of the audience are not into crypto they want the experience they're not going to learn about wallets we have to build it so they can build it with our credit they can buy their credit card so that's a core part of it number three as we said earlier exclusivity you don't buy it you don't get to listen to it that has to be a core benefit that in

effect our artists are saying to their fans I have a magic box and you know this is an artist you love and I have put content in it that only 50 or 100 or a thousand depend how big the artist is are going to see all you have to do is get your credit card out and pay five dollars to see what's in that box that's what we've created in terms of the underlying technology the way we do this is when a user creates an account with us we provision a wallet for them so and that's connected to like their email address we then when they purchase a vault that's in effect at nft and it's minted on Solana and the metaplex format and we take that nft we meant it we put it into that wallet that wallet or sorry that nft acts as a

key to unlock the media the media itself is stored in R weave in an encrypted format so our waves decentralized storage so it's there permanently and the idea there is that they own this so if you buy this music you shouldn't have to worry where Vault goes away fault goes away you still have access to your music so what happens is the rftx is the key it works with the Vault protocol which grabs the media of R weave decrypts it downloads it to the user device and so then they can enjoy their music what the user sees is they put a credit card in they buy it the music downloads they play it they're happy where does the user listen to them oh in the app so we have native IOS and Android apps okay okay and you said

there's other multimedia that can be sort of maybe it's not only a song yeah or copy the set list or I don't know yeah so we support as long as it's digital media we can support it but the main digital media we support are audio files that's not just music it could be voice voice memos is very popular we have a lot of artists who you know whenever they're creating a song this is the original memo where they came up with the melody we have those right if you love a song Imagine hearing the first you know the first time they came up with the melody or some of the lyrics so we put that in a handwritten lyrics when they wrote the song and axed aside and then they wrote it and doodled on it so they can create a picture of that behind the scenes

video we can put in there and also some of our artists have put in the stamps so the actual individual the vocals the drums you can play those individually and then lastly and it's a really nice thing that's come back which was really big for vinyl and to some extent CD which was the lighter notes like who produced who mixed it all of the sort of background that if you're a real music fan that you really get into oh this guy's great writer I love what he did here and this you know so that some of them wrap it up with the liner notes it makes so much sense I get so fired up about this is such a great example of you're building a business that is using blockchain to create their experience for both artists and and yeah and it's not about speculation at all I'm not

trying to buy this piece of like this song or this album or this live performance so that I can go flip it and sell it to somebody else I'm bio because I yeah I love this artist and I want to have this company you were saying before we recorded that currently could I resell it's actually you know that's part of what you mentioned before we've actually focused so much on the collecting and playing experience so we've not enabled resell yet we will do we're gonna do it later this year but we want people to come in and buy it because they want that music not because they think it's going to become more valuable now some of the stuff will like I'm almost certain as well like we have some artists coming on board like with an artist in New York called the cave

and his stuff is amazing and he's done two drops they've sold out really quickly I'm very confident he is going to be a major success and when he does like sure would you like to see one of only 50 of his first ever single of that song in this format of course you would but at the moment we really want to focus on the collecting and Playback experience and that later on we're going to produce resell I think that's so smart I actually think that's that's a model that more builders in web 3 should be thinking about in that model don't get me wrong I think we value the decentralization of web 3 you and yeah both so important we value the true ability of ownership which would mean that you should be able to resell it or

trade it or give it to somebody else all of that but the initial reason should be based upon some form of utility and if you remove the ability to resell it then it forces that utility it forces us to get good at delivering on a poor user benefit that people are buying it for the right reason which ensures product Market fit right so that's right it's very very interesting you've mentioned a few the cave are you talking about the Miley Cyrus example yeah I'm sure Miley Cyrus hasn't done a vault yet but hopefully it does someday can you give us any other examples of what artists have done and what the results have been particularly on the dollars and cents I'd be curious to know yeah how much these artists are making because I know one thing I always

think about is on sound sound XYZ which we've talked about a bunch on the show I loved it at the top of their site they show how much money has gone to artists yeah such a core mission of what they're doing yeah so we've worked with about 30 artists right now the interesting ones are more when you compare to their streaming Revenue so a few examples there a really good one is a Canadian singer songwriter called Jordan Hart his last album he did about two billion streams over the last 12 months so it's about seven a thousand dollars he for his next album he actually ate songs that he was working on them and he said I'm not sure Ollie's going to make the

