The Renaissance of the Cultural Investor
The Thesis
A new class of angel investors will focus on art instead of tech; these cultural investors will build communities, crowdfund artists & supercharge talent discovery.
The Introduction
This idea is for you if:
You have good taste.
You know what an NFT is.
Both must be true.
Culture & investing have become grossly overused terms in the last 12 months, so it seems a bit cliche to bring them together when describing “the job of the future” but, here we are. The rise in popularity of cryptocurrency technology is giving way to what may be the dream gig of Gen Alpha. Cultural investors acquire art & other content that they determine to have cultural significance locally or globally. These acquisitions appreciate monetary value or hold other importance to the investor.
Instead of a portfolio of your favorite stocks and bonds, it’s a portfolio of your favorite art, clothes, game skins, (Top Shot) moments, etc…
This isn’t a new idea, it’s just been a logistical nightmare until now. 1 Any creative industry where payments or royalties are tracked online can be a home for this new type of investor.
Let’s look at cultural investing in the music industry.
The Crowdfunding
Combining fractional ownership & art is an all time growth hack.
Two quick definitions.
Fractional Ownership: Your piece of the pie. Usually expressed as a percentage.
Ex: Mac owns 10% of the song.
Art: The conscious use of the imagination in the production of objects intended to be contemplated or appreciated as beautiful.
Imagine creating generational wealth because you knew about the next superstar when they barely had 1,000 fans.
It’s 2022 & an independent artist is making noise in south Florida. A snippet drops of their next song and it goes viral. Using this attention to their advantage, they have their best friend cook up a short video using Unreal Engine & they sell the video + song as an NFT. They want each token holder to get 5% of the streaming royalty from the song’s release on DSPs (Apple, Tidal, Spotify, etc...).
The artist creates 10 editions of the piece and charges $500 per token (edition).
The artist sells 10 tokens for $500 & a 5% streaming royalty per. A total of $5,000 for 50% of the song.
Each cultural investor paid $500 & received an NFT.
With 5 million streams on the song, the artist makes $30,000 ($5,000 from tokens & $25,000 from streaming [50% share of 5 million streams]). 2
Each investor would have $3,000 ($500 value of the NFT they own & $2,500 from streaming [5% share of 5 million streams]). 3
If the song is a hit & does 500 million streams? The artist makes over $2.5 million & each of those investors just turned $500 into over $250,000. Pays to have great taste.
By adding cultural investors to the mix, record labels will be able to reallocate the risk they take on advances and marketing budgets.
It’s 2022 & Republic Records are negotiating a deal for their latest popstar. They auction off a portion of the streaming royalty for a future album. Using those funds, the artist now has the advance and marketing budget they desire & Republic utilizes company funds to improve infrastructure. The money saved from trading equity will allow labels to pay top dollar for talented staff and technology. Artists will sign with companies because they understand the rollout & marketing is important. The leg up will be on the labels being able to hire the best talents and break the best music, consistently. There’s less risk in (good) staff than artists.
People know major labels have large budgets but the economics scale with the type of artist. There are investors with enough money to afford the costs that the premier global talents incur. The financial return, status & influence that comes with the art will be more than worth it in these cases.
The industry as of late has felt like “most money” wins & it’s time the conversation shifts to “best art”.
The Community
If you come from nothing & have 50 people invest $10, you now have $500 to spend on making a video. You can give up 1% to each person and you now have a small budget and still own 50% of your song. These investors can play different roles from team members to advisors, promoters & a bunch of ways I’m sure I haven’t thought of. You could build a large accessible community or a tight knit core of people with money who believe in you.
From social influencer to cultural investor, this gives a new definition to people monetizing their platforms. YouTubers & Tik Tok stars are the next label heads. Picture the person who shows you your favorite dances, making money off the song’s streams. Your relationships, group chats & Discords will be used to try and discover the next Drake. For all the people who say they were up on an artist early, there is now a financial motivation to discovery. Influencers will be rewarded for sharing & creating dope content and not just shilling for basic ads that don’t resonate with their audience.
There’s the financial gain, there’s fandom & then there’s the flex. Instead of having the best aux, you have the best portfolio of hit songs you’ve invested in. It gives collectors and fans of smaller genres the ability to put their money where their eyes and ears are, while building their net worth. It’s a chance to show off your taste & your ability to predict culture.
This isn’t as foreign of a concept as you would think. “Tipping” has been common in eastern markets for over a decade. There are fan leaderboards showing which fans and fan groups have purchased an artist’s album. 4 Don’t discount rabid fans with deep pockets just wanting to collect and be a part of their favorite artists’ success.
