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The Rise of Token-Gated Streaming: A Guide to the Benefits and Risks

BY Langston Thomas

May 02, 2023

The incentives of being a music fan have been waning over the years. Ticket prices continue to skyrocket thanks to monopolized ticket marketplaces, and streaming prices are also rising. As a result, attendees are finding it less rewarding to show up for their favorite acts, and artists are having an increasingly difficult time mustering connections with their core audiences.

All in all, the music economy feels incredibly constricted.

This is precisely why creators and consumers have been turning to the blockchain. It’s a way to circumvent some of the worst features of the music industry. Now, some of the NFT-enabled features conceived over the last few years have started trickling outward to the mainstream.

From NFT ticketing to decentralized community building, a wide variety of token-gated endeavors have made their way to the masses. Now, token-gated streaming has reached mainstream audiences 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-centric media model — for input. 

But first, what is token-gating?

Token-gating, in essence, is any instance where a blockchain token — often an NFT, but it could be another kind of crypto token — is used as an access pass. Token-gating has become popular in Web3 because it is a means of quickly and easily restricting access to content, events, collections, Discord servers, and more to those who hold a specific token.

Although token-gating is more often than not used for allow-listing purposes, it has recently become a tool for creators in the Web3 music space to create a layer of exclusivity surrounding their content. For example, Spottie WiFi token-gated several of his music NFT drops, and Daniel Allan and Reo Cragun launched token-gated sample packs. At this point, when it comes to streaming, token-gated success stories abound.

And now, the legacy streaming industry has caught on.

Spotify and token-gated streaming

In February of 2023, Spotify started testing “token-enabled playlists,” which let holders of specific NFTs use their wallets to access curated music. For the first part of the rollout, Android users in select countries gained access to the feature if they held NFTs from FlufMoonbirdsKingship, or Overlord.

Speaking to nft now about the rise of token-gated streaming, Thomas Fiss, SVP of Strategic Partnerships at the eco-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 with cryptocurrency-based models, it’s good for all of us in the space and for mass adoption in general,” said Fiss. “At the core, we’re talking about attribution of streaming (engagement), and artists and labels being given additional transparency to their fans’ listening behaviors, and rewarding them for it.”

From the perspective of a general NFT enthusiast, more prominent brands staking their claim on the blockchain surely seems like a win for the NFT community. Yet, as promising as these types of activations may sound, token-gating still has a way to go before established players like Spotify place their bets.

“At Spotify, we routinely conduct a number of tests in an effort to improve our user experience. Some of those end up paving the path for our broader user experience, and others serve only as important learnings,” a Spotify spokesperson said in a statement about the platform’s token-gating features. “We have no further news to share 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 have pivoted 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 hold a specific NFT.

In an interview with nft now, Audius CEO and Co-Founder Roneil Rumburg said he understands the genuine value of token-gating streaming for artists and fans. “The opportunity to identify your most highly engaged fans, and then kind of hyper serve them — provide them an experience that they can’t otherwise access with other artists — is a great way to drive more purchasing activity and engagement from those fans,” he said.

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

And the value is?

Rumburg’s statements hit at the heart of what is, arguably, the most significant advantage of token-gating. Although it can help increase financial rewards for platforms and artists, Rumburg notes that the real benefit is giving users novel experiences — and artists novel use cases — that they can’t get anywhere else.

“There’s a perspective of growing the pie vs. better allocating the pie that already exists. Where I think the [traditional music] industry gets concerned is when they see things that are cannibalizing what they have — just shuffling the percentages of the existing pie,” Rumburg said.

“I think Web3 technologies are, as a general rule, growing the pie. The usage that’s happening on Audius is not competing with, or even really related to, the activity that’s happening on the major DSPs […] The casual listener is someone that should be served, too, right? It’s just not who we are,” he clarified.

Likewise, Fiss noted that the most significant advantages of token-gated music lie in its ability to offer new forms of engagement and connection.

“Labels, managers, and artists can form deeper insights into passive vs. active fans and deploy retargeting tactics to activate these audiences accordingly. Artists can reward fans that are moving the needle while continuing to nurture any passive fans,” he said. “The gist here is that music marketers need to remove the stigma around ‘Web3’ being a walled garden and refocus attention on the insights and opportunities the technology provides to supplement legacy data and marketing tactics,” Fiss added.

The risks of token-gated streaming

However, it seems not everyone is sold on token-gated streaming. Even those within the Web3 music space are on the fence about the features. As noted by Sean Bonner, Now Pass Holder and member of 8tari, token-gating, in its current form, seems at times to almost be a step backward.

“The promise of Web3 isn’t preventing people from enjoying your work, but rather to let anyone enjoy it and make ownership the thing that is rare,” Bonner wrote in the nft now Discord. “With music, ownership can be limited and come with special perks while still letting anyone listen. Requiring people to buy something before they hear it feels like a great way to lose fans. Better to let people fall in love with your art and then buy in for more,” he added.

Requiring 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 Michał Milczarek, who highlighted the upside of music NFTs as enhancing the fan-artist relationship, but also the potential disadvantages of token-gating as part of the Web3 music ecosystem.

“Modern listeners live in the world of Spotify. Music should be easy to get and for free. For many people supporting 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 tougher, considering educational problems and the general public image of blockchain and Web3,” he continued.

What does the future hold?

Although there is still some debate about whether there is 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 spread and who can interact with it or collect it. Creators are free to use or ignore the tools, which is a win for sovereignty overall.

That said, in the end, these tools may not sit well with many of the world’s largest platforms, as their current models aren’t based on building niche audiences and communities. Instead, platforms like Spotify rely on as many users engaging as possible. So it remains to be seen whether or not the legacy music industry will be willing to change. But if the tools meet artist and consumer needs, then they may not need legacy brands to help them secure widespread adoption anyways.

Editor’s note: Want to share your thoughts and insights with nft now readers? We’re working to build a more community-centric media model. Head over to the Now Pass website to learn more.

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