album I'm going to turn it into an EP and I'm going to drop it exclusively involved he sold that out in 24 hours and he made one and a half thousand dollars from those songs before he even released his album he's got to do two more drops and so our ambition and what we realized is we could have upsized it a lot more our ambition is for him to make more money from his new album than he did from his old one before he drops the album right so that's kind of where we're at where we actually we don't expect to replace streaming there will always be a place for streaming 90 or 95 of Music should be on streaming artists want that reach you want the ubiquity like everybody

wants to be Miley Cyrus you want to have a billion streams and your path to getting done even Miley Cyrus like I say a great example this is Taylor Swift Taylor Swift is a master at selling physical product because physical product today is the only place where she can actually well there's two things you can do one is you can actually generate a lot of money up front and number two she can influence charting because a physical sale is worth a hundred times a stream so when she re-released midnight for three extra songs suddenly she's back at the charts again because people are buying that physical album so when you see a physical sale do you mean like a CD or a vital violence CD yeah it's just credible so here we have the most Innovative artist one of the

most Innovative artists today from a business perspective and she's shifting physical and why is that why are we using a format that is 70 years old which is Impractical yeah immovable doesn't play in the device that everybody has music on half the people who buy vital don't own a record player well because people want a connection with the artist right and so like she is demonstrating there is a need for a format that can give people ownership but what if they could not only have ownership they could also play it on their phone and that's kind of what we're trying to get to so basically Vault would replace the vinyls that I think

so final is like a billion dollar industry I still think that people wanted on their walls it looks really pretty and I clip myself and most people who buy vinyl don't play it that much but I know the half people don't play it because half of them don't have record players which is wild it's a collectible right and you know the interesting thing is and I love exploring that because you'd say well in fact a friend of mine who works in the record industry and he said they accidentally printed the wrong final record and he set it out to a thousand like super funds right and he said they had an absolute heart attack and they're like oh my God we have to email everybody and he was working with them and he said let's just wait and see what happens and he said after two weeks

they got three emails these are super funds nobody listened to it so that was the thing but I think the point here is that people want the connection with the artist they want to support the artist they want to own something and it's important that the music is in there even if they're not using that format and so I just think that's really interesting and so we see that as well when we're selling faults we've surveyed people and it's interesting the three reasons why they buy number one and you have to have one is I love this artist right so when people say to me well I wouldn't buy this and I'm like okay what artists do you really love and if they don't love an artist I'm like well you're not a

customer anyhow okay but yeah they all have an artist that they love and I'm like okay you love this artist okay number two the number two reason is they want to hear that music right that's why I think it's important that this music is exclusive because it has to be something that it's a magic box I don't get to see what's in it unless I buy it and number three is important but it's still number three is I want to support that artist and so that's the sort of package that what we're trying to create which is I love this artist I want to hear this music and I want to support them can you give us a mental model or some way to think about where music is going and how the different players fit in we've talked about sound we've talked about

audience previously on this show we've talked about Royal I almost don't even know if we want to go into we've talked about Ticketmaster and what Avenged Sevenfold is doing and yes do you give us the idea of how our frame all this yeah our mental model and I think they're all interesting right and I think they're all interesting applications of web3 Royal is interesting for a more developed artist is actually just one of many options for an artist to monetize their income stream Royal's not very good if you're a smaller emerging artist right you need a big Community do you need recurring Revenue stream and so you could go to Royal and you could monetize part of it that way you could go to there's a company called

beat bread which will give you money as an advance you could go to our record label and take in advance and there's a number of also you could also sell off your catalog or a portion of your catalog so it is one of many options I think it's an interesting one I think the thing for me that is on proven with royal is is it a consumer product or is it a financial product by that I mean who buys it do they buy it and put a premium on it because they're a super fun and therefore they like to own that or are they buying it because it gives like that eight percent return on Capital blah blah blah blah and I don't know I don't know I think they're doing a really nice job and it's a nice product but also I think it sort of sits

in my head audience to me sits much more like a with a SoundCloud space it's iCloud has been a not a very successful business but it has been very successful for a lot of artists in terms of getting awareness it's not when I go to a lot in SoundCloud because I it doesn't sort of fit with my own sort of personal consumption of music and so I don't really know it as well as the other ones and then the third one which is sound XYZ so it's not actually see I think best execution of music nfts that I think is out there I think they've done an amazing job at building a community I think they've done an amazing job at creating sort of user benefit of holding a kind of a non-exclusive asset and that anyone