These royalty bearing assets create long term social & fiscal wealth. These are investment vehicles that double as conduits to jumpstart underfunded artists’ careers & connect like minded people.
The Talent Discovery
There is little incentive for fans to search for new music and artists. Cultural investors will bolster the effect of artist discovery and support at early stages because fans will be incentivized to find hidden gems. Right now, playlists & curators dominate what people hear on the streaming platforms. This technology will create a wave of micro-A&Rs that will bring attention to more quality acts.
60,000 songs are uploaded daily, so quality selection is at the core of this type of investor. 5 Picking out art that is visually striking, sonically pleasing & culturally relevant gives you 3 opportunities to make good on your investment. Getting in early on the right artist means you could have some of their longest revenue generating pieces. Having ownership in the right art means you could help bring a hit to the public’s attention and never work again. This will drive the creators to make the dopest art as there will be more supportive eyes and ears than ever before. The quality of art that becomes popular will be more reflective of the masses, than of a select few individual’s tastes.
The better your taste is, the less likely you’re investing in a depreciating asset.
The Logistics
In the words of Thanos, this is inevitable. I imagine the platform will be something like eBay + Tumblr. A place where the NFTs can be displayed and auctioned, the rights managed and accounted for, & a social viewing / reposting / commenting element to it.
There is a possible solution right now, however it’s not completely “on-chain.”
How You Do It Now:
Create Video + Music + Story
The most crucial aspect of art, is the art itself (meta, I know). The content must be well crafted with a narrative that resonates with potential buyers. The music must also be rolled out and promoted well, this is very important to long term growth.
Choose Marketplace or Sell Directly
Nifty Gateway, SuperRare, Foundation, Origin, etc...
Token Redemption / Contact
Either you contact the purchasers of the NFT & verify they own it or have them contact you.
Release Music
Use DistroKid or Ditto for release (100% royalty distribution services) & add token buyers as collaborators to automate royalty payment.
If you have any questions on how to do this yourself (or ideas on how it could be improved) feel free to reach out. We’ll (We Make Music) be doing this process with 11 LIT3S’ next EP release and will share the resources / notes from the process (spreadsheet for tracking, royalty agreement, etc...).
How You (Might) Do It In The Future:
There will be a platform that will bundle the ideas above (& add some new ones) in a smooth manner that will make this as simple as signing up for an Instagram account. You will buy & sell the NFT & the royalty in one marketplace. The team at CreateSafe are starting to enable this new generation of rights management. 6 They’re building a SmartWallet that tracks art from creation & allows the artist to handle their interactions with cultural investors. Artists can create, store and monetize their music assets seamlessly.
This may also be adopted in closed loop (permissioned) systems and done internally by larger artists or labels. Ease of use will be crucial to any platform in this space.
Some say this opens Pandora’s payola box. What happens when a DJ or executive with influence is secretly buying equity in an artist and over playing their music?
The simple answer is, it won’t matter. The best will prevail. With cultural investing you're incentivized to pick the most timeless & captivating pieces.
The Closing
There are at least 3 distinct bases of cultural investors.
Fan / Collector (Huge Audience): Who will buy and support because they love your content and/or love collecting art.
Flexer / Influencer (Rich Audience): Who will buy the art so other people can know they bought the art. The status they gain from curating or owning is worth it.
Financial (Huge + Rich Audience): Who understand the monetary value of what you make & think they have room to profit as well.
There are rarely ideas that prove good for the incumbents and the newcomers. That’s what makes the concept of cultural investments so universal. This is for the artist that loves world building and using multiple mediums to tell their stories. This is for the collector who lives to explore those worlds and experience the ideas. This is the start of something incredible. We’re barely scratching the surface of what the new digital age can be. An age where artists & the people that support them will have a more symbiotic relationship than ever before. The renaissance of the cultural investor is just beginning.
Money Trees
Visit Money Trees to learn more: https://www.moneytreesgrow.com/
Contact
Hit us on email, DM or occasionally in Clubhouse to talk more.
Khufu Reign | khufu@wemakemusic.com | @khufu
Brandon Hixon | brandon@wemakemusic.com | @brandonvhixon
Tirinda Hixon | tirinda@wemakemusic.com | @tirinda
References
There is even more money to be made on the secondary market for the NFT itself, for both artist and investor. Due to its speculative nature, the secondary market is impossible to predict. If the song does well and the artist gains more notoriety, it’s a reasonable assumption the NFT will also grow in value. These numbers assume the NFT does not go up or down in value. The streaming royalty is calculated using Apple Music’s payout scale.