can listen to that I I listened I actually I use their app and I like it and I like to play it yeah it's but it's weird to me that my playlist of music that I don't own that to me just feels a little weird it's like why did I buy it and so I would say that well I'll say how we view them and how we think the world is different so our fundamental different world view is I think they think that a music nft should be freely listenable and music should be available for free our view is that some music and maybe these worlds coexist certainly some music should not be it should actually be restricted it should be exclusive to the people who purchased it and you know maybe it's the case that 95 of music is in sort of sits in their world

and five percent sits in our world certainly we feel we understand our user behavior and we don't feel uh we went back to this on product Market fit we know our users aren't buying it because they think it's going to appreciate value because right now they can't even sell it and that is would be my main concern with sound which is how much of it is price speculation it seems to be very baked into their product and all of the marketing around it is all about how music nfts are going to be the future and you should buy it now and I'm like that makes me feel very uncomfortable because I'm not sure I don't really think I want music to be

expected of as I said and I don't want what I don't want is when there's bear markets like we're in the moment for artists to like not be able to operate right like I want them to be able to be able to buy it because they love the content not buying it because oh well it's a bear market and nothing's going up in value so I'm not buying it so that's our so scientists probably our closest rival of those three and that's fair but we have a very difficult view of the world I would say I agree I think you definitely do to me honestly when I think about sounding audience the most interesting use case to me there is the curator economy and the way that they are focused on building out a way that if

you make the biggest playlist that you get token reward right yes that that makes total sense to me like the curator economy cannot exist without blockchain yeah with blockchain obviously it can exist okay yeah let's go do that whoever has built the biggest playlist on Spotify they deserve some credit yeah competition coming their way for sure yeah at both of those companies have I've done even though we have philosophical differences shall we say actually a huge respect for both companies and and I think they've done things there which I think are really revolutionary and they're things that we look at and go that's really cool I think you're right there I do think that you're correct that you have a different view which is to offer a utility-based

product which is access access is probably one of the best words that I can continually use when I'm trying to describe FTS right is it is an ability to give access directly peer-to-peer from an artist from a Creator to a fan that you would not be able to give them with another file type right yes like in the current web 2 way of doing that I would either have to mail you a physical like file type of a CD or something like that or I'd have to put it on behind some web to login where you log in with your email but then it's super easy to share and you don't have ownership and so yeah there's a loss there I'm curious

you are building a protocol and a consumer app that's right same time how do you see I see that long term what's the vision and the goal yeah absolutely and that's how we spent certainly we talked to investors we spent a lot of time on that so there's really two things there's Vault the player and then there's Vault the format and the difference is that what our aspiration is is that other people built other players and in fact DSP is so a digital service provider that's a Spotify title these are SoundCloud our aspiration is that they start to support this format type and why would these are a title do it well they want to support our artists they

want to differentiate from Spotify what if they could say to their artists you could create a premium version and sell it and the reason your fans will buy it is because they will own it why would these reduce and so well they'll make more money doing that and they'll differentiate from Spotify so our vision success to us our sort of five ten year goal is whenever all of the dsps all the way up to Spotify support this format you can buy it on any one of them and play it on any one of them and in that future fault probably as a player probably fails because you know we're not competing with Spotify like we just can't compete with Spotify but that's kind of the world we want we want fall to become an industry standard in the same way that CD became an interest on

her CD was invented by Sony but Sony realized that they couldn't make it proprietary they couldn't say you know only Sony artists can record in the CD and only Sonic can make this player it's actually it's quite revolutionary when you think about in retrospect they actually invented the technology and pretty much open source and said you know what anyone can record this format and anyone can make a player and we'll make it you know a small royalty in everyone that's created that's actually a model for what we're trying to do which is to create a format that every artist every label and every DSP can use and in effect what we care about is that format and the sort of the the protocol behind it so what is the business model so the business model is well today what

happens is we have like dsps typically take a 30 cut that's the same with us but where we think about it is 25 goes to the retailer which is US Vault the application five percent goes to the protocol when other players spin up and start selling in default format they will get 25 and that protocol will get five percent and that will go back to the treasury of the token holders is there a token there isn't yet but there will be interesting I won't go down that path that's a whole other tokenomics and I'd love to dive in yeah but when it says I suppose you're a business model and and actually again a real world analogy is with Sony they when they open source this format as it were they then

created like a kind of a council of other companies or stakeholders who had an interest in that format we want to do that again but on a web 3 format where Universal should have a stake in this Sony should have a stake in this Spotify should have a stick anyone who uses this format should have a stake in how this format evolves and so we would expect them all to be token holders which is really if the whole Mantra and vision of web3 is decentralized governance that's right yeah you can do that with your token yeah and it would be amazing to be able to get you would welcome input from those oh yeah absolutely we would you know and I think the the finance is to try and like how did they gain it and what proportion do they get it do they

get it relative to their usage of the protocol that's the tokenomics nearly as it were but that's down the line fascinating okay I want to show quotes a little bit for those who want to go and check this out actually you know what let me before we show I do have a question here is the user acquisition for you directly from the artists is that where most of the users are coming from uh it's a mix so we you know I have a reasonable installed base of people who collect these we also have quite deliberately focused on some genres so for example the New York and a rock scene is somewhere that we if you actually look about half of our vaults on the platformer from there so when we drop a new one you know we can actually

say Hey you liked telescreens well you're probably gonna like Sid Simons or you're gonna like Bo or you're going to like some some this is kind of similar similar genre the other half probably is more than half I see Cubs from the artist and if you think about the artist what else they have to sell like the March line like they can tell them to go to support yeah t-shirts are they can tell them to go to Spotify and stream and they may not play no no no no there are three cents per Stream So for them they actually now have something they can say to their fans hey guys I'm dropping my album unfault usually 50 of them there's only 100 of them go buy it a lot of the users come in that way and when they do come in there's no talk

about web 3 there's no talk about nfts it's just hey you want to buy this what's the range of price typically for yeah so at the very low end for a single the deluxe single is 4.99 and then for an album it's 25 to 30. and does the artist decide the price we work with the artist to set we advise them on price and scarcity right yeah it's so interesting when we're so early there's so much more and I'm sure it's a great thing as an entrepreneur it's actually beneficial if you get to work very closely with your users in the beginning yeah yeah but it also it's a scale challenge right because it's this you're in that gradual and then quickly right like yeah in that gradual phase yeah

what we found is we very deliberately have chosen to work with emerging artists so we feel like what are two major ones so Fletcher was a big one launched with us last year but the great thing about merging artists is we can work very closely with them we can also make mistakes and we've made mistakes where we like like a very simple one we thought the best time to launch is when they're launching a single on dsps on Spotify but what we find is that they were drawing diet because on that day there's promoting on Spotify and so invariably we now either launch like a month before a month after months before unreleased pre-released month after Deluxe Inn question so you have to give them like different windows and I want to learn that with a small artist you've

never heard of I don't want to learn that with Taylor Swift and at the same time there is a lot of understanding within the web three so for the hobbyists the mechanics of us who are here there's a lot of understanding of this is new tech or so yeah really the number of examples you could pick out most recently Nike dropping their hour Force One collection they had to push back mint a week and then when they actually did admit they had a bunch of tech issues and they had down for a few hours and yeah Twitter space to explain it so there is I think an understanding within but what's interesting is that's within the web 360. you're not focused on that you're focused 90. yeah 95 of our artists they don't know like they've heard of that

FTS after they've somewhat negative few on them and we've had to sort of strip that away and we say look understand that this is a vehicle this is a format and they fall in love with that and some of them are like okay I get the underlying technology and I think that's cool a lot of them just don't really care it's like it's not they understand that they understand it enough that they're like okay I get it but there are not that interested in that yeah I wasn't going to ask this but I need to I've got to ask about what Avenged Sevenfold is doing and with like this idea of membership for your fans yeah and then also nft ticketing just because we're talking I'm just curious sure you guys think about so it's actually one thing that fault set out

not to be which is a club we're not a music Club Music clubs have had a pretty mixed history there's only some artists that are good at it and I'd say one of the things that I find very disparating coming into music and something you wanted to change was to some extent I think people have devalued the music they sort of said well you know the music is kind of free and we're going to upsell them to insert this the community being one and I think that's imagine saying about a master you know like let's let out a da Vinci or this Picasso that art is free but you get to be part of a club right you would never do that and I think it's weird that we treat music

like that I don't know even that like if you had you know when people graduate out of art school like they have exhibitions they don't sort of say oh this stuff should be free like these are these guys are college students they actually say no this person's an artist we're going to Value it we're gonna put on a show like some of them go for thousands of dollars and we actually found it when we were out fundraising that some VCS are still in the world that like oh music should be free and I'm like I can understand as a consumer why you think that but why do you think artists should accept that so to some extent and when we work with artists and they to some extent I think I don't know if it's lack of confidence or have you been trained as they're like what else

can I stuff in there should we do a discount of the merch should we give like free event tickets and we're like your music is brilliant like your music is fantastic don't devalue what you do don't stuff it with all of this other stuff that I users don't care about in fact there was research recently I think that media did it and they asked people what they wanted what they would pay an extra five dollars a month and they had a whole range of them at the very top was unreleased music right at the very bottom was AMA with the artist right like I just always amazed it like they were like you know what and I was like you know that's great fans actually they want the music they value it the AMA with the artist is something that

could happen on you know Instagram like that's not valuable so that's kind of our Viewpoint so we're no that's not to say some artists are really good at doing fan clubs there's a I'll give them a shout out there's an artist called Silver Cup in New York great band they have a very active Discord server and they have done an amazing job there are exceptions like that and that's brilliant we've designed Vault to be kind of agnostic to whether you're that type of artist or not you can use it but I'm for most artists I don't see it I don't see Miley Cyrus running a Discord server most indoor artists I know struggled to update their Instagram when they say they will I just don't see their Community it's totally blood yeah I don't want to be in it I love their

music but I'm like do I really want to hang out all my days on the Discord server fill up other people people who like Eddie's punk bands no but maybe I'm not the right demo but to me the main use case that I get really excited about is two actually one access to live shows it is ridiculous that if you are a major fan of an artist you also have to compete with like thousands of books oh right yeah I think that's if you look at T Swift's so crazy what happened with different console tickets are going for like 10 20 000 in the secondary and she gets zero of that so yeah that access for for super fans yeah and then some

form of royalty like to me that seems to be more of a web 2 problem like Spotify and apple music know exactly who the top Taylor Swift fans are why can't they figure out a way to ensure that they get those tickets like this isn't a difficult problem so like I I always obviously market dynamics but I don't think it dates web three I think web3 foods help but I'm not sure it needs website your other other point on web3 or nft ticketing I think it's again it's really interesting I would say with that one is be careful what you wish for you know understand that nfts allow the primary issuer to control the asset that you think you own which is not true to the same extent with physical assets so

in the US as an example obviously there's similar laws in other countries there's this thing called writer for sale which is if I buy this phone right it's an Apple phone Apple can't say that I can only get it repaired on an Apple store or I can only resell it through their approved channels right they cannot say that because I've bought it I own it I have the right to do what the hell I like with it understand that with nfts these primary vendors which are Ticketmaster primarily that's what they are getting the ability to which is to control what you can do with a product that you thought you owned so my big fear with nft ticketing is you actually people lose the rates they had before

because that primary vendor who isn't necessarily looking out for our best interest is actually exerting more control that they didn't have in the sort of pre-web three world I'm confused actually now yeah it is because to me if the ticket was an nft then I should have and I'm the buyer of that ticket yeah I should have a much easier time selling it no no I'm saying that you actually potentially have a less easy time really because yes because with a physical ticket it's about the law the law is there's a writer for sale that you could actually go and sell it on StubHub the primary vendors are just Ticketmaster Live Nation I've hated that an afford it in court and have tried to restrict it at every possible way they can over the

last 20 years stubhub's being taken to court numerous times over them allowing for resale like resale that's why scalpers is like that's a special issue but remember when they talk about scalpers they also mean you what they they're saying is right you shouldn't be allowed to write or your right should be really constrained about what you can do so what they're saying is Well if you bought that Taylor Swift ticket you don't own it it's just a license from us and if you want to resell it well you can do it through the approved Channel and that approved Channel takes 30 and it does this and it does that so that's my concern I actually think nft tickets could lead us to a less good world that

we are in today wow and is that because this law does not apply to nfts well we that's what we'll have to see right like is a ticket an asset or a license so for example an MP3 when you buy an MP3 It's hard to buy them now but when you did it was a license it wasn't an asset you couldn't sell it you couldn't leave it in your will not many people did I'm sure but it wasn't an asset that you owned the question is going to be is that nft ticket an asset that you own or is it a sort of license in which the primary vendor can actually describe you know under what grinds you can use this thing that you thank you all but you don't really

right and is that why Ticketmaster is building on like centralized blockchains like flow could well be right because if they did build if they built on a decentralized blockchain experience they would be yeah like do this yes it's rare for these very large powerful organizations to build things for the benefit of consumers where they don't have you know it doesn't increase their control and so ticketing is probably the one area where I've been sort of least excited about within music because I I actually think the situation were you today where you actually owed an asset those rights could be eroded three and a half days wow that is it very very hot

take Nigel you're the first person that ever has been bearish on nft ticketing I feel like that's one of like the use cases that gets discussed the most right it could be it could be great for Ticketmaster you know it sounds like it all depends on what happens on whether it gets considered an asset or a license right well like think about it in the same way as we actually look at these debates about royalties within the nft world like here we think blur open C or bad because they're not enforcing these royalties think about it in that instance the Creator that's our artist there's somebody we perceive is a good person and therefore they do deserve this money but in the ticketing world that Creator is Ticketmaster right and now open C and blur are saying well

we're not so in this open world we don't have to we didn't have to enforce the royalty it was just a you know we did it because that was what was considered the right thing to do and so it's a question of what do we think of the originator of this asset as it were and do we truly own that asset okay I'm gonna stop us there because yeah I could keep going here tell us about new music Tuesday and how somebody can grab the next Vault drop yeah so one of the things we launched a few weeks ago we developed this new concept or any format and we realized that you know we can't just expect people to come and buy it they want to actually experience it and so every Tuesday we launch a new artist on the platform where we do a free drop and

anyone over 24 hours can come in it's nearly always a single but it's a you know it's a full single and they can get it for free in fact they can get two copies and we're going to start introduce the idea that you meant to and gift one so you can get your friends involved because a great lineup of artists coming over the next month so every Tuesday starting at midday Eastern it runs for 24 hours because we've got a global membership base can come in and grab one awesome we'll Link in the show Notes too whatever you can find this week's drop and is that open Edition or is there it's we capped it but we didn't think we would hit our cap we it was like we've just started it we had our cap on Tuesday of 500 we're probably up at next week the idea is not to hit the

cap but sometimes we do what what a good problem to have yeah okay anything else you want to share floor is yours for a show where people can find Baldwins yes in the show notes yeah you can follow you vault is Vault dot fan it's Vault music on the app at Play Store if you want to follow me I'm Nigel Michaels on Twitter awesome yeah we'll put the links in the show notes okay a couple speed round questions before we wrap up first one favorite person to follow on Twitter oh yes so that's the easy one so it's Kobe but maybe the 2022 Kobe where you actually posted a lot you know I was actually went by because I was thinking about this who was the favorite person

to follow and you know Kobe if you're out there come back the bear Market needs you you know it's weird to have somebody who just well he has his own interest like I think he just finds it really funny and he actually is very funny himself and just brings like humor and levity to the whole situation so I think we need to see more of them back but it makes me think about I was talking to zenica another founder in the space and a thought leader recently and we were both talking about our struggles with mental health because of burnout right and burnout is so pervasive for factors in web3 in this space because not only are you a startup founder yeah who has the pressure of perhaps

investors and product motor fit and the team and trying to build something but you also have holders who are yelling at you about the floor price so I I don't know I find it interesting I wonder I don't know Kobe but I wonder if he needed a break and if he did yeah absolutely definitely take a favorite must-read book that you recommend the most oh the one that I read recently and I kind of couldn't believe I hadn't read it before was a high fidelity so I've rediscovered that Nick hardby is I think the greatest writer alive but getting into the music industry last couple of years it was like the one book was like well I have to read that now I'm reading everything he's writing he's written but

that's an amazing book awesome okay last question if you had a billboard that one billion people were going to see what would you write on it I would say it would be it would probably be some of the lines as like music is valuable right music and musicians are valuable and they're probably just that but you know like the Sub sub Headliners like we did show it right like we need to give them formats that they can showcase their art and we as consumers need to Value it because if we don't keep paying for people they won't they'll stop making it and to me that would be a terrible world to live in so that would be my billboard a great reminder and I think something that we started off this episode talking about this 10 billion dollar problem and I

think a lot of people have a tough time grasping really why it matters and there's why it matters it matters because we will lose musicians and music makes the world a better place yes our lives better it gives us an outlet it gives us culture it gives us so much that we don't even necessarily recognize and so yeah we really need to respect that Nigel this has been an awesome time thanks so much for coming on and hanging out with us today really appreciate everything you're doing and yeah look forward to staying in touch that's great thank you thanks for listening in everybody have a great day thank you for listening to web3 Academy your one trusted source to capitalize on the next big phase of the internet if you enjoyed this episode please share it and

subscribe or follow so that you don't miss the next one while you're at it there's a link in the description for a free newsletter where we provide timely and relevant web through insights so you can confidently build and invest in web 3. make sure to subscribe today one final note this podcast is for educational purposes only and nothing we say is financial advice crypto and Webster are risky and you should never invest more than you're willing to lose thank you friends and see you in the